IRS and Treasury Department Outline New Guidelines for Alternative Fuel Vehicle Refueling Property Credit

Income TaxImage by Steve Buissinne

WASHINGTON, D.C. — The Internal Revenue Service (IRS) and the Department of the Treasury have unveiled new guidelines regarding the qualified alternative fuel vehicle refueling property credit. These guidelines, issued under Notice 2024-20, aim to clarify the eligibility criteria for census tracts and announce plans to propose regulations for the credit in the near future.

These updates come on the heels of changes brought about by the Inflation Reduction Act, which amended the credit for qualified alternative fuel vehicle refueling property. The modifications apply to properties placed into service between January 1, 2023, and December 31, 2032.

Under the new guidelines, the credit amount for non-depreciable property is set at 30% of the cost of the qualified property placed into service during the tax year. Meanwhile, the credit for depreciable property starts at 6% of the cost but could be increased to 30% if the prevailing wage and apprenticeship requirements are met. However, the credit is capped at $100,000 for depreciable property and $1,000 for non-depreciable property.

To qualify for the credit, the property must be located in an eligible census tract. These tracts include any population census tract that qualifies as a low-income community, or any population census tract not classified as an urban area.

One of the primary objectives of the notice is to inform taxpayers about the list of eligible census tracts ahead of the 2023 filing season. It also explains how taxpayers can identify the 11-digit census tract identifier for the location where the property is placed in service. Although the IRS plans to propose regulations with this information in the future, taxpayers can rely on the notice until the proposed regulations are published.

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Additionally, the notice provides background information, pertinent definitions, and outlines relevant census concepts. It also explains the definitions and delineations of low-income communities and non-urban census tracts, and how updates to low-income community census tract determinations factor into credit eligibility.

The IRS has also released a series of frequently asked questions to shed more light on the alternative fuel vehicle refueling property credit.

By offering tax credits for alternative fuel vehicle refueling properties, the IRS and the Treasury Department are making strides toward promoting cleaner energy use and reducing our reliance on fossil fuels. This move could have significant implications for the environment, public health, and the economy, marking a crucial step in the nation’s efforts to combat climate change.

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