The United States Treasury Department and the Internal Revenue Service (IRS) have jointly issued Notice 2024-05, providing updated guidance on the commercial clean vehicle credit. This notice, which pertains to commercial vehicles put into service in the calendar year 2024, offers a safe harbor for certain qualified commercial clean vehicles.
According to the new guidance, the safe harbor allows taxpayers to rely on the Department of Energy’s (DOE) analysis of incremental costs when calculating the clean vehicle credit. The DOE’s analysis indicates that the incremental cost of all street electric vehicles, excluding compact car plug-in electric hybrids (PHEVs), with a gross vehicle weight rating of less than 14,000 pounds, will exceed $7,500 in the calendar year 2024.
As a result, the incremental cost will not limit the credit amount available for these street electric vehicles that are placed into service in 2024. This means that companies investing in these vehicles will be able to claim the full credit, providing a significant financial incentive for businesses to transition to cleaner transportation options.
For compact car PHEVs put into service during the same period, where the incremental cost was calculated as less than $7,500, the IRS will accept the use of the DOE’s published incremental cost when taxpayers calculate their credit amount. This provision ensures that owners of these smaller hybrid vehicles can also benefit from the credit.
The DOE’s analysis also includes an assessment of current costs for several classes of street electric vehicles with a gross vehicle weight rating of 14,000 pounds or more. For these vehicles, which represent larger and heavier commercial vehicles, the IRS will similarly accept a taxpayer’s use of the DOE’s published incremental cost in calculating the credit amount.
This new guidance is part of ongoing efforts by the federal government to incentivize the adoption of cleaner, more sustainable transportation options. By providing a safe harbor and allowing reliance on DOE cost analyses, the IRS is reducing the complexity of claiming the commercial clean vehicle credit, thereby encouraging more companies to invest in cleaner vehicle technologies.
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