IRS Proposes Tax Credits for Business Electric Vehicle Purchases
Published Date: 1/14/2025
Proposed Rule
Summary
The IRS is proposing new rules to give tax credits for businesses that buy clean commercial vehicles, like electric trucks or vans. This helps companies save money when they put these eco-friendly vehicles to work. Comments on the plan are open until March 17, 2025, with a public hearing set for April 28, 2025.
Analyzed Economic Effects
9 provisions identified: 4 benefits, 2 costs, 3 mixed.
Credit Amount, Percentage, and Caps
If you place a qualified commercial clean vehicle in service, the credit for that vehicle is the lesser of: (A) 15% of your basis in the vehicle (or 30% if the vehicle is not powered by a gasoline or diesel internal combustion engine), or (B) the vehicle's incremental cost. The credit for any vehicle cannot exceed $7,500 if its GVWR is less than 14,000 pounds, or $40,000 for any other vehicle.
Incremental Cost Calculation Formula
The proposed rule defines incremental cost using a powertrain-based formula: (manufacturer's cost of the clean vehicle powertrain × the vehicle's retail price equivalent) minus (manufacturer's cost of the comparable ICE powertrain × that vehicle's retail price equivalent). The rule also provides powertrain-specific equations (BEV, FCEV, PHEV, PHFCEV) and requires use of manufacturer's component costs and RPEs.
Battery Capacity and Propulsion Requirements
A qualified commercial clean vehicle must be propelled to a significant extent by an electric motor drawing electricity from a battery that is rechargeable from an external source and that has at least 15 kilowatt-hours of capacity (or at least 7 kilowatt-hours if the vehicle's GVWR is under 14,000 pounds).
Manufacturer Reporting and Qualified Status Rules
A vehicle must be made by a 'qualified manufacturer' that enters into a written agreement and provides periodic written reports (including VINs and certifications) to the IRS; if a manufacturer fails to provide accurate, timely reports or updates, the vehicle may not meet section 45W requirements and the vehicle can be ineligible for the credit. The IRS may terminate qualified manufacturer status for fraud, intentional disregard, or gross negligence.
Negative or No Comparable Vehicle Means No Credit (Safe Harbor Available)
If an incremental cost calculation yields a negative number or if no comparable ICE vehicle exists, the incremental cost is treated as zero and no credit results under the general rule; however, taxpayers may rely on safe harbors (including RPE safe harbors) provided by the IRS to calculate incremental cost and claim the credit.
Tax-Exempt Entities and Section 6417 Election
Section 6417 allows applicable entities, and section 6417(b)(6) treats the section 45W credit as an 'applicable credit' for certain tax-exempt entities described in section 168(h)(2)(A)(i), (ii), and (iv), enabling those entities to make an election to be treated as making a payment against income tax equal to the credit amount.
VIN Must Be Reported on Tax Return
You cannot claim the section 45W credit for a vehicle unless you include that vehicle's Vehicle Identification Number (VIN) on your tax return for the year the vehicle is placed in service.
Auxiliary Power Units Excluded from Incremental Cost
When calculating incremental cost, the manufacturer's cost of auxiliary power units (APUs) installed on both the clean vehicle and the comparable ICE vehicle is disregarded (APU costs are excluded from the incremental cost calculation).
Placed-in-Service Date Is Date of Possession
For section 45W, a vehicle is considered 'placed in service' on the date the taxpayer takes possession of the vehicle, which determines the taxable year when the credit may be claimed.
Personalized for You
How does this regulation affect your finances?
Personalize government policy and PRIA will tell you what this federal register document means for your household, plus every other regulation we track. PRIA reads each provision against your financial profile to show you exactly what matters to your wallet.
Key Dates
Related Federal Register Documents
2026-17822, Violations of Laws or Regulations
The Office of the Comptroller of the Currency (OCC) proposes to revise the supervisory framework for the issuance of matters requiring attention (MRAs) in response to violations of laws or regulations and for addressing violations for which the OCC does not take an enforcement action or issue an MRA.
2026-17902, Bicycle Use in Park Areas
The National Park Service (NPS) proposes to modify the procedural requirements in existing NPS regulations for the designation of roads and trails for bicycle use within park areas. The changes would align NPS regulations with applicable Federal law and policy, remove unnecessary requirements, and ensure public involvement when needed. The changes in this rule would allow the NPS to manage its resources and allocate taxpayer funds more efficiently and streamline the approval of new and expanded opportunities for use and enjoyment of park areas by the American public.
2026-17867, Amendment of Class D Airspace and Class E Airspace Over New Haven, CT
This action proposes to amend Class D and Class E airspace over New Haven, CT. This action would modify the dimensions of the New Haven, CT Class D airspace to appropriately contain Instrument Flight Rules (IFR) operations at the Tweed/New Haven Airport. This action would also update verbiage in the Class D airspace legal description to comply with current FAA guidance. This action would also update the airport name and geographic coordinates for Tweed/New Haven airport in both the Class D and Class E5 airspace legal descriptions. This action would also remove the exclusions for adjacent Class E5 airspace from the New Haven, CT Class E5 airspace legal description.
2026-17840, Airworthiness Directives; Airbus Helicopters
If you fly Airbus Helicopters Model SA330J, the FAA wants you to keep checking the main gearbox fan for gaps and replace parts if needed. They’re giving you more time to install a better fan bearing assembly that stops these checks. You can’t install certain parts unless they meet new rules, so keep an eye on deadlines to stay safe and legal!
2026-17871, Proposal of Special Measure Regarding Banque Misr UAE as a Financial Institution Operating Outside of the United States of Primary Money Laundering Concern
FinCEN is issuing a notice of proposed rulemaking, pursuant to section 311 of the USA PATRIOT Act, that finds the five United Arab Emirates-based branches of Banque Misr (collectively, Banque Misr UAE) to be of primary money laundering concern and proposes imposing a special measure to: prohibit U.S. financial institutions from opening or maintaining a correspondent account for, or on behalf of, Banque Misr UAE; require U.S. financial institutions to take reasonable steps not to process a transaction for the correspondent account in the United States of a foreign banking institution if such a transaction involves Banque Misr UAE; and require U.S. financial institutions to apply special due diligence to their foreign correspondent accounts that are reasonably designed to guard against their use to process transactions involving Banque Misr UAE.
2026-17767, Promoting Telehealth in Rural America
In this document, the Federal Communications Commission (Commission) seeks comments on the scope of the similar service and rural area comparability requirements, comments on possible improvements to, or replacements of, our existing cost study method of determining rural telecommunications rates, comments on possible methods of promoting the use of lower-cost technologies intended to provide backup services, comments on a proposal to establish an eligible services list for the Rural Health Care (RHC) Program, comments on whether to adopt performance metrics to expedite the processing of RHC Program funding requests, and comments on whether to eliminate the approval requirement of evergreen contracts and an annual report requirement.
Previous / Next Documents
Previous: 2025-00186, Base Erosion and Anti-Abuse Tax Rules for Qualified Derivative Payments on Securities Lending Transactions
Big companies that lend securities and pay foreign related parties will see new rules on how certain payments are counted and reported for tax purposes. These changes aim to stop companies from shrinking their U.S. tax bills unfairly. Comments on the proposed rules are open until April 14, 2025, so affected companies should pay attention and get ready!
Next: 2025-00467, Endangered and Threatened Wildlife and Plants; Threatened Status for the Florida Manatee and Endangered Status for the Antillean Manatee
The U.S. Fish and Wildlife Service wants to update protections for manatees by listing the Florida manatee as threatened and the Antillean manatee as endangered. This change replaces the old West Indian manatee listing and means stronger rules to keep these gentle giants safe. You can share your thoughts by March 17, 2025, and join a public meeting on February 26, 2025.