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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG–123525–23]
RIN 1545–BR06

Section 45W Credit for Qualified
Commercial Clean Vehicles
Internal Revenue Service (IRS),
Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
AGENCY:

This document contains
proposed regulations that would
provide guidance on the qualified
commercial clean vehicle credit enacted
by the Inflation Reduction Act of 2022.
These proposed regulations would affect
eligible taxpayers that place a qualified
commercial clean vehicle in service
during a taxable year. These proposed
regulations would also affect
manufacturers of qualified commercial
clean vehicles.
DATES: Written or electronic comments
must be received by March 17, 2025.
The public hearing on these proposed
regulations is scheduled for April 28,
2025, at 10 a.m. eastern standard time
(EST). Requests to speak and outlines of
topics to be discussed at the public
hearing must be received by March 17,
2025. If no outlines are received by
March 17, 2025, the public hearing will
be cancelled.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal
eRulemaking Portal at https://
www.regulations.gov (indicate IRS and
REG–123525–23) by following the
online instructions for submitting
comments. Once submitted to the
Federal eRulemaking Portal, comments
cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish
for public availability any comments
submitted to the IRS’s public docket.
Send paper submissions to:
CC:PA:01:PR (REG–123525–23), Room
5203, Internal Revenue Service, P.O.
Box 7604, Ben Franklin Station,
Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations,
David Villagrana or Rika Valdman at
(202) 317–6853 (not a toll-free number);
concerning submissions of comments or
the public hearing, Publications and
Regulations Section at (202) 317–6901
(not a toll-free number) or by email at
[email protected] (preferred).
SUPPLEMENTARY INFORMATION:

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SUMMARY:

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Authority

Background

This document contains proposed
amendments to the Income Tax
Regulations (26 CFR part 1) regarding
sections 25E, 30D, 45W, and 6417 of the
Internal Revenue Code (Code) as they
relate to the credit for qualified
commercial clean vehicles (proposed
regulations). The proposed regulations
are issued by the Secretary of the
Treasury or her delegate (Secretary)
under the authority granted by sections
25E(e), 30D(d)(3) and (f)(5), 45W(c)(1),
(d)(1), and (f), 6417(h), and 7805(a) of
the Code.
Section 45W(f) provides an express
delegation authorizing the Secretary to
issue ‘‘such regulations or other
guidance as the Secretary determines
necessary to carry out the purposes of
this section, including regulations or
other guidance relating to determination
of the incremental cost of any qualified
commercial clean vehicle.’’
Section 45W(c)(1), in part,
incorporates in the definition of the
term ‘‘qualified commercial clean
vehicle’’ that the vehicle ‘‘meets the
requirements of section 30D(d)(1)(C).’’
Section 30D(d)(1)(C) requires that such
vehicle be made by a ‘‘qualified
manufacturer,’’ as defined in section
30D(d)(3). Section 30D(d)(3) provides
that a qualified manufacturer must enter
‘‘into a written agreement with the
Secretary under which such
manufacturer agrees to make periodic
written reports to the Secretary (at such
times and in such manner as the
Secretary may provide) providing
vehicle identification numbers and such
other information related to each
vehicle manufactured by such
manufacturer as the Secretary may
require.’’
Section 45W(d)(1), which provides
that rules similar to the rules under
section 30D(f) (without regard to section
30D(f)(10) or (11)) apply for purposes of
section 45W, incorporates section
30D(f)(5), which provides an express
delegation of authority stating, ‘‘[t]he
Secretary shall, by regulations, provide
for recapturing the benefit of any credit
allowable under subsection (a) with
respect to any property which ceases to
be property eligible for such credit.’’
Section 6417(h) authorizes the
Secretary to issue such regulations or
other guidance as may be necessary to
carry out the purposes of section 6417.
Finally, section 7805(a) authorizes the
Secretary ‘‘to prescribe all needful rules
and regulations for the enforcement of
[the Code], including all rules and
regulations as may be necessary by
reason of any alteration of law in
relation to internal revenue.’’

I. Overview
Section 13403(a) of Public Law 117–
169, 136 Stat. 1818 (August 16, 2022),
commonly known as the Inflation
Reduction Act of 2022 (IRA), added
section 45W to the Code. Section
13403(b)(1) of the IRA added section
45W to the list of general business
credits in section 38 of the Code.
Section 45W provides a credit against
the tax imposed by chapter 1 of the
Code (chapter 1) with respect to each
qualified commercial clean vehicle
placed in service by the taxpayer during
the taxable year (section 45W credit).
The section 45W credit is effective for
vehicles placed in service after
December 31, 2022. The section 45W
credit is one of three related clean
vehicle credits enacted under or revised
by the IRA. Section 25E provides a
credit for previously-owned clean
vehicles. Section 30D provides a credit
for new clean vehicles.

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II. Section 45W
Section 45W(a) provides that, for
purposes of section 38, the qualified
commercial clean vehicle credit for any
taxable year is an amount equal to the
sum of the credit amounts determined
under section 45W(b) with respect to
each qualified commercial clean vehicle
placed in service by the taxpayer during
the taxable year. The amount of the
section 45W credit is treated as a
general business credit. Section
38(b)(37) lists as a current year business
credit the qualified commercial clean
vehicle credit determined under section
45W.
Section 45W(b)(1) provides that,
subject to the limitation in section
45W(b)(4), the amount of the section
45W credit is the lesser of: (A) 15
percent of the taxpayer’s basis in the
vehicle (30 percent in the case of a
vehicle not powered by a gasoline or
diesel internal combustion engine
(ICE)), or (B) the incremental cost of the
vehicle.
Section 45W(b)(2) provides that the
incremental cost of any qualified
commercial clean vehicle is an amount
equal to the excess of the purchase price
for such vehicle over the purchase price
of a comparable vehicle. Section
45W(b)(3) defines ‘‘comparable vehicle’’
to mean, with respect to any qualified
commercial clean vehicle, any vehicle
that is powered solely by a gasoline or
diesel ICE and is comparable in size and
use to such vehicle.
Section 45W(b)(4) provides that the
section 45W credit amount determined
under section 45W(b) with respect to
any qualified commercial clean vehicle

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cannot exceed: (A) in the case of a
vehicle that has a gross vehicle weight
rating of less than 14,000 pounds,
$7,500; and (B) in the case of a vehicle
not described in section 45W(b)(4)(A),
$40,000.
Section 45W(c) defines ‘‘qualified
commercial clean vehicle’’ for purposes
of the section 45W credit as any vehicle
which: (1) meets the requirements of
section 30D(d)(1)(C) of the Code, and is
acquired for use or lease by the taxpayer
and not for resale; (2) either meets the
requirements of section 30D(d)(1)(D),
and is manufactured primarily for use
on public streets, roads, and highways
(not including a vehicle operated
exclusively on a rail or rails), or is
mobile machinery, as defined in section
4053(8) of the Code (including vehicles
that are not designed to perform a
function of transporting a load over the
public highways); (3) either is propelled
to a significant extent by an electric
motor which draws electricity from a
battery that has a capacity of not less
than 15 kilowatt hours (or, in the case
of a vehicle that has a gross vehicle
weight rating of less than 14,000
pounds, 7 kilowatt hours) and is capable
of being recharged from an external
source of electricity, or is a motor
vehicle that satisfies the requirements
under section 30B(b)(3)(A) and (B) of
the Code; and (4) is of a character
subject to the allowance for
depreciation.
Section 45W(d) establishes special
rules for purposes of the section 45W
credit. Section 45W(d)(1) provides that
rules similar to the rules of section
30D(f)(1) through (9) apply to section
45W. Section 45W(d)(2) provides that
section 45W(c)(4) does not apply to any
vehicle that is not subject to a lease and
which is placed in service by a taxexempt entity described in section
168(h)(2)(A)(i), (ii), or (iv) of the Code.
Section 45W(d)(3) provides that no
section 45W credit is allowed with
respect to any vehicle for which a credit
was allowed under section 30D.
Section 45W(e) provides that no
section 45W credit is allowed with
respect to any vehicle unless the
taxpayer includes the vehicle
identification number of such vehicle
on the return of tax for the taxable year.
Section 45W(f) grants the Secretary
authority to issue regulations or other
guidance to carry out the purposes of
section 45W, including regulations or
other guidance relating to the
determination of the incremental cost of
any qualified commercial clean vehicle.
Section 45W(g) provides that no
section 45W credit is allowed with
respect to a vehicle acquired after
December 31, 2032.

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III. Section 25E
Section 13402 of the IRA added
section 25E to the Code. The credit
under section 25E (section 25E credit) is
a personal credit allowable under
subpart A of the Code that relates to
previously-owned clean vehicles.
IV. Section 30D
Section 30D was originally enacted by
section 205(a) of the Energy
Improvement and Extension Act of
2008, Division B of Public Law 110–343,
122 Stat. 3765, 3835 (October 3, 2008),
to provide a credit for the purchase and
placing in service of new qualified plugin electric drive motor vehicles (section
30D credit). Section 30D was amended
several times since its enactment, most
recently by section 13401 of the IRA.
Section 30D, as amended by the IRA,
relates to new clean vehicles.
The section 30D credit may be treated
as either a personal credit or a general
business credit, depending on whether
the vehicle is used for personal use or
is of a character subject to the allowance
for depreciation.
Section 30D(d)(1) defines ‘‘new clean
vehicle’’ as a motor vehicle that satisfies
eight requirements set forth in section
30D(d)(1)(A) through (H). As relevant to
section 45W and these proposed
regulations, section 30D(d)(1)(C)
provides that the vehicle must be made
by a qualified manufacturer, and section
30D(d)(1)(D) provides that the vehicle
must be treated as a motor vehicle for
purposes of title II of the Clean Air Act
(CAA).
Section 30D(d)(3) defines ‘‘qualified
manufacturer’’ as any manufacturer
(within the meaning of the regulations
prescribed by the Administrator of the
Environmental Protection Agency (EPA)
for purposes of the administration of
title II of the CAA (42 U.S.C. 7521–
7590)) that enters into a written
agreement with the Secretary under
which such manufacturer agrees to
make periodic written reports to the
Secretary (at such times and in such
manner as the Secretary may provide)
providing vehicle identification
numbers and such other information
related to each vehicle manufactured by
such manufacturer as the Secretary may
require.
Section 30D(f)(1)–(9) provides special
rules for purposes of section 30D that
are relevant to section 45W by virtue of
the cross-reference in section 45W(d)(1).
Section 30D(f)(1) provides that the basis
of any property for which a credit is
allowable under section 30D(a) is
reduced by the amount of such credit so
allowed (determined without regard to
section 30D(c)).

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Section 30D(f)(2) provides that the
amount of any deduction or other credit
allowable under chapter 1 for a vehicle
for which a credit is allowable under
section 30D(a) is reduced by the amount
of credit allowed under section 30D(a)
for such vehicle (determined without
regard to section 30D(c)).
Section 30D(f)(3) provides that in the
case of a vehicle the use of which is
described in section 50(b)(3) or (4) of the
Code (generally, use by tax-exempt
organizations, the United States, a
government entity, or foreign person or
entities) and that is not subject to a
lease, the person who sold such vehicle
to the person or entity using such
vehicle is treated as the taxpayer that
placed such vehicle in service, but only
if such person clearly discloses to such
person or entity in a document the
amount of any credit allowable under
section 30D(a) with respect to such
vehicle (determined without regard to
section 30D(c)). Section 30D(f)(3) was
repealed for vehicles placed in service
after December 31, 2023.
Section 30D(f)(4) provides that no
section 30D credit is allowable with
respect to any property referred to in
section 50(b)(1) (generally, property
used predominantly outside of the
United States).
Section 30D(f)(5) authorizes the
Secretary to promulgate regulations
providing for the recapture of the
benefit of any section 30D credit
allowable with respect to any property
which ceases to be property eligible for
such credit.
Section 30D(f)(6) provides that no
section 30D credit is allowed for any
vehicle if the taxpayer elects to not have
section 30D apply to such vehicle.
Section 30D(f)(7) provides that a
vehicle is not considered eligible for a
section 30D credit unless such vehicle
is in compliance with: (A) the
applicable provisions of the CAA for the
applicable make and model year of the
vehicle (or applicable air quality
provisions of State law in the case of a
State which has adopted such
provisions under a waiver under section
209(b) of the CAA), and (B) the motor
vehicle safety provisions of 49 U.S.C.
30101 through 30169.
Section 30D(f)(8) provides that in the
case of any vehicle, the credit described
in section 30D(a) is only allowed once
with respect to such vehicle, as
determined based upon the vehicle
identification number of such vehicle,
including any vehicle with respect to
which the taxpayer elects the
application of section 30D(g).
Section 30D(f)(9) provides that no
section 30D credit is allowed with
respect to any vehicle unless the

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taxpayer includes the vehicle
identification number of such vehicle
on the return of tax for the taxable year.
V. Section 6417
Section 6417 of the Code allows an
applicable entity (as defined in section
6417(d)(1)(A)) to make an election with
respect to an applicable credit (as
defined in section 6417(b)) to be treated
as making a payment against the tax
imposed by subtitle A of the Code
(related to income taxes) for the taxable
year equal to the amount of such credit.
Under section 6417(b)(6), in the case of
a tax-exempt entity described in section
168(h)(2)(A)(i), (ii), or (iv), the term
‘‘applicable credit’’ includes the section
45W credit determined under section
45W by reason of section 45W(d)(2).1
VI. Prior Guidance

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A. Notice 2022–56
On November 3, 2022, the Treasury
Department and the IRS published
Notice 2022–56, 2022–47 I.R.B. 480,
seeking comments regarding sections
45W and 30C of the Code. The notice
requested general comments on issues
arising under section 45W, as well as
specific comments concerning: (1)
factors to determine ‘‘comparable in size
and use’’ for purposes of the comparable
vehicle definition in section 45W(b)(3)
used to determine incremental cost; (2)
the definition of mobile machinery; (3)
the application of ‘‘rules similar to the
rules under section 30D(f)’’ to section
45W; (4) the ‘‘no double benefit’’ rule in
section 45W(d)(3); (5) compliance
considerations for qualified
manufacturers; (6) the definition of
‘‘significant extent’’ for purposes of
section 45W(c)(3)(A); (7) the term
‘‘property of a character subject to an
allowance for depreciation’’ for
purposes of section 45W(c)(4); and (8)
other terms in section 45W that require
definition or additional guidance.
The Treasury Department and the IRS
received over 130 comments on Notice
2022–56. These comments were
carefully considered in the preparation
of these proposed regulations.
B. Revenue Procedures
On December 27, 2022, the Treasury
Department and the IRS published
Revenue Procedure 2022–42, 2022–52
I.R.B. 565. Among other things, Rev.
Proc. 2022–42 provided guidance for
qualified manufacturers to enter into
1 The reference in section 6417(b)(6) to section
45W(d)(3) was intended to be a reference to section
45W(d)(2). See General Explanation of Tax
Legislation Enacted in the 117th Congress, JCS–1–
23 (December 21, 2023) at 282. Thus, the proposed
regulations refer to section 45W(d)(2). See also TD
9988, 89 FR 17546, at 17546 n.1.

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written agreements with the IRS, as
required in sections 30D, 25E, and 45W,
and to report certain information
regarding vehicles produced by such
manufacturers that may be eligible for
credits under these sections.
On October 23, 2023, the Treasury
Department and the IRS published
Revenue Procedure 2023–33, 2023–43
I.R.B. 1135. Among other things, Rev.
Proc. 2023–33 superseded certain
provisions of Rev. Proc. 2022–42, and
provided updated information on the
submission of written agreements by
manufacturers to the IRS in order to be
considered qualified manufacturers, as
well as updated information on the
method of submission of monthly
reports by qualified manufacturers.
On December 18, 2023, the Treasury
Department and the IRS published
Revenue Procedure 2023–38, 2023–51
I.R.B. 1544. Among other things, Rev.
Proc. 2023–38 updated and
consolidated the procedural rules for
qualified manufacturers with respect to
the section 25E credit, the section 30D
credit, and the section 45W credit, and
superseded certain provisions of Rev.
Proc. 2022–42 and Rev. Proc. 2023–33.
C. Safe Harbor Notices
On January 17, 2023, the Treasury
Department and the IRS published
Notice 2023–9, 2023–3 I.R.B. 402, which
provides a safe harbor for purposes of
the section 45W credit regarding the
incremental cost of certain qualified
commercial clean vehicles placed in
service in calendar year 2023, based on
a December 2022 incremental cost
analysis by the U.S. Department of
Energy (DOE) across classes of street
vehicles (DOE analysis).
On January 8, 2024, the Treasury
Department and the IRS published
Notice 2024–5, 2024–2 I.R.B. 347, which
provides a safe harbor for the purposes
of the section 45W credit regarding the
incremental cost of certain qualified
commercial clean vehicles placed in
service in calendar year 2024. The safe
harbor for 2024 is based on the DOE
analysis, as amended by the DOE in
December 2023 to incorporate minor
modifications that did not alter the
incremental cost results. Notice 2024–5
also requested comments regarding
additional types or classes of vehicles
that should be included in the safe
harbor in the future. The Treasury
Department and the IRS received
comments in response to the Notice.
These comments were carefully
considered in the preparation of these
proposed regulations.

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D. Final Regulations Under Sections
25E, 30D, and 6213
On May 6, 2024, the Treasury
Department and the IRS published final
regulations (TD 9995) in the Federal
Register (89 FR 37706) providing rules
and definitions for the section 25E
credit and the section 30D credit. In
addition, the final regulations provide
guidance under section 6213(g)(2)(T)
through (V) of the Code on the meaning
of ‘‘mathematical or clerical error’’ with
regard to certain assessments of tax
without a notice of deficiency in
connection with the section 25E credit,
the section 30D credit, and the section
45W credit.
Explanation of Provisions
I. Overview
Proposed § 1.45W–1 would provide
definitions applicable to section 45W
and the section 45W regulations.
Proposed § 1.45W–2 would provide
rules for determining the amount of the
section 45W credit, including the
determination of incremental cost for
qualified commercial clean vehicles.
Proposed § 1.45W–3 would provide
rules related to a vehicle’s qualification
as a qualified commercial clean vehicle.
Proposed § 1.45W–4 would provide
special rules relating to the credit
eligibility of a vehicle involved in
certain transactions and uses, the
interaction of the section 45W credit
with other credits, and recapture of the
section 45W credit. Proposed § 1.45W–
5 would provide reporting requirements
for purposes of the section 45W credit.
II. Credit for Qualified Commercial
Clean Vehicles; Definitions
Proposed § 1.45W–1 would provide
definitions applicable to section 45W
and the section 45W regulations.
A. Battery
Proposed § 1.45W–1(b)(1) would
define the term ‘‘battery’’ to mean a
collection of one or more battery
modules, each of which has two or more
battery cells, electrically configured in
series or parallel, to create voltage or
current. The term ‘‘battery’’ does not
include items such as thermal
management systems or other parts of a
battery cell or module that do not
directly contribute to the
electrochemical storage of energy within
the battery, such as battery cell cases,
cans, or pouches. This definition is
consistent with section 45W(c)(3)(A)
because battery modules and cells are
the sources from which an electric
motor draws electricity. The definition
is also consistent with the definition of
battery in § 1.30D–2(b)(5).

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B. Battery Electric Vehicle
Proposed § 1.45W–1(b)(2) would
define the term ‘‘battery electric
vehicle’’ (BEV) as a vehicle propelled
solely by an electric motor that draws
electricity from batteries capable of
being recharged from an external source
of electricity. This definition is
consistent with section 45W(c)(3)(A),
which requires, in part, that a qualified
commercial clean vehicle be propelled
to a significant extent by an electric
motor that draws electricity from a
battery.

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C. Fuel Cell Electric Vehicle
Proposed § 1.45W–1(b)(3) would
define ‘‘fuel cell electric vehicle’’
(FCEV) as a vehicle (i) that is propelled
by power derived from one or more cells
that convert chemical energy directly
into electricity by combining oxygen
with hydrogen fuel which is stored on
board the vehicle in any form and may
or may not require reformation prior to
use, and (ii) that, in the case of a light
duty vehicle (that is, a passenger
automobile or light truck), has received
on or after August 8, 2005 (the date of
the enactment of section 30B), a
certificate that such vehicle meets or
exceeds the Bin 5 Tier II emission level
established in regulations prescribed by
the Administrator of the Environmental
Protection Agency (EPA) under section
202(i) of the CAA for that make and
model year vehicle. This definition
repeats the substance of section
30B(b)(3)(A) and (B) and adds the
enactment date of section 30B (August
8, 2005) to implement section
45W(c)(3)(B), which incorporates the
requirements of section 30B(b)(3)(A)
and (B).
D. Gross Vehicle Weight Rating
Proposed § 1.45W–1(b)(4) would
define ‘‘gross vehicle weight rating’’
(GVWR) as having the meaning
provided in 49 CFR 571.3(b) and 40 CFR
86.082–2. The Department of
Transportation (DOT) definition of
GVWR in 49 CFR 571.3(b) (providing
definitions related to Federal Motor
Vehicle Safety Standards) is
substantially identical to the EPA
definition of GVWR in 40 CFR 86.082–
2 (related to the control of emissions
from highway vehicles and engines).
Because ‘‘gross vehicle weight rating’’ is
a term of art embedded in the regulatory
regimes of two other Federal agencies,
proposed § 1.45W–1(b)(4) would
provide a definition consistent with
existing DOT and EPA regulations.
E. Manufacturer
Proposed § 1.45W–1(b)(5)(i) would
define ‘‘manufacturer’’ as any

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manufacturer within the meaning of the
regulations prescribed by the
Administrator of the EPA for purposes
of the administration of title II of the
Clean Air Act (42 U.S.C. 7521 et seq.)
and as defined in 42 U.S.C. 7550(1).
This definition would repeat the
substance of the definition of
‘‘manufacturer’’ within section
30D(d)(3)’s definition of ‘‘qualified
manufacturer,’’ which is incorporated
by section 45W(c)(1). Consistent with
the definition of ‘‘manufacturer’’
provided in § 1.30D–2(b)(28), proposed
§ 1.45W–1(b)(5)(i) would provide that, if
multiple manufacturers are involved in
the production of a vehicle, the
requirements of section 30D(d)(3) must
be met by the manufacturer that satisfies
the reporting requirements of the
greenhouse gas emissions standards set
by the EPA under the Clean Air Act (42
U.S.C. 7521 et seq.) for the subject
vehicle.
In addition, the proposed rules would
move the existing rule regarding the
modification of a new motor vehicle
that has not yet been placed in service
from § 1.30D–2(b)(28)(ii)(B) to § 1.45W–
1(b)(5)(ii) so that all rules related to the
section 45W credit would be included
in the section 45W regulations. This
rule allows a manufacturer that modifies
a new motor vehicle (as defined in 42
U.S.C. 7550(3)) that does not satisfy the
requirements of section 45W(c)(3) so
that the vehicle, after modification, does
satisfy such requirements to enter into
an agreement under section 30D(d)(3) if
such modification occurs prior to the
new motor vehicle being placed in
service.
F. Placed in Service
Under proposed § 1.45W–1(b)(6), a
qualified commercial clean vehicle
would be considered ‘‘placed in
service’’ on the date the taxpayer takes
possession of the vehicle. This proposed
definition is consistent with the
definition provided in § 1.30D–2(b)(36)
and § 1.25E–1(b)(10), which gives effect,
in the specific context of vehicles, to the
general concept of ‘‘placed in service’’
from other Code provisions addressing
credits and depreciation. See § 1.46–
3(d)(1)(ii) and (d)(4)(i) (for qualified
investments, property is considered
placed in service in the earlier of the
period for depreciation with respect to
such property begins or when placed in
a condition or state of readiness and
availability for a specifically assigned
function); § 1.167(a)–11(e)(1)(i) (for
purposes of depreciation, property is
first placed in service when first placed
in a condition or state of readiness and
availability for a specifically assigned
function); and § 1.179–4(e) (property is

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considered placed in service when
placed in a condition or state of
readiness and availability for a
specifically assigned function); see also
Consumers Power Co. v. Comm’r, 89
T.C. 710 (1987) (citing §§ 1.46–3(d)(1)(ii)
and 1.167(a)–11(e)(1)(i), hydroelectric
plant placed in service for purposes of
depreciation and investment credit
when all phases of preoperational
testing were completed, thereby
demonstrating that the plant was
available for service on a regular basis);
Noell v. Comm’r, 66 T.C. 718, 728–729
(1976) (citing § 1.46–3(d)(1)(ii), landing
strip placed in service for purposes of
investment credit when strip was paved
and therefore available for full service).
The proposed definition is also
consistent with regulations issued under
Code sections addressing the excise tax
on heavy trucks and trailers, 26 CFR
145.4051–1(c)(2) of the Temporary
Excise Tax Regulations under the
Highway Revenue Act of 1982 (Pub. L.
97–424) (‘‘a vehicle shall be considered
placed in service on the date on which
the owner of the vehicle took actual
possession of the vehicle’’).
G. Plug-in Hybrid Electric Vehicle
Proposed § 1.45W–1(b)(7) would
define ‘‘plug-in hybrid electric vehicle’’
(PHEV) as a vehicle that uses batteries
that can be recharged from an external
source of electricity to power an electric
motor that propels the vehicle to a
significant extent, and another fuel,
such as gasoline or diesel, to power an
ICE or other propulsion source. This
definition is consistent with section
45W(c)(3)(A), which requires, in part, a
vehicle propelled by an electric motor
that draws electricity from a battery, and
with section 45W(b)(1)(A), which
contemplates differing basis percentages
for purposes of calculating the amount
of the section 45W credit depending on
whether a vehicle is powered in part by
a gasoline or diesel ICE.
H. Plug-in Hybrid Fuel Cell Electric
Vehicle
Proposed § 1.45W–1(b)(8) would
define ‘‘plug-in hybrid fuel cell electric
vehicle’’ (PHFCEV) as a vehicle that
uses batteries that can be recharged from
an external source of electricity to
power an electric motor that propels the
vehicle to a significant extent and a
hydrogen fuel source that powers an
electric motor through the fuel cell
system. This definition is consistent
with section 45W(c)(3)(A), which
requires, in part, a vehicle propelled by
an electric motor that draws electricity
from a battery.

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I. Qualified Commercial Clean Vehicle
Proposed § 1.45W–1(b)(9) would
define ‘‘qualified commercial clean
vehicle’’ to mean a vehicle that meets
the requirements of section 45W(c) and
§ 1.45W–3(b) through (d). Because
section 30D(d)(1)(C), incorporated by
section 45W(c)(1), requires a qualified
commercial clean vehicle to be made by
a qualified manufacturer, proposed
§ 1.45W–1(b)(9)(i), (ii), and (iii) would
add that a vehicle does not meet the
requirements of section 45W(c) if the
qualified manufacturer fails to provide a
periodic written report for such vehicle
prior to the vehicle being placed in
service by the taxpayer claiming the
credit reporting the vehicle
identification number of such vehicle,
and certifying compliance with the
requirements of section 45W(c); if the
qualified manufacturer provides
incorrect information with respect to the
vehicle on such report; or if the
qualified manufacturer fails to update
its report in the event of a material
change with respect to the vehicle.
These proposed rules are consistent
with those that apply to qualified
manufacturers in the context of other
clean vehicle credits. See § 1.30D–
2(b)(32).

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J. Qualified Manufacturer
Proposed § 1.45W–1(b)(10) would
define ‘‘qualified manufacturer,’’
consistent with § 1.30D–2(b)(42), to
mean a manufacturer that meets the
requirements described in section
30D(d)(3) at the time the manufacturer
submits a periodic written report to the
IRS under a written agreement
described in section 30D(d)(3). The term
‘‘qualified manufacturer’’ would not,
under the proposed rule, include any
manufacturer whose qualified
manufacturer status has been terminated
by the IRS. Proposed § 1.45W–1(b)(10)
would further provide that the IRS may
terminate qualified manufacturer status
for fraud, intentional disregard, or gross
negligence with respect to any
requirements of sections 25E, 30D, 45W,
regulations or any guidance thereunder,
including with respect to the periodic
written reports described in section
30D(d)(3). See § 601.601 of the
Statement of Procedural Rules (26 CFR
part 1).
K. Secretary
Proposed § 1.45W–1(b)(11) would
provide that the term ‘‘Secretary’’ has
the meaning provided in section
7701(a)(11)(B) of the Code.
L. Section 45W Regulations
Proposed § 1.45W–1(b)(12) would
define the term ‘‘section 45W

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regulations’’ to mean §§ 1.45W–1
through 1.45W–5.
III. Amount of Section 45W Credit;
Incremental Cost
Proposed § 1.45W–2 would provide
rules for determining the amount of the
section 45W credit, including the
determination of incremental cost for
qualified commercial clean vehicles.
A. Per-Vehicle Credit Amount
Section 45W(b)(1) provides that,
subject to section 45W(b)(4), the amount
of the section 45W credit for a qualified
commercial clean vehicle placed in
service during the taxable year is equal
to the lesser of: (1) 15 percent of the
basis in such vehicle, or 30 percent in
the case of a vehicle not powered by a
gasoline or diesel ICE; or (2) the
incremental cost of such vehicle (as that
phrase is defined in section 45W(b)(2)).
Section 45W(b)(4) limits the amount of
the section 45W credit with respect to
any qualified commercial clean vehicle
to $7,500 in the case of a vehicle that
has a GVWR of less than 14,000 pounds,
and $40,000 in the case of any other
vehicle.
Proposed § 1.45W–2(a) would
therefore provide that, subject to the
limitation in section 45W(b)(4), the pervehicle credit amount under section
45W(b)(1) with respect to any qualified
commercial clean vehicle is the lesser of
15 percent of the basis of such vehicle
(or 30 percent in the case of a vehicle
not powered by a gasoline or diesel
ICE), or the incremental cost of such
vehicle.
B. Incremental Cost of a Qualified
Commercial Clean Vehicle
Section 45W(b)(2) provides that the
incremental cost of any qualified
commercial clean vehicle is an amount
equal to the excess of the purchase price
for such vehicle over such price of a
comparable vehicle. Section 45W(b)(3)
defines a comparable vehicle, with
respect to any qualified commercial
clean vehicle, as a vehicle powered
solely by a gasoline or diesel ICE that is
comparable in size and use to such
vehicle.
Section 45W incentivizes taxpayers to
purchase vehicles with certain clean
propulsion technologies instead of
vehicles powered solely by a gasoline or
diesel ICE. Any cost comparison
between such vehicles and their ICE
alternatives, no matter how precisely
defined, would inevitably reflect cost
differences beyond those associated
with the propulsion technologies (for
example, a custom body would likely
create a cost difference between two
otherwise similar vehicles). If such cost

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differences were reflected in the amount
of the credit, the credit could
incentivize adoption of vehicle features
unrelated to the purposes of section
45W.
Proposed § 1.45W–2(b) would
therefore provide that incremental cost
is determined by multiplying the
manufacturer’s cost of the components
necessary for the powertrain of the
qualified commercial clean vehicle by
the retail price equivalent (RPE) of that
vehicle, and then subtracting from that
amount the product of the
manufacturer’s cost of the powertrain of
the comparable vehicle and the RPE of
that vehicle. Expressed formulaically,
the rule is as follows:
Incremental cost = (cost of qualified
commercial clean vehicle
powertrain × RPE of qualified
commercial clean vehicle)¥(cost of
comparable vehicle powertrain ×
RPE of comparable vehicle)
This approach attempts to eliminate,
to the extent possible, any cost
differences unrelated to the propulsion
technologies of the vehicles (see also the
discussion of ‘‘comparable vehicle’’ in
section III.D of this Explanation of
Provisions). Application of an RPE (see
section III.C of this Explanation of
Provisions) adjusts the manufacturer’s
cost of a powertrain to reflect the
taxpayer’s cost with respect to that
powertrain. See section III of this
Explanation of Provisions for a
discussion of the ways in which a
taxpayer might ascertain manufacturer’s
costs.
The Treasury Department and the IRS,
in consultation with the DOE, are
proposing an incremental cost equation
based on the incremental cost of the
powertrain because the powertrain is a
large fraction of the incremental cost
between a clean vehicle and a
comparable vehicle and because there is
robust data available to verify the
difference in costs between vehicles.
This incremental cost equation is
consistent with current modeling done
by the DOE regarding the costs of clean
vehicles compared to ICE vehicles. As
modeling techniques, data capabilities,
and vehicle design evolve, the Treasury
Department and the IRS will continue to
study this approach.
To implement this approach in the
context of the range of propulsion
technologies and configurations
contemplated by the statute (that is,
BEVs, FCEVs, PHEVs, and PHFCEVs),
the Treasury Department and the IRS, in
consultation with the DOE, developed
specific equations and associated
definitions for BEVs, FCEVs, PHEVs,
and PHFCEVs that would be provided

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in proposed § 1.45W–2(c)(2) through (5)
and (d). These equations would be
powertrain-specific versions of the
general equation described in proposed
§ 1.45W–2(b) and would specify the cost
of the components that, with respect to
each type of powertrain, comprise the
powertrain cost. For example, the cost
of a BEV powertrain would, under the
rule provided in § 1.45W–2(c)(2), be
equal to the sum of the costs of the
electric traction drive system, the
battery, and the electrical accessories,
each a term defined in § 1.45W–2(d)(1)
through (3). These equations and rules
provided in proposed § 1.45W–2(c)(2)
through (5), which address the cost of
BEV, PHEV, FCEV, and PHFCEV
powertrains and the cost of ICE
powertrains of comparable vehicles, are
consistent with the incremental cost
provisions of section 45W(b)(2) and (3).
The Treasury Department and the IRS
welcome comments on these proposed
incremental cost equations and rules. In
particular, comments are requested on
whether other vehicle equipment or
aspects of a vehicle’s design should be
included in the incremental cost
equations. Any recommended additions,
however, must be supportable by robust,
verifiable quantitative data.
C. Retail Price Equivalent and Safe
Harbor
Because section 45W(b)(2) defines
incremental cost in terms of purchase
price rather than manufacturer’s cost, an
RPE is necessary to adjust a
manufacturer’s cost of a qualified
commercial clean vehicle powertrain
and an ICE powertrain to reflect a
taxpayer’s purchase price of such
powertrains. RPEs vary from vehicle to
vehicle, manufacturer to manufacturer,
and across different segments of the
market (that is, a reasonable RPE for a
lightweight vehicle may differ from a
reasonable RPE for medium or a heavyduty vehicle). Consistent with this
understanding, proposed § 1.45W–
2(b)(1) would allow taxpayers to
calculate the incremental cost of a
qualified commercial clean vehicle
using the RPE applicable to such
vehicle.
Proposed § 1.45W–2(b)(3)(i) would
provide that a qualified commercial
clean vehicle’s RPE is determined by
calculating the ratio of the
manufacturer’s suggested retail price
(MSRP) of such vehicle to the
manufacturer’s cost to manufacture such
vehicle. Proposed § 1.45W–2(b)(3)(i)
through (iii) would further provide that
the MSRP represents the sum of the
retail price and the retail delivered price
suggested by the manufacturer for each
accessory or item of optional equipment

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which is not included within the retail
price as reported on the label that is
affixed to the windshield or side
window of the vehicle, as described in
15 U.S.C. 1232. Because RPE represents
the ratio of the MSRP of the vehicle to
the manufacturer’s cost, it is
understood, for purposes of the
incremental cost determination required
by section 45W and proposed § 1.45W–
2(b)(3), to represent that ratio with
respect to every component of the
vehicle, including those that comprise
the vehicle’s powertrain.
The Treasury Department and the IRS
understand that providing the precise
RPE for a vehicle may involve the
effective disclosure of proprietary
information. For this reason, the
Treasury Department and the IRS, in
consultation with the DOE, intend to
provide RPE safe harbors for different
segments of the vehicle market in the
near term. Taxpayers are advised to
check www.irs.gov for updates. See
section VI.C of the Background section
of this preamble.
D. Comparable Vehicle
Section 45W(b)(3) provides that, for
purposes of determining incremental
cost, the term ‘‘comparable vehicle’’
means, with respect to any qualified
commercial clean vehicle, any vehicle
that is powered solely by a gasoline or
diesel ICE and that is comparable in size
and use to such vehicle. To clarify the
meaning of ‘‘size and use,’’ proposed
§ 1.45W–2(b)(4) would provide that a
vehicle powered solely by a gasoline or
diesel ICE is comparable in size and use
to a qualified commercial clean vehicle
if the vehicles have substantially similar
GVWRs, number of doors, towing
capacity, passenger capacity, cargo
capacity, mounted equipment,
drivetrain type, overall width, height
and ground clearance, trim level, and so
on. The Treasury Department and the
IRS intend this list to be representative
of the types of criteria under which the
comparability of two vehicles would be
assessed. This list also distinguishes
such criteria from the mere performance
characteristics of powertrains (which, if
used as a sole basis for comparison,
could result in a negative incremental
cost and therefore a section 45W credit
of $0). In other words, a solely gasolineor diesel-powered ICE vehicle is not
necessarily comparable to a qualified
commercial clean vehicle simply
because the performance characteristics
of the powertrains are identical. Rather,
a comparable vehicle must be in the
same class and share other
characteristics, as appropriate to the
vehicle, such as number of doors, cargo
capacity, drivetrain type, and trim level.

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See the example provided in § 1.45W–
2(b)(4)(iv).
Proposed § 1.45W–2(b)(4)(ii) would
provide that, in the specific
circumstance where the qualified
manufacturer of a qualified commercial
clean vehicle manufactures a solely
gasoline- or diesel-powered ICE version
(excluding prototype or other nonproduction versions) of such qualified
commercial clean vehicle, meaning a
vehicle of the same model and model
year, and with features substantially
similar to those of the qualified
commercial clean vehicle (such as those
noted in the prior paragraph), such
vehicle is the only comparable vehicle
for purposes of the incremental cost
determination under section
45W(b)(1)(B) and (2). In circumstances
in which a qualified manufacturer of a
qualified commercial clean vehicle does
not manufacture a solely gasoline- or
diesel-powered ICE version of such
qualified commercial clean vehicle that
is of the same model and model year,
and with features substantially similar
to those of the qualified commercial
clean vehicle, the comparable vehicle
for purposes of the incremental cost
determination under section
45W(b)(1)(B) and (2) would be
determined by the taxpayer (or
manufacturer) based on the criteria
identified in the prior paragraph.
E. Negative Incremental Cost Treated as
Zero
Proposed § 1.45W–2(c)(8) would treat
an incremental cost calculation that
results in a negative figure (meaning the
qualified manufacturer’s cost of the
qualified commercial clean vehicle’s
powertrain is less than the
manufacturer’s cost of the ICE
powertrain of a comparable vehicle) as
zero. Because zero would in every case
be the lesser of the allowable basis
percentage, as provided in section
45W(b)(1), no credit would be allowed
with respect to such vehicle. This rule
is consistent with the ‘‘lesser of’’
comparison required by section
45W(b)(1) and the general purpose of
section 45W to incentivize the purchase
of vehicles with certain clean
propulsion technologies instead of ICE
alternatives. The fact that a taxpayer’s
calculation of incremental cost under
the general rule is zero for a particular
qualified commercial clean vehicle
would not preclude that taxpayer from
using a safe harbor described in
proposed § 1.45W–2(c)(11) to determine
incremental cost in order to claim the
section 45W credit with respect to that
vehicle.

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F. Incremental Cost if No Comparable
Vehicle Exists
If the particular characteristics of a
qualified commercial clean vehicle lead
a taxpayer to conclude that no
comparable vehicle exists and, as a
result, no incremental cost is calculable
for that vehicle, proposed § 1.45W–
2(c)(9) would provide that the
incremental cost of such vehicle is zero.
However, consistent with the proposed
rule described in the preceding
paragraph, the fact that the incremental
cost under the general rule is zero for a
particular qualified commercial clean
vehicle does not preclude that taxpayer
from using a safe harbor described in
proposed § 1.45W–2(c)(11) to determine
incremental cost in order to claim the
section 45W credit with respect to that
vehicle. This proposed rule would
apply only to situations in which no ICE
vehicle alternative is produced by any
manufacturer, for example, because the
intended operating environment
precludes the use of ICE vehicles. At
this time, the Treasury Department and
the IRS, in consultation with the DOE,
have not identified any qualified
commercial clean vehicles for which no
comparable vehicle exists. For these
reasons, proposed § 1.45W–2(c)(9) is
expected to be relevant only in rare
instances. The Treasury Department and
the IRS note that proposed § 1.45W–
2(c)(9) aligns with one purpose of
section 45W—to incentivize the
adoption of electric, hybrid, and fuel
cell vehicles instead of ICE alternatives.

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G. Power Takeoffs
Some vehicles eligible for the section
45W credit may use power takeoffs to
transmit power to drive machinery or
equipment other than the vehicle itself.
In the case of a BEV or hybrid vehicle,
the use of power takeoffs might
necessitate additional batteries; in the
case of an FCEV, the use of power
takeoffs might necessitate additional
fuel cells or additional hydrogen
storage. This situation, however,
appears indistinguishable from a
situation in which a BEV or hybrid
vehicle might be equipped with
additional batteries for other reasons
(for example, extended range), or a
situation in which an FCEV might be
equipped with additional fuel cells for
other reasons. Even if this were not the
case, determining, at the time the
taxpayer claims the credit, the relative
extent to which the batteries in any
given qualified commercial clean
vehicle might be employed to power the
vehicle and the ancillary machinery
would present significant challenges. As
a result, proposed § 1.45W–2(c)(7)

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would provide that the incremental cost
calculation for a qualified commercial
clean vehicle with a power takeoff
would be carried out in the same
manner as the incremental cost
calculation for a qualified commercial
clean vehicle without a power takeoff.
Specifically, an appropriate comparable
vehicle would be selected (likely a
vehicle with the same type of takeoffpowered machinery or equipment or
machinery) and the manufacturer’s cost
of the ICE powertrain would be
subtracted from the qualified
manufacturer’s cost of the BEV, FCEV,
PHEV, or PHFCEV powertrain (inclusive
of any additional batteries, fuel cells, or
hydrogen storage).
H. Auxiliary Power Units
Some vehicles eligible for the section
45W credit may use auxiliary power
units (APUs) to drive machinery or
equipment that is mounted or installed
on the vehicle; such APUs are not
necessarily electric, hybrid, or fuel cell
based. Proposed § 1.45W–2(c)(6) would
clarify that the incremental cost of
qualified commercial clean vehicles
outfitted with APUs is calculated
exclusive of the installed APUs. For
example, the comparable vehicle for a
BEV outfitted with an APU to drive an
aerial lift may be an ICE truck outfitted
with an APU to drive an aerial lift (see
discussion of comparable vehicles in
section III.D of this Explanation of
Provisions), but the manufacturer’s cost
of the APU is disregarded in the
incremental cost equation for both the
BEV and the ICE vehicles. Similarly, to
calculate the incremental cost of a FCEV
with an installed APU that powers the
refrigeration unit, the appropriate
comparable vehicle may be an ICE
refrigerator truck, but the
manufacturer’s cost of the APU is
disregarded for both vehicles.
I. Reliance on Qualified Manufacturer’s
Incremental Cost Calculation and Safe
Harbor
Information regarding a qualified
manufacturer’s cost for the components
of a qualified commercial clean vehicle
powertrain may not be readily available
to taxpayers. If a qualified manufacturer
discloses this information to a taxpayer
to facilitate the taxpayer’s calculation of
incremental cost, or if the qualified
manufacturer discloses its incremental
cost calculation for a qualified
commercial clean vehicle it
manufactures as provided in section
45W and these regulations, proposed
§ 1.45W–2(c)(10) would permit
taxpayers to rely on such disclosure.
Taxpayers would, however, be required
to retain the disclosure documentation

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in their records as long as the period of
limitations for the taxable period in
which the credit was claimed remains
open. A qualified manufacturer that
discloses its incremental cost
calculation for a qualified commercial
clean vehicle it manufactures must base
such incremental cost calculation on
actual cost data for both the qualified
commercial clean vehicle and the
comparable vehicle. Similarly, a
taxpayer that calculates incremental
cost by using cost data for the qualified
commercial clean vehicle provided by
the qualified manufacturer must use
actual cost data for the comparable
vehicle for such calculation. See the
definition of ‘‘qualified manufacturer’’
provided in proposed § 1.45W–1(b)(10)
and discussed in section II.J of this
Explanation of Provisions for the
potential consequences of qualified
manufacturer fraud, intentional
disregard, and gross negligence with
respect to the requirements of section
45W, the section 45W regulations, and
any guidance issued under section 45W.
Alternatively, taxpayers may rely on
the incremental cost safe harbors
published in Notice 2023–9 and Notice
2024–5, and any succeeding guidance
published in the Internal Revenue
Bulletin, as applicable, for the taxable
year in which a credit is claimed. These
incremental cost safe harbors are based
on the incremental cost analysis
conducted by the DOE, as described in
periodic reports published by the DOE.
J. Powertrain Subcomponents
The Treasury Department and the IRS,
in consultation with the DOE,
developed proposed § 1.45W–2(d)(1)
through (9) to provide definitions and
clarify the typical subcomponents of a
BEV, FCEV, PHEV, PHFCEV, and ICE
powertrain for purposes of determining
a qualified commercial clean vehicle’s
incremental cost under section
45W(b)(2) and (3) and § 1.45W–2(c).
Recognizing that different vehicles may
implement different technologies,
system configurations, and design
decisions, the subcomponents listed in
the definitions in § 1.45W–2(d)(1)
through (9) are not intended to prescribe
required subcomponents or to be an
exhaustive list of those that may be
appropriate to consider for purposes of
determining the incremental cost of a
given vehicle. For example, the
qualified manufacturer’s cost of a BEV
powertrain must reflect the qualified
manufacturer’s cost of the electric
traction drive system, battery,
transmission, and electrical accessories,
but each of those components are
comprised of subcomponents that may
vary among vehicles.

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Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules
K. Incremental Cost of Qualified
Commercial Clean Vehicle Previously
Placed in Service by Another Person
Proposed § 1.45W–2(f)(1) would
provide that the incremental cost of a
qualified commercial clean vehicle
previously placed in service by another
person is calculated by multiplying the
incremental cost of such vehicle when
new by a residual value factor
determined by the age of the vehicle.
Proposed § 1.45W–2(f)(2) would provide
that the age of such a vehicle is
determined by subtracting the model
year of the vehicle from the calendar
year in which the taxpayer places the
vehicle in service as a qualified
commercial clean vehicle. Because
model years are, in some cases, released
ahead of calendar years, and because it
is possible for a single vehicle to be sold
more than once within a twelve-month
period, an age of zero (or a negative
number in the case of a vehicle placed
in service twice before the calendar year
corresponding to its model year) does
not result in an incremental cost of a
used qualified commercial clean vehicle
equal to that of the vehicle when new.
The residual value factor table in
proposed § 1.45W–2(f)(3) reflects an
analysis conducted by the DOE with
respect to the decline in the value of
vehicles with ICE powertrains over
time. The analysis for light-duty
vehicles (Class 1–3 Passenger Car and
Light Truck) utilized MSRP and ‘‘True
Market Value’’ estimates from Edmunds
to calculate residual values across
specific makes and models, powertrains,
vehicle age, and size classes for vehicles
with model years from 2010 to 2021. For
medium to heavy duty vehicles (Class
4–8), residual values were calculated
from used vehicle listing data from
Commercial Truck Trader and
TruckPaper.com, validated against data
from Price Digests for vehicles with
model years from 2000 to 2020. As a
mature propulsion technology, ICE
vehicles exhibit a relatively stable
pattern of declining value compared to
their clean vehicle counterparts,
meaning, in part, that ICE vehicles tend
to retain more value over time than
clean vehicles. Analysis of the declining
value patterns of ICE vehicles compared
to their clean counterparts, however,
suggests that the residual values of clean
vehicles are coming into alignment with
those of ICE vehicles. As a result, the
ICE vehicle depreciation pattern
represents a good approximation of the
likely depreciation pattern for clean
vehicles as clean vehicle technologies
continue to mature. The residual value
factor is applied to the incremental cost
of the qualified commercial clean

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vehicle when new, regardless of
whether that incremental cost is
determined by the taxpayer, supplied to
the taxpayer by the qualified
manufacturer, or provided by safe
harbor guidance published in the
Internal Revenue Bulletin for the tax
year in which such vehicle is originally
placed in service.
IV. Qualified Commercial Clean Vehicle
Proposed § 1.45W–3 would provide
rules related to a vehicle’s qualification
as a qualified commercial clean vehicle.
A. Vehicles Acquired for Use or Lease
and Not for Resale
Section 45W(c)(1) provides, in part,
that a qualified commercial clean
vehicle must be acquired for use or lease
by the taxpayer and not for resale.
Proposed § 1.45W–3(b)(1), would
provide that, except in cases involving
tax-exempt entities identified in section
45W(d)(2), a taxpayer acquires a vehicle
for use or lease if the taxpayer acquires
it for use or lease in a trade or business
of the taxpayer. Thus, for example, if a
taxpayer that is engaged in the business
of leasing vehicles to customers acquires
a commercial clean vehicle for the
purpose of leasing the vehicle to
customers as part of that business, this
requirement would be satisfied.2 For
further consideration of vehicles
purchased by a vehicle leasing business
qualifying for a section 45W credit, see
the recapture rules explained in V.E of
this Explanation of Provisions.
Proposed § 1.45W–3(b)(1) is
consistent with the requirement under
section 45W(c)(4) that the vehicle be of
a character subject to the allowance for
depreciation, which, under section
167(a), extends only to property used in
a trade or business or held for the
production of income. The proposed
rule is also consistent with the trade or
business purposes expressed in section
45W(c)(1), the statutory identification of
the section 45W credit as being for
‘‘commercial’’ clean vehicles, and the
allowance of the credit as a section 38
general business credit.
If the lease of a qualified commercial
clean vehicle would not be respected as
a lease for Federal income tax purposes,
proposed § 1.45W–3(b)(2) would treat
the lessor as having acquired the vehicle
for resale and disallow the credit to
such lessor with respect to the
purportedly leased vehicle. Whether the
lessee may claim the section 45W credit
2 Whether an activity is treated as a trade or
business depends on the facts and circumstances of
the activity. Courts have considered factors such as
the profit motive of the taxpayer and the regularity
and continuity of the activity. Commissioner v.
Groetzinger, 480 U.S. 23 (1987).

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3513

with respect to the vehicle would
depend on whether the requirements of
section 45W and the section 45W
regulations are met with respect to the
vehicle. This rule, which recognizes that
a sale may, in some cases, be
mischaracterized as a lease for Federal
income tax purposes, aligns with
section 45W(c)(1) to limit ‘‘use and
lease’’ to the scenarios in which the
section 45W credit is allowable to a
taxpayer.
B. On-Road Vehicles
Section 45W(c)(2)(A) provides that a
qualified commercial clean vehicle may
be a vehicle ‘‘that meets the
requirements of subparagraph (D) of
section 30D(d)(1) and is manufactured
primarily for use on public streets,
roads, and highways (not including a
vehicle operated exclusively on a rail or
rails).’’ Regarding the former
requirement, section 30D(d)(1)(D) states
that the vehicle must be ‘‘treated as a
motor vehicle for purposes of title II of
the [CAA],’’ a determination that
implicitly incorporates the EPA’s
application of the relevant CAA
provisions, as well as any applicable
regulations or guidance thereunder. The
latter requirement, ‘‘manufactured
primarily for use on public streets,
roads, and highways,’’ occurs with
sufficient frequency in the Internal
Revenue Code, the U.S. Code more
broadly, and various regulations and
guidance issued thereunder to warrant
deference to existing understandings of
the phrase across Federal statutes.
Section 45W(c)(2)(B) provides, in the
alternative, that a qualified commercial
clean vehicle may be a vehicle ‘‘that is
mobile machinery, as defined in section
4053(8) (including vehicles that are not
designed to perform a function of
transporting a load over the public
highways).’’ The definition of mobile
machinery provided in section 4053(8)
presents significant challenges for
taxpayers and the IRS in the context of
section 45W. For a discussion of the
complexities of section 4053(8) in the
context of section 45W generally, and
the implications of those complexities
for the credit-eligibility of off-road
vehicles in particular, see section VII of
this Explanation of Provisions.
Section 4053(8) is an exemption to
certain Federal excise taxes imposed on
highway vehicles (see sections 4051(a),
4071(a), and 4481(a)), a concept defined
in § 48.4061(a)–1(d) of the
Manufacturers and Retailers Excise Tax
Regulations as ‘‘any self-propelled
vehicle, or any trailer or semitrailer,
designed to perform a function of
transporting a load over public
highways, whether or not also designed

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to perform other functions.’’ In other
words, mobile machinery as defined in
4053(8), in the context of existing
Federal excise taxes, is meaningful only
as a subset of highway vehicles. As a
result, most, if not all, vehicles
traditionally considered ‘‘mobile
machinery’’ (including those exempt
from the aforementioned Federal excise
taxes) would be eligible for the section
45W credit under section 45W(c)(2)(A).
A vehicle may satisfy the
requirements of both section
45W(c)(2)(A) and (B). For example, a
digger derrick truck exempt from the tax
imposed by section 4051 by reason of
section 4053(8) would qualify for the
credit under section 45W(c)(2)(B).
Furthermore, because it is a ‘‘highway
vehicle’’ under § 48.4061(a)–1(d), the
digger derrick would almost certainly
also qualify under section 45W(c)(2)(A),
meaning that it would be treated as a
motor vehicle for purposes of title II of
the CAA and be considered
manufactured primarily for use on the
public streets, roads, and highways. In
such instances, the taxpayer may choose
the prong of section 45W(c)(2) under
which the vehicle will qualify, which
may be relevant for recordkeeping and
other purposes.
C. Electric Motor and Battery
Requirements
Section 45W(c)(3)(A) provides
requirements with respect to the electric
motor and battery of certain qualified
commercial clean vehicles. In part,
section 45W(c)(3)(A) requires that a
qualified commercial clean vehicle be
propelled to a significant extent by an
electric motor that draws electricity
from a battery that meets certain
specifications depending on the GVWR
of the vehicle. Proposed § 1.45W–3(d)(1)
would repeat the substance of section
45W(c)(3)(A). Proposed § 1.45W–3(d)(2)
would clarify that a battery is capable of
being recharged from an external source
of electricity if such source of electricity
is not an integral part of the vehicle.
Proposed § 1.45W–3(d)(2) would also
provide the example of a regenerative
braking system as an integral part of the
vehicle and, thus, not an external source
of electricity. This rule would render
certain hybrid vehicles ineligible for the
section 45W credit, a result consistent
with the requirement that the vehicle be
propelled to a significant extent by an
electric motor which draws electricity
from a battery and the requirement for
an external source of electricity.
V. Special Rules
Section 45W(d) provides three special
rules. First, section 45W(d)(1) provides,
by cross reference to section 30D(f), that

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rules similar to the rules under section
30D(f)(1) through (9) apply for purposes
of the section 45W credit. Second,
section 45W(d)(2) provides that a
qualified commercial clean vehicle
placed in service by a tax-exempt entity
described in section 168(h)(2)(A)(i), (ii),
or (iv) is not required to be of a
character subject to the allowance for
depreciation if it is not subject to a
lease. Third, section 45W(d)(3) provides
that any vehicle for which a credit was
allowed under section 30D is not
allowed a section 45W credit.
Proposed § 1.45W–4 would provide
special rules relating to the credit
eligibility of a vehicle resulting from
certain transactions and uses, the
interaction of the section 45W credit
with other credits, and recapture of the
section 45W credit. These rules are
described in Part V.A. through E. of this
Explanation of Provisions.
A. No Double Benefit Rule
Section 30D(f)(8), as incorporated by
section 45W(d)(1), provides that a
section 45W credit is allowed only once
with respect to a vehicle, as determined
based upon the vehicle identification
number of such vehicle. Section
45W(d)(3) provides that no credit is
allowed under section 45W with respect
to any vehicle for which a credit was
allowed under section 30D. To
consolidate these two rules, proposed
§ 1.45W–4(a)(1) would provide that no
credit will be allowed under section
45W(a) with respect to any vehicle for
which a section 45W credit or a section
30D credit was previously allowed for
such vehicle.
Section 45W(d)(1), which
incorporates section 30D(f)(2), provides
a general no double benefit rule with
respect to any deduction or other credit
allowable under chapter 1 for a vehicle
for which a credit was allowed under
section 45W. Proposed § 1.45W–4(a)(2)
would repeat the substance of section
30D(f)(2). This proposed rule is
consistent with the no double benefit
rule provided in § 1.25E–2(b)(1).
B. Vehicles Previously Placed in Service
Section 45W does not explicitly
prohibit vehicles previously placed in
service from being eligible for a section
45W credit.3 Vehicles previously placed
in service present challenges with
regard to the statutory no double benefit
3 In the Description of Energy Tax Changes Made
by Public Law 117–169, the Joint Committee on
Taxation describes section 45W as ‘‘creat[ing] a
credit for qualified commercial clean vehicles
originally placed in service by a taxpayer,’’ and in
footnote 111 adds: ‘‘A technical correction may be
necessary to reflect this intent.’’ JCT, Description of
Energy Tax Changes Made by Public Law 117–169,
p. 58 (Apr. 19, 2023).

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rules in that taxpayers seeking to claim
the section 45W credit for such vehicles
may not have access to information
about whether a deduction or credit was
previously allowed, or to what extent,
and the IRS would be prohibited from
providing such information because
disclosure of information related to
another taxpayer’s claim for a tax credit
for a particular vehicle is confidential
return information and is protected from
disclosure under section 6103 of the
Code. Nonetheless, the normal rules
requiring taxpayers to establish their
entitlement to a credit or other tax
benefit apply. Accordingly, a taxpayer
claiming a 45W credit for a vehicle
previously placed in service must
maintain evidence in their books and
records sufficient to establish that no
credit under section 30D or section 45W
has been allowed previously with
respect to the vehicle, and in the case
of any prior credit allowed under
section 25E, the amount of such prior
credit, and must provide such
information to the IRS upon request. See
§ 1.6001–1; Roberts v. Comm’r, 62 T.C.
834, 836 (T.C. 1974); Isaacs v. Comm’r,
109 T.C.M. (CCH) 1624 (T.C. 2015).
Such evidence may include signed
attestations from all previous owners
that a credit was not claimed with
respect to such vehicle.
The proposed regulations would also
amend § 1.25E–2 by adding a new
paragraph (b)(3), which would clarify
that a vehicle for which a credit was
allowed under section 45W may qualify
for a section 25E credit in a subsequent
year with no reduction in the amount of
allowable section 25E credit. This rule
would be consistent with § 1.25E–
2(b)(2), which provides a similar rule
regarding the interaction between the
section 25E credit and the section 30D
credit.
C. Credit Ineligibility Resulting From
Certain Transactions and Uses
Proposed § 1.45W–4(b)(2) would
provide that if a sale of a qualified
commercial clean vehicle is cancelled
before the taxpayer places the vehicle in
service, then (i) the taxpayer may not
claim the section 45W credit with
respect to such vehicle; (ii) the vehicle
may still be eligible for the section 45W
credit; and (iii) a subsequent buyer will
not be required to apply the residual
value rules of § 1.45W–2(f)(3) to
determine the incremental cost of the
vehicle.
Proposed § 1.45W–4(b)(3) would
provide that if a taxpayer returns a
qualified commercial clean vehicle to
the seller within 30 days of placing such
vehicle in service, then (i) the taxpayer
may not claim the section 45W credit

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with respect to such vehicle; (ii) the
vehicle may still be eligible for the
section 45W credit; and (iii) a
subsequent buyer must apply the
residual value rules of § 1.45W–2(f)(3) to
determine the incremental cost of the
vehicle.
In the case of a resale of a qualified
commercial clean vehicle, proposed
§ 1.45W–4(b)(4) would provide that if a
taxpayer resells such vehicle within 30
days of placing the vehicle in service,
then (i) the taxpayer is treated as having
acquired such vehicle with the intent to
resell; (ii) the taxpayer may not claim
the section 45W credit with respect to
the vehicle; (iii) the vehicle may still be
eligible for the section 45W credit; and
(iv) a subsequent buyer must apply the
residual value rules of § 1.45W–2(f)(3) to
determine the incremental cost of the
vehicle.

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D. Business Use of Qualified
Commercial Clean Vehicle Required
Section 45W(c)(4) requires a qualified
commercial clean vehicle to be of a
character subject to the allowance for
depreciation. Nothing in section 45W
indicates that a partial section 45W
credit is allowable with respect to a
vehicle that is used only partially for
business use and is therefore only
partially depreciable. Section 30D, a
related clean vehicle credit that was
amended by the IRA, explicitly includes
an allocation rule to treat such credit as
either a business or personal credit
based upon business or personal use.
See section 30D(c)(1). Section 30C, also
enacted as part of the IRA, has a similar
allocation rule. See section 30C(d)(1).
The absence of such an allocation rule
in section 45W, which was enacted as
part of the same legislation, suggests
that Congress did not intend for the
section 45W credit to reflect less than
100 percent business use.
Proposed § 1.45W–4(b)(5) would
provide that if a taxpayer’s trade or
business use of a qualified commercial
clean vehicle is less than 100 percent of
the taxpayer’s total use of that vehicle
(with the exception of incidental
personal use, such as a stop for lunch
on the way between two job sites) for
the taxable year such vehicle is placed
in service, including because the vehicle
is sold or otherwise disposed of, then
the vehicle is ineligible for the section
45W credit. This rule would also apply
to a qualified commercial clean vehicle
placed in service by a tax-exempt entity,
except that 100 percent trade or
business use means the tax-exempt
entity’s use that is related to an exempt
purpose or an unrelated trade or
business purpose.

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E. Recapture
Section 30D(f)(5), which is
incorporated in section 45W(d)(1),
authorizes the Secretary to provide for
recapturing the benefit of any section
45W credit allowable with respect to
any property which ceases to be
property eligible for such credit.
Proposed § 1.45W–4(c)(2)(i) would
provide that if a taxpayer ceases to use
the vehicle for 100 percent trade or
business use during the 18-month
period beginning on the date the vehicle
is placed in service, including because
the vehicle is sold or otherwise
disposed of, then (i) the taxpayer may
not claim the section 45W credit with
respect to the vehicle, and if the
taxpayer has already claimed the credit,
the credit is recaptured; (ii) the vehicle
may still be eligible for the section 45W
credit; and (iii) a subsequent buyer must
apply the residual value rules of
§ 1.45W–2(f)(3) to determine the
incremental cost of the vehicle. In
determining the 18-month period as the
appropriate length of time for which the
vehicle must be used in a trade or
business for purposes of recapturing the
benefit of any section 45W credit
allowable, the Treasury Department and
the IRS took into consideration
commercial vehicle leasing practices
and sought to accommodate such
practices.
Proposed § 1.45W–4(c)(2)(ii) would
provide that, for a vehicle placed in
service by a tax-exempt entity, the 100
percent trade or business use rule
(excepting incidental personal use) in
§ 1.45W–4(b)(5) applies, which means
use for an exempt purpose or unrelated
trade or business purpose.
F. Elective Payment Election
1. Section 6417
Section 6417, enacted by the IRA,
provides a benefit to applicable entities
(defined in section 6417(d)(1)(A) and
§ 1.6417–1(c)), which include certain
tax-exempt and government entities that
are described in section 50(b)(3) or (4).
Section 6417 allows an applicable entity
to make an election to be treated as
making a payment of tax in the amount
of certain applicable credits, including
the section 45W credit, which results in
a refund equal to the amount of the
applicable credits if such entity has no
other tax liability. Section 6417(d)(2)(A)
requires an entity making an election to
determine an applicable credit without
regard to section 50(b)(3) or (4)(A)(i),
effectively turning those sections off for
purposes of calculating an applicable
credit.
These proposed regulations would
make a clarification to proposed

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§ 1.6417–6(b)(1) 4 to align with these
proposed section 45W regulations.
Proposed § 1.6417–6(b)(1) in these
proposed regulations would add a
reference to section 45W(d)(1) (which
incorporates the rules of section
30D(f)(1) related to basis reduction and
section 30D(f)(5) and the related
proposed § 1.45W–4(c) pertaining to
recapture) to the list of examples of
provisions of the Code that apply.
Accordingly, proposed § 1.6417–6(b)(1)
would state that if ‘‘another provision of
the Code contains a rule that operates
without reference to section 50 to
reduce the basis of property with
respect to which an applicable credit is
determined and/or recapture any
amount of an applicable credit (such as
sections 30C, 45Q(f)(4), 45W(d)(1), and
48(a)(10)), then the rules of that
provision of the Code and the
regulations issued under that provision
of the Code apply, except that any
applicable credit continues to be
determined without regard to section
50(b)(3) and (4)(A)(i) and by treating any
property with respect to which such
applicable credit is determined as used
in a trade or business of the applicable
entity, consistent with section
6417(d)(2) and § 1.6417–2(c).’’
2. Leases
Section 45W(d)(2) provides that the
section 45W(c)(4) rule regarding
depreciation does not apply to any
vehicle that is not subject to a lease and
that is placed in service by a tax-exempt
entity described in section
168(h)(2)(A)(i), (ii), or (iv).
Proposed § 1.45W–4(d)(3) would
provide that for purposes of section
45W(d)(2), a vehicle is ‘‘subject to a
lease’’ if it is leased within 30 days of
being placed in service by a tax-exempt
entity. For example, a school district
purchases and places in service a fleet
of electric school buses that otherwise
qualify for the section 45W credit. The
school district then leases the fleet to a
school transportation contractor 31 days
after the school district placed the fleet
in service. The fleet of electric school
buses is not subject to a lease within the
meaning of section 45W(d)(2) and
proposed § 1.45W–4(d)(3) because the
buses were leased more than 30 days
after being placed in service by the
school district. As a result, the fleet of
4 Revisions to § 1.6417–6(b)(1) were previously
proposed in the notice of proposed rulemaking
(REG–118269–23), published in the Federal
Register (89 FR 76759, September 19, 2024), which
sets forth rules regarding the Section 30C
Alternative Fuel Vehicle Refueling Property Credit.
These proposed regulations include identical
proposed language to § 1.6417–6(b)(1) other than
the addition of a reference to section 45W(d)(1).

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electric school buses may be eligible for
the section 45W credit.
This definition of ‘‘subject to a lease’’
aligns with the statutory language that
tax-exempt entities may be eligible for
the section 45W credit if the qualified
commercial clean vehicle at issue meets
the relevant criteria near the time of
being placed in service, which is when
vehicle eligibility is measured.
VI. Reporting Requirements
Proposed § 1.45W–5 would provide
reporting requirements for purposes of
the section 45W credit.

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A. Requirement To File Return
Section 45W(e) provides that no
section 45W credit can be determined
with respect to any vehicle unless the
taxpayer includes the vehicle
identification number of such vehicle
on the return of tax for the taxable year.
Proposed § 1.45W–5(a) would provide
that no section 45W credit is allowed
unless the taxpayer claiming such credit
files a Federal income tax return or
information return, as appropriate, for
the taxable year in which the qualified
commercial clean vehicle is placed in
service. The taxpayer must attach to
such return a completed Form 8936,
Clean Vehicle Credits, or successor
form, that includes all information
required by the form and instructions.
The taxpayer must also attach a
completed Schedule A (Form 8936),
Clean Vehicle Credit Amount, or
successor form or schedule, that
includes all information required by the
schedule and instructions, such as the
vehicle identification number of the
qualified commercial clean vehicle.
B. Credit May Generally Be Claimed on
Only One Tax Return
Proposed § 1.45W–5(b)(1) would
provide a general rule, subject to the
exceptions discussed later in this
Explanation of Provisions, that the
amount of the section 45W credit
attributable to a qualified commercial
clean vehicle may be claimed on only
one Federal income tax return,
including on a joint return in which one
of the spouses or the spouse’s whollyowned business entity is listed on the
title as the sole owner of the vehicle. In
the event a qualified commercial clean
vehicle is placed in service by multiple
taxpayers that do not file a joint tax
return (for example, in the case of
married individuals filing separate
returns), no allocation or proration of
the section 45W credit will be available,
and only one of the taxpayers placing
the qualified commercial clean vehicle
in service will be eligible for the entirety
of the allowable section 45W credit.

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Proposed § 1.45W–5(b)(2) would
provide a rule for grantor trusts.
Specifically, proposed § 1.45W–5(b)(2)
would provide that for qualified
commercial clean vehicles placed in
service by a trust, to the extent the
grantor or another person is treated as
owning all or part of a trust under
sections 671 through 679 of the Code,
the section 45W credit will be allocated
to such grantor or other person in
accordance with § 1.671–3(a)(1).
Proposed § 1.45W–5(b)(3) would
provide an exception for qualified
commercial clean vehicles placed in
service by certain passthrough entities,
namely a partnership or S corporation.
In such cases, the section 45W credit
will be allocated among the partners of
the partnership under § 1.704–1(b)(4)(ii)
or among the shareholders of the S
corporation under sections 1366(a) and
1377(a) of the Code and claimed on the
tax returns of the ultimate partners or of
the S corporation shareholders.
C. Taxpayer Reliance on Manufacturer
Certifications and Periodic Written
Reports to IRS
Proposed § 1.45W–5(c) would allow
taxpayers to rely on certain
certifications and information provided
by a manufacturer. Under this proposed
rule, a taxpayer that acquires a qualified
commercial clean vehicle and places it
in service would be able to rely on the
information and certifications contained
in the qualified manufacturer’s written
reports to the IRS. The procedures for
such periodic written reports are
established in guidance published in the
Internal Revenue Bulletin. To the extent
a taxpayer relies on certifications or
attestations from the qualified
manufacturer, the qualified commercial
clean vehicle the taxpayer acquires will
be deemed to meet the requirements of
sections 30D(d)(1)(C) and 45W(c)(1).
VII. Off-Road Mobile Machinery
Section 45W(c)(2) provides, in part,
that the term ‘‘qualified commercial
clean vehicle’’ includes ‘‘mobile
machinery, as defined in section 4053(8)
(including vehicles that are not
designed to perform a function of
transporting a load over the public
highways).’’ Section 4053(8), in turn,
defines mobile machinery as any
vehicle which consists of a chassis (A)
to which there has been permanently
mounted (by welding, bolting, riveting,
or other means) machinery or
equipment to perform a construction,
manufacturing, processing, farming,
mining, drilling, timbering, or similar
operation if the operation of the
machinery or equipment is unrelated to
transportation on or off the public

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highways, (B) which has been specially
designed to serve only as a mobile
carriage and mount (and a power
source, if applicable) for the particular
machinery or equipment involved,
whether or not such machinery or
equipment is in operation, and (C)
which, by reason of such special design,
could not, without substantial structural
modification, be used as a component of
a vehicle designed to perform a function
of transporting any load other than that
particular machinery or equipment or
similar machinery or equipment
requiring such a specially designed
chassis.
Section 4053(8) is an exemption from
the tax imposed by section 4051(a) and
has been employed as an exemption
from the taxes imposed by sections
4071(a) and 4481(a), all of which
contribute to the Highway Trust Fund.
See section 9503(b) of the Code. In that
context, the section 4053(8) definition is
relevant only to highway vehicles,
defined in § 48.4061(a)–1(d) 5 as ‘‘any
self-propelled vehicle, or any trailer or
semitrailer, designed to perform a
function of transporting a load over
public highways, whether or not also
designed to perform other functions.’’
The parenthetical in section
45W(c)(2)(B)—‘‘including vehicles that
are not designed to perform a function
of transporting a load over the public
highways’’—contradicts that definition
and, therefore, arguably expands the
traditional category of ‘‘mobile
machinery’’ to include off-road vehicles.
Such an expanded category might, for
purposes of section 45W, include
certain agricultural vehicles,
construction vehicles, forestry vehicles,
utility vehicles designed for airport
operations, and other types of off-road
vehicles.
However, section 4053(8) and several
provisions of section 45W present
significant challenges with respect to
the administrability of a section 45W
credit that encompasses such off-road
vehicles. Recognizing that, whenever
possible, every word and every
provision of a statute should be given
effect, Washington Market Co. v.
Hoffman, 101 U.S. 112, 115–6 (1879),
the Treasury Department and the IRS
continue to study, and request any
relevant comments on, the
considerations described in section
5 The section 4061 manufacturers excise tax on
certain highway vehicles was repealed and replaced
with the section 4051 retail excise tax on similar
vehicles. See Highway Revenue Act of 1982 (Public
Law 97–424), effective April 1, 1983. The
§ 48.4061(a)–1(d) definition of ‘‘highway vehicle’’ is
incorporated into the current section 4051 regime
by § 145.4051–1(a)(2).

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VII.A through G of this Explanation of
Provisions.
A. Section 4053(8) as Applied to OffRoad Vehicles
The definition of ‘‘mobile machinery’’
provided in section 4053(8) is vehicle
specific and fact intensive. Vehicles
with chassis that include a pintle hook
or that have been modified to
accommodate a water tank do not
qualify as mobile machinery because
such vehicles are not specially designed
to serve only (solely) as the mobile
carriage or mount for the mounted
equipment or machinery. Florida Power
& Light Co. v. U.S., 375 F.3d 1119 (Fed.
Cir. 2004). For the same reason, peanut
drying trailers and boat trailers are not
mobile machinery. Rockwater, Inc. v.
U.S., No. 4:21–CV–00125–CDL, 2023
WL 2473452 (M.D. Ga. Jan. 3, 2023),
aff’d in part, reversed in part and
remanded in part, 2024 WL 4799277,
(11th Cir. Nov. 16, 2024); Hostar Marine
Transp. Systems, Inc. v. U.S., No. 06–
10834–DPW, 2008 WL 4615464 (D.
Mass. Oct. 16, 2008), aff’d, 592 F.3d 202
(1st Cir. 2010). In addition, highway
tractors fitted with winches,
compressors, or blowers are not mobile
machinery because such equipment,
used to load or unload cargo, is not
‘‘unrelated to transportation on or off
the public highways.’’ Schlumberger
Technology Corp. and Subsidiaries v.
U.S., 55 Fed. Cl. 203 (2003).
When applied to off-road vehicles, a
category to which section 4053(8) was
not traditionally relevant, the text of
section 4053(8) presents significant
challenges for taxpayers and the IRS.
Particular vehicles would, on a vehicleby-vehicle basis, be rendered ineligible
for the section 45W credit for reasons
irrelevant to the purpose of the credit,
such as the presence of a pintle hook or
the fact that the vehicle can carry a load
other than its mounted machinery or
equipment. Consideration of these types
of vehicle features, although critical to
ensuring the correct taxation of highway
vehicles for purposes of the Highway
Trust Fund, would lead to arbitrary
results in the context of a credit
intended to incentivize the use of clean
vehicle propulsion technologies—for
example, the eligibility of one vehicle
for the section 45W credit and the
ineligibility of an identical vehicle,
except for the addition of a pintle hook.
To mitigate these challenges, the
Treasury Department and the IRS are
considering an approach that would
deem off-road vehicles (that is,
‘‘vehicles not designed to perform a
function of carrying a load over the
public highways’’) to satisfy the
requirements of section 4053(8)(B) and

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(C). Such an approach would
acknowledge that section 4053(8)(B) and
(C) assess a vehicle’s potential to cause
wear and tear on the public highways.
While this is critical in determining
whether a vehicle qualifies for an
exemption from taxes that fund the
Highway Trust Fund, it has no
relevance to off-road vehicles.
Therefore, this approach would apply
the core definition of ‘‘mobile
machinery’’ provided in section
4053(8)(A) and, consistent with the
cross reference provided in section
45W(c)(2)(B), do so in precisely the
same way as section 4053(8)(A) is
applied in the context of Federal excise
taxes.
While this approach would render
vehicle-by-vehicle analysis unnecessary
in many cases and might eliminate
certain types of inconsistent results with
respect to vehicle eligibility for the
section 45W credit, categorical bars on
eligibility for certain types of vehicles
would remain. For example, off-road
dump trucks would be ineligible for the
credit because their permanently
mounted machinery or equipment, that
is, the hydraulics that lift the dump
body, is not ‘‘unrelated to
transportation’’ (the dump structure
itself is a vehicle body rather than
machinery or equipment; see Notice
2017–5, 2017–6 IRB 779). Agricultural
tractors would be ineligible to the extent
they lack permanently mounted
machinery or equipment. Forklifts could
be ineligible because their permanently
mounted equipment, which can be used
to load and unload goods and transport
goods from one location to another, is
related to transportation. And mowers
would be ineligible because their
permanently mounted machinery or
equipment does not perform an
operation similar to those enumerated
in section 4053(8)(A). The Treasury
Department and the IRS request
comments on other approaches that
might be adopted in applying section
4053(8) to off-road vehicles in a manner
consistent with both the purpose and
text of section 45W and the statutory
requirements of section 4053(8),
including established case law
interpreting section 4053(8).
B. Off-Road Vehicles Lack NHTSARequired VINs
1. In General
Section 45W(e) provides that no
credit can be determined under section
45W(a) with respect to any vehicle
unless the taxpayer includes the vehicle
identification number of such vehicle
on the return of tax for the taxable year.
See also section 45W(d)(1), which

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requires, among other things, the
application of rules similar to those
provided in section 30D(f)(8) (‘‘In the
case of any vehicle, the credit described
in [section 30D](a) shall only be allowed
once with respect to such vehicle, as
determined based upon the vehicle
identification number of such vehicle
[. . . .]’’); section 30D(f)(9) (‘‘No credit
shall be allowed under this section with
respect to any vehicle unless the
taxpayer includes the vehicle
identification number of such vehicle
on the return of tax for the taxable
year.’’); and, the definition of ‘‘qualified
manufacturer’’ provided by section
30D(d)(3), incorporated by section
45W(c)(1) by cross-reference to ‘‘the
requirements of section 30D(1)(C),’’
which, by definition, requires a
qualified manufacturer to enter into a
written agreement with the Secretary
under which such manufacturer agrees
to make periodic written reports to the
Secretary providing, among other
things, vehicle identification numbers
‘‘related to each vehicle manufactured
by such manufacturer as the Secretary
may require.’’
Neither section 45W nor any other
section of the Code provides a definition
of ‘‘vehicle identification number’’ or
‘‘VIN.’’ See sections 25E, 30D, 45W,
170(f)(12), and 6213(g)(2)(T) through
(V). A ‘‘vehicle identification number,’’
as a term of art and in common speech,
refers specifically to the series of Arabic
numbers and Roman letters (defined in
49 CFR 565.13(a)) that the manufacturer
assigns to every motor vehicle in the
United States, including imported
vehicles, subject to the authority of the
National Highway Traffic Safety
Administration (NHTSA), an operating
administration that is part of the DOT.
See 49 CFR 565.10 through 565.14. For
this purpose, motor vehicles are
vehicles ‘‘driven or drawn by
mechanical power and manufactured
primarily for use on public streets,
roads, and highways.’’ 49 U.S.C. 30101–
30102. As a result, manufacturers of offroad vehicles are not required by
NHTSA to assign VINs to such vehicles.
To give effect to the parenthetical in
section 45W(c)(2)(B) that includes offroad vehicles, therefore, requires a more
general understanding of the term
‘‘vehicle identification number’’ as used
in section 45W. Such an understanding
might encompass other numbering
systems, provided that those systems
would, if integrated with the NHTSArequired VIN system, allow qualified
manufacturers and the IRS to uniquely
identify each credit-eligible vehicle for
purposes of the qualified manufacturer
requirements of section 30D(d)(3) and
the one-credit-per-vehicle provision of

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section 30D(f)(8)—for example, product
identification numbers (PINs)
administered by the Society of
Automotive Engineers (SAE) or the
Association of Equipment
Manufacturers (AEM). Compliance with
section 30D(d)(3) and (f)(8)—and, thus,
the eligibility of any off-road vehicle for
the section 45W credit—would depend
on the integration of the various
‘‘vehicle identification number’’ systems
in question, which would determine
eligibility based on either a NHTSArequired VIN or a unique identifier
system for vehicles that do not have a
NHTSA-required VIN. The IRS must be
able to identify each section 45W crediteligible vehicle based solely on the
‘‘vehicle identification number’’
assigned to the vehicle, and the ‘‘vehicle
identification number’’ must be unique
across all numbering systems accepted
by the IRS for the purpose of
administering section 45W. To integrate
the unique identifier system with the
NHTSA-required VIN, the unique
identifier system should be a 17-digit
alpha-numeric identifier.
2. Potential Integrated System for
Vehicle Identification Numbers
The Treasury Department and the IRS
are studying various potential options
for an integrated system of vehicle
identification numbers for purposes of
section 45W. Until guidance is
published detailing any such future
system, vehicles without a NHTSArequired VIN are unable to satisfy the
statutory VIN requirement in section
45W(e) and are therefore ineligible for
the section 45W credit.
The various potential options under
consideration by the Treasury
Department and the IRS include the
following structural elements:
i. If a qualified commercial clean
vehicle has a NHTSA-required VIN, the
qualified manufacturer of such vehicle
would need to report the NHTSArequired VIN to the IRS for such vehicle
to be eligible for the section 45W credit.
The taxpayer claiming a section 45W
credit for the qualified commercial
clean vehicle in such a case would need
to report the NHTSA-required VIN on
their tax return for the taxable year in
which the section 45W credit is claimed
for such claim to be valid.
ii. If a qualified manufacturer assigns
a PIN to a qualified commercial clean
vehicle and that PIN is also a unique 17digit identifier consisting of a three-digit
World Manufacturer Code (WMC) and
14 alpha-numeric characters that follow,
the qualified manufacturer would need
to provide the PIN to the taxpayer no
later than 15 days from the time the
identity of the taxpayer purchasing the

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vehicle is known, or 15 days from when
the taxpayer requests a PIN from the
qualified manufacturer, whichever is
later. The qualified manufacturer could
choose to satisfy this requirement by
labeling the PIN on the vehicle,
including adding the PIN to the item of
specified property by affixing a label to
the vehicle or by etching the PIN on the
vehicle. Alternatively, a qualified
manufacturer could choose to affix a
label containing the PIN to the vehicle’s
documentation or purchase records. The
qualified manufacturer would need to
report the PIN and the identity of the
taxpayer purchasing the vehicle to the
IRS no later than 15 days from the time
that the identity of the taxpayer
purchasing the vehicle is known for the
vehicle to be considered eligible. A
taxpayer claiming a section 45W credit
in such a case would need to report the
PIN on their tax return or information
return for the taxable year in which the
section 45W credit is claimed for such
claim to be valid.
iii. If a qualified commercial clean
vehicle does not have a VIN or a PIN
issued by a qualified manufacturer, the
qualified manufacturer could apply to
receive a valid three-digit unique
qualified manufacturer identifier
(QMID). Upon the issuance of a QMID,
the qualified manufacturer would assign
unique 17-digit PINs to the qualified
commercial clean vehicles it
manufactures. Each 17-digit PIN would
begin with the QMID followed by 14
alpha-numeric digits that the qualified
manufacturer assigns to each vehicle.
The qualified manufacturer would need
to provide the PIN to the taxpayer no
later than 15 days from the time the
identity of the taxpayer purchasing the
vehicle is known, or 15 days from when
the taxpayer requests a PIN from the
qualified manufacturer, whichever is
later. The qualified manufacturer could
choose to satisfy this requirement by
labeling the PIN on the vehicles,
including adding the PIN to the item of
specified property by affixing a label to
the vehicle or by etching the PIN on the
vehicle. Alternatively, a qualified
manufacturer could choose to affix a
label containing the PIN to the vehicle’s
documentation or purchase records. The
qualified manufacturer would need to
report the PIN and the identity of the
taxpayer purchasing the vehicle to the
IRS no later than 15 days from the time
that the identity of the taxpayer
purchasing the vehicle is known for the
vehicle to be considered eligible. A
taxpayer claiming a section 45W credit
in such a case would need to report the
PIN on the taxpayer’s tax return or
information return for the taxable year

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in which the section 45W credit is
claimed for such claim to be valid.
iv. A qualified manufacturer would
not be able to set prerequisites for a
taxpayer receiving a PIN that are not
required to verify the purchase of the
qualified commercial clean vehicle,
such as requiring taxpayers to sign up
for promotional emails, texts, or other
communications from the qualified
manufacturer, its related entities, or
partners. However, qualified
manufacturers could choose to provide
PINs to taxpayers through the mail,
online, email, or other means of
electronic delivery. Qualified
manufacturers could choose to provide
PINs in conjunction with a formal
registration for a warranty, provided
that the taxpayer could easily obtain the
PIN without completing the formal
warranty registration.
v. For qualified commercial clean
vehicles previously placed in service by
another person or entity, a subsequent
taxpayer could be required to contact
the qualified manufacturer to obtain a
PIN.
vi. Qualified manufacturers that
manufacture vehicles without a
NHTSA-required VIN would need to
enter into new qualified manufacturer
agreements.
3. Vehicles Without a NHTSA-Required
VIN Are Not Currently Eligible for the
Credit
Eligibility of any off-road vehicle for
the section 45W credit is dependent on
the issuance of final regulations
establishing an integrated vehicle
identification number system that
accommodates off-road mobile
machinery or other vehicles without a
NHTSA-required VIN that is sufficient
to satisfy the statutory vehicle
identification number requirement. This
means that off-road mobile machinery
without a NHTSA-required VIN is not
eligible for the section 45W credit.
4. Request for Comments
The Treasury Department and the IRS
request comments on the potential
integrated vehicle identification number
system described in section VII.B2 of
this Explanation of Provisions.
Specifically, the Treasury Department
and the IRS request comments on the
following questions:
i. What challenges, if any, would
manufacturers have in implementing
and complying with the integrated
vehicle identification number system
described in section VII.B2 of this
Explanation of Provisions? What would
be the costs and timeline for
manufacturers to implement and
comply with the proposed system? Are

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there cases in which manufacturers or
other stakeholders, such as retailers,
would decline to employ the system
because compliance would be overly
burdensome? Commenters are
encouraged to specifically identify types
and amounts of costs that manufacturers
would incur in implementing and
complying with the proposed system, as
well as specific aspects of the proposal
that would require set amounts of time
to develop and implement.
ii. Should the Treasury Department
and the IRS leverage existing systems,
e.g. SAE or AEM, that assign WMCs that
could be used as the first three digits of
the PIN? Are there perceived problems
with these systems? Do these systems
ensure there is no overlap with any
VINs assigned under NHTSA’s rules?
Are there other PIN tracking systems in
place that the IRS could leverage?
iii. If the Treasury Department and the
IRS were to implement the integrated
vehicle identification number system
described in section VII.B2 of this
Explanation of Provisions, what changes
or exceptions, if any, should be made?
iv. What modifications, if any, could
be made to the integrated vehicle
identification number system described
in section VII.2 of this Explanation of
Provisions to accommodate limitations
while still adhering to the unique
identifier requirement?
v. How would qualified
manufacturers furnish PINs to taxpayers
(e.g., with the vehicle, through an online
website, etc.) in a manner that ensures
the taxpayer has easy access to the PIN
when filing their tax return or
information return? How would off-road
vehicle manufacturers obtain and
provide information on the identity of
those purchasing qualified commercial
clean vehicles to assist the IRS in
ensuring compliance? What labelling
requirements should apply in assigning
PINs?

Section 216(1) of the CAA, generally
referenced in regulations under title II of
the CAA (see, for example, 40 CFR
86.082–2(b), 85.1902(f), and 1037.801),
defines ‘‘manufacturer’’, in relevant
part, as ‘‘any person engaged in the
manufacturing or assembling of new
motor vehicles, new motor vehicle
engines, new nonroad vehicles or new
nonroad engines, or importing such
vehicles or engines for resale . . . .’’
Section 216(2) of the CAA defines
‘‘motor vehicle’’ as any self-propelled
vehicle designed for transporting
persons or property on a street or
highway. Section 216(11) of the CAA
defines ‘‘nonroad vehicle’’ as a vehicle
that is powered by a nonroad engine
and that is not a motor vehicle or a
vehicle used solely for competition.
Section 216(10) of the CAA in turn
defines ‘‘nonroad engine’’ as an ICE
(including the fuel system) that is not
used in a motor vehicle or a vehicle
used solely for competition.
Under these definitions,
‘‘manufacturer’’ includes a maker of an
off-road vehicle with a ‘‘conventional’’
ICE, a maker of an off-road vehicle with
a hybrid engine (to the extent that such
vehicle includes an ICE), or a maker of
motor vehicles. It does not include a
maker of only off-road vehicles with an
exclusively electric motor or fuel cell
system. Consequently, makers of such
off-road vehicles that do not also make
any motor vehicles or off-road vehicles
with ICEs or hybrid engines cannot be
‘‘qualified manufacturers’’ for purposes
of section 45W, and their vehicles are,
consequently, ineligible for the credit.
This result, which might allow a section
45W credit for an off-road vehicle
equipped with a hybrid powertrain but
in some cases disallow a credit for a
functionally identical vehicle equipped
with an electric powertrain, may
disadvantage manufacturers who make
only products that appear well aligned
with the purposes of the credit.

C. Manufacturers That Exclusively
Manufacture Off-Road Clean Vehicles
Are Not Qualified Manufacturers

D. Some Off-Road Vehicles May Not
Display Their Gross Vehicle Weight
Ratings
Section 45W(b)(4) provides a
limitation for the credit based on the
vehicle’s GVWR, such that the amount
of the section 45W credit does not
exceed $7,500 in the case of a vehicle
that has a GVWR of less than 14,000
pounds, and $40,000 for other vehicles.
Similarly, section 45W(c)(3)(A) bases
battery capacity requirements applicable
to certain vehicles by reference to
GVWR: a battery that has a capacity of
not less than 15 kilowatt hours (or, in
the case of a vehicle that has a GVWR
of less than 14,000 pounds, 7 kilowatt
hours).

Section 45W(c)(1) provides, in part,
that a qualified commercial clean
vehicle must meet the requirements of
section 30D(d)(1)(C). Section
30D(d)(1)(C), in turn, provides that a
vehicle must be made by a qualified
manufacturer. Section 30D(d)(3),
incorporated by section 45W(c)(1)’s
cross reference to section 30D(d)(1)(C),
defines ‘‘qualified manufacturer,’’ in
part, as any manufacturer within the
meaning of the regulations prescribed
by the Administrator of the EPA for
purposes of the administration of title II
of the CAA (42 U.S.C. 7521–7590).

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3519

GVWR is not defined in the Internal
Revenue Code or any regulations
thereunder. However, the DOT and the
EPA have defined the term for purposes
of regulating motor vehicle safety and
emissions. DOT regulations define the
term ‘‘gross vehicle weight rating’’ as
the value specified by the manufacturer
as the loaded weight of a single vehicle.
See 49 CFR 383.5 and 571.3(b).
Similarly, EPA regulations define the
term ‘‘gross vehicle weight rating’’ as
the value specified by the manufacturer
as the maximum design loaded weight
of a single vehicle. See 40 CFR 86.082–
2.
Motor vehicles are required by DOT
regulations to be affixed with labels
including the GVWR of the vehicle (see
49 CFR parts 567 and 568). The only
vehicles to which those standards apply
are motor vehicles, which are defined in
49 U.S.C. 30102 as ‘‘vehicle[s] driven or
drawn by mechanical power and
manufactured primarily for use on
public streets, roads, and highways
[. . . .]’’ Off-road vehicles may not have
a GVWR affixed. It may, therefore, be
difficult for taxpayers to determine and
substantiate the appropriate credit
limitation under section 45W(b)(4).
E. Off-Road Vehicles Employing Fuel
Cells May Be Ineligible
Section 45W(c)(3)(B) provides that a
qualified commercial clean vehicle
includes ‘‘a motor vehicle which
satisfies the requirements under
subparagraphs (A) and (B) of section
30B(b)(3) if the vehicle satisfies the
other requirements of section 45W(c).’’
Section 30B(b)(3) defines a ‘‘new
qualified fuel cell motor vehicle’’ for
purposes of section 30B as a motor
vehicle, and provides among other
requirements that it be a motor vehicle
(A) that is propelled by power derived
from 1 or more cells that convert
chemical energy directly into electricity
by combining oxygen with hydrogen
fuel that is stored on board the vehicle
in any form and may or may not require
reformation prior to use, and (B) that, in
the case of a passenger automobile or
light truck, has received on or after the
date of the enactment of this section a
certificate that such vehicle meets or
exceeds the Bin 5 Tier II emission level
established in regulations prescribed by
the Administrator of the EPA under
section 202(i) of the CAA for that make
and model year vehicle. Section
30B(b)(3)(A) and (B) apply, in the
context of section 30B, only to ‘‘motor
vehicles,’’ a term defined in section
30B(h)(1) to mean ‘‘any vehicle which is
manufactured primarily for use on
public streets, roads, and highways (not
including a vehicle operated exclusively

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on a rail or rails) and which has at least
4 wheels.’’ If this definition of ‘‘motor
vehicle’’ applies to section
45W(c)(3)(B)—a meaning suggested by
that subparagraph’s use of the term
‘‘motor vehicle’’ (which appears
nowhere else in section 45W)—then offroad vehicles powered by otherwise
eligible fuel-cell technology would be
ineligible for the section 45W credit.

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F. DOT Vehicle Safety Provisions
Section 45W(d)(1) requires, among
other things, the application of a rule
similar to section 30D(f)(7). Section
30D(f)(7) provides, in part, that a vehicle
is not considered eligible for a credit
unless such vehicle is in compliance
with the motor vehicle safety provisions
of 49 U.S.C. 30101 through 30169. As
described in section VII.B of this
Explanation of Provisions, the grant of
authority under those provisions of law
do not extend to off-road vehicles. See
49 U.S.C. 30101 through 30102. It is
unlikely that any off-road vehicle might
be, as a factual matter, compliant with
safety provisions that, legally, do not
apply to it.
However, given the broad scope of
vehicles that potentially fall under the
category of off-road vehicles for
purposes of section 45W, and the scope
of the safety provisions provided in 49
U.S.C. 30101 through 30169, identifying
similar safety provisions and the criteria
by which such similarity might be
judged appear to present significant
challenges.
G. Math Error Authority
Section 6213(g)(2)(V) provides that
the term ‘‘mathematical or clerical
error’’ means an omission of a correct
vehicle identification number required
to be included on a return under section
45W(e). As noted in section VII.B of this
Explanation of Provisions, treating offroad mobile machinery (as described in
the parenthetical in section
45W(c)(2)(B)) as eligible for the 45W
credit would require a broad
interpretation of the term ‘‘vehicle
identification number’’ as that term is
used in section 45W(e) and the
provisions of section 30D that are
incorporated into section 45W through
section 45W(d)(1). If the Treasury
Department and the IRS were to develop
an integrated vehicle identification
number system that could accommodate
a broad, general definition of the term
‘‘vehicle identification number’’ to
encompass off-road mobile machinery
in the section 45W context, the Treasury
Department and the IRS would propose
a conforming amendment to § 301.6213–
2. Such an amendment would provide
clarity to taxpayers by providing a cross-

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reference to this broad, general
definition of the term ‘‘vehicle
identification number.’’
H. Other Considerations
The proposed regulations may
introduce challenges to allowing section
45W credits for off-road vehicles beyond
those flowing from the statutory
language, particularly in the calculation
of incremental cost of off-road vehicles.
Determining the residual value of offroad vehicles that have been previously
placed in service by another person or
entity, the appropriate considerations
for identifying a comparable vehicle,
and the appropriate RPE or RPEs for
purposes of a safe harbor, all present
considerable difficulties given the range
of vehicles that may fall into the offroad vehicle category.
I. Request for Comments
The Treasury Department and the IRS
are, in consultation with the DOE,
continuing to study these and related
questions. The Treasury Department
and the IRS request comments on each
of the considerations described in
section VII.A through H of this
Explanation of Provisions related to the
eligibility of off-road mobile machinery
for the section 45W credit.
Proposed Applicability Dates
Proposed §§ 1.45W–1 through 1.45W–
5 are proposed to apply to taxable years
ending after [date of publication of the
final regulations in the Federal
Register]. Proposed § 1.25E–2(b)(3) is
proposed to apply to taxable years
ending after [date of publication of the
final regulations in the Federal
Register]. Proposed § 1.30D–2(b)(28)(ii)
is proposed to apply to taxable years
ending after [date of publication of the
final regulations in the Federal
Register]. The second and third
sentences of proposed § 1.6417–6(b)(1)
are proposed to apply to property
placed in service in taxable years ending
after [date of publication of the final
regulations in the Federal Register].
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury
Regulations under Executive Order
12866 (June 9, 2023), tax regulatory
actions issued by the IRS are not subject
to the requirements of section 6 of
Executive Order 12866, as amended.
Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) (PRA) generally

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requires that a Federal agency obtain the
approval of the Office of Management
and Budget (OMB) before collecting
information from the public, whether
such collection of information is
mandatory, voluntary, or required to
obtain or retain a benefit. An agency
may not conduct or sponsor, and a
person is not required to respond to, a
collection of information unless it
displays a valid control number
assigned by the Office of Management
and Budget.
OMB Control Number 1545–2137
covers Form 8936 and Form 8936–A
regarding clean vehicle credits,
including the requirement to include on
the taxpayer’s return for the taxable year
the vehicle identification number of the
vehicle for which the section 45W credit
is claimed. Rev. Proc. 2022–42 and Rev.
Proc. 2023–38 describe the procedural
requirements for qualified
manufacturers to make periodic written
reports to the IRS to provide
information related to each vehicle
manufactured by such manufacturer
that is eligible for the section 45W credit
as required in section 30D(d)(3). The
collections of information contained in
Rev. Proc. 2022–42 and Rev. Proc.
2023–38 are described in those
documents and were submitted to the
Office of Management and Budget in
accordance with the PRA under control
number 1545–2137. The notice of
proposed rulemaking is not changing or
creating these already approved
collection requirements.
In accordance with § 1.6001–1, a
taxpayer claiming a credit under section
45W must keep permanent books of
account or records sufficient to establish
the amount of any such credit required
to be shown by such taxpayer in any
return of tax or information. For PRA
purposes, general tax records are
already approved by OMB under 1545–
0074 for individuals, 1545–0123 for
business entities, and under 1545–0092
for trust and estate filers. The notice of
proposed rulemaking is not changing or
creating these already approved
collection requirements.
The collections of information in the
proposed regulations creates reporting,
third-party disclosure and
recordkeeping requirements that are
necessary to ensure that specified
property meets the requirements for the
qualified commercial clean vehicle
credit under section 45W. These
collections of information generally
would be used by the IRS for tax
compliance purposes and by taxpayers
to ensure the vehicle qualifies for the
credit.
The reporting requirements include a
provision requiring manufacturers to

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register with the IRS to become
qualified manufacturers, as detailed in
§ 1.45W–5(c). The third-party disclosure
requirement includes the requirement
that manufacturers provide taxpayers
with a PIN number that identifies the
specified property as qualified under
section 45W. The likely respondents are
businesses and other for-profit entities.
The burden for these requirements is as
follows:
Estimated number of respondents:
4,500.
Estimated frequency of responses: 1.
Estimated average annual burden per
response: 0.25 hours.
Estimated total reporting burden:
1,125 hours.
The proposed regulations include a
third-party disclosure and associated
recordkeeping requirements for
qualified manufacturers to provide
taxpayers with the incremental cost
value, which may include detailed cost
information for the powertrains, and for
taxpayers to keep records of these
disclosures, as detailed in § 1.45W–
2(c)(10).
The likely respondents are businesses
and other for-profit and tax-exempt
entities. The burden for these
requirements is as follows:
Estimated number of respondents:
500.
Estimated frequency of responses: 1.
Estimated average annual burden per
response: 1.0 hours.
Estimated total reporting burden: 500
hours.
The collections of information
contained in this notice of proposed
rulemaking have been submitted to the
Office of Management and Budget for
review in accordance with the
Paperwork Reduction Act under OMB
Control Number 1545–2137.
Commenters are strongly encouraged to
submit public comments electronically.
Written comments and
recommendations for the proposed
information collection should be sent to
https://www.reginfo.gov/public/do/
PRAMain, with copies to the IRS. Find
this particular information collection by
selecting ‘‘Currently under Review—
Open for Public Comments,’’ and then
by using the search function. Submit
electronic submissions for the proposed
information collection to the IRS via
email at [email protected] (indicate
REG–123525–23 on the Subject line).
Comments on the collection of
information must be received by March
17, 2025.
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes
certain requirements with respect to

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Federal rules that are subject to the
notice and comment requirements of
section 553(b) of the Administrative
Procedure Act (5 U.S.C. 551 et seq.) and
that are likely to have a significant
economic impact on a substantial
number of small entities. Unless an
agency determines that a proposal will
not have a significant economic impact
on a substantial number of small
entities, section 603 of the RFA requires
the agency to present an initial
regulatory flexibility analysis (IRFA) of
the proposed rule. The Treasury
Department and the IRS have not
determined whether the proposed rule,
when finalized, will have a significant
economic impact on a substantial
number of small entities. This
determination requires further study.
However, because there is a possibility
of a significant economic impact on a
substantial number of small entities,
these proposed regulations include an
IRFA. The Treasury Department and the
IRS invite comments on both the
number of entities affected by these
proposed regulations and the economic
impact of these proposed regulations on
small entities.
Small business entities that claim the
section 45W credit must satisfy
reporting requirements. They will
continue to file Form 8936, Clean
Vehicle Credits (or successor form as the
Secretary prescribes), as was the case for
the section 45W credit prior to the
publication of these proposed
regulations. The estimated burden for
business taxpayers filing Form 8936 is
approved under OMB control number
1545–2137 and 1545–0123.
Although the Treasury Department
and IRS estimate that small business
entities will claim the credit under
section 45W in a given year, the
proposed regulations will not have a
significant economic impact on such
entities because the proposed
regulations do not impose any
additional burden on taxpayers outside
of what is provided by the statute. For
example, section 30D(f)(5), which is
incorporated into the section 45W
regime by section 45W(d)(1), requires
the Secretary to prescribe regulations
that provide for the recapture of the
credit with respect to any property
which ceases to be property eligible for
such credit. These proposed rules
merely provide the framework for the
statutorily required recapture.
The Treasury Department and IRS
have determined that the continued
requirement to file a Form 8936 (or
successor form as the Secretary
prescribes) is unlikely to involve
significant administrative costs beyond
what was previously required.

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3521

A. Need for and Objectives of the Rule
The proposed regulations would
provide the eligibility rules and key
definitions applicable to the section
45W credit to allow taxpayers to know
whether the clean vehicle they intend to
purchase is eligible for the section 45W
credit. In addition, the proposed
regulations would provide rules
regarding the recapture authority under
section 45W(d)(1), so that taxpayers and
the IRS would have clear rules regarding
when a clean vehicle may cease to be
eligible property for purposes of the
section 45W credit. Further, the
proposed regulations would provide
rules for determining the amount of the
section 45W credit, including the
determination of incremental cost for
qualified commercial clean vehicles.
The proposed rules are expected to
encourage taxpayers to purchase and
place in service qualified commercial
clean vehicles, thereby increasing the
number of clean vehicles on the roads.
Thus, the Treasury Department and the
IRS intend and expect that the proposed
rules will deliver benefits across the
economy and environment that will
beneficially impact various industries,
including clean vehicle manufacturers
and dealers.
B. Affected Small Entities
The Small Business Administration
estimates in its 2023 Small Business
Profile that 99.9 percent of United States
businesses meet its definition of a small
business. The applicability of these
proposed regulations does not depend
on the size of the business, as defined
by the Small Business Administration.
As described more fully in the preamble
to this proposed regulation and in this
IRFA, these rules may affect a variety of
different businesses across several
different industries, but will primarily
affect commercial purchasers of
qualified commercial clean vehicles and
qualified manufacturers of qualified
commercial clean vehicles. The
Treasury Department and the IRS
currently estimate the number of
manufacturers of on-road qualified
commercial clean vehicles to be
approximately 77, and the number of
manufacturers of off-road mobile
machinery to be approximately 4,500.
For off-road mobile machinery
manufacturer estimates, the Treasury
Department and IRS reviewed tax return
filings for relevant industry codes for
prior taxable years and made
assumptions regarding the likelihood of
such taxpayers manufacturing electric
or hydrogen-powered off-road mobile
machinery. For taxpayers that are not
likely to meet the definition of small

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business entity, the Treasury
Department and the IRS assumed that
100 percent would manufacture off-road
mobile machinery that may qualify for
the credit under section 45W. For
taxpayers likely to meet the definition of
small business entity, the Treasury
Department and the IRS assumed that
varying percentages of such taxpayers,
based on the size of their operations,
would manufacture off-road mobile
machinery that may qualify for the
credit under section 45W.
Of the estimated 77 manufacturers of
on-road qualified commercial clean
vehicles, the Treasury Department and
the IRS have determined that none of
them are small businesses entities. Of
the estimated 4,500 manufacturers of
off-road mobile machinery, the Treasury
Department and the IRS estimate that
more than half would likely be
considered a small business entity.
The Treasury Department and the IRS
expect to receive more information on
the impact on small businesses through
comments on this proposed rule and
again if the integrated system for vehicle
identification numbers for purposes of
section 45W is established.

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1. Impact of the Rules
The recordkeeping and reporting
requirements would increase for
qualified manufacturers of off-road
mobile machinery seeking to become
qualified manufacturers in the event of
the establishment of an integrated
system for vehicle identification
numbers. Although the Treasury
Department and the IRS do not have
sufficient data to precisely determine
the likely extent of the increased costs
of compliance, the estimated burden of
complying with the recordkeeping and
reporting requirements are described in
the PRA section of the preamble. Based
on the total number of estimated
manufacturers of off-road mobile
machinery (4500) and an estimated
registration time of 0.25 hours per
registration, the Treasury Department
and IRS estimate that off-road mobile
machinery manufacturers will spend a
total of 1,125 hours registering as
qualified manufacturers.
2. Alternatives Considered
The Treasury Department and the IRS
considered various alternatives in
promulgating these proposed
regulations. Significant alternatives and
issues considered include: (1) the
application of NHTSA rules toward
administering vehicle identification
numbers; (2) the appropriate length of
time for which a vehicle must be used
in a trade or business as it relates to the
recapture rules provided in proposed

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§ 1.45W–4(c); and (3) how best to
implement the no double benefit rules
and incremental cost calculation to the
eligibility of used vehicles for the
section 45W credit.
Regarding the application of NHTSA’s
rules administering vehicle
identification numbers compared to an
integrated vehicle identification system,
the Treasury Department and the IRS
considered the appropriate scope of the
definition of ‘‘vehicle identification
number’’ and how that definition
should be consistent with or diverge
from the inclusion of and reference to
off-road mobile machinery in the
statutory text of section 45W(c)(2)(B).
The Treasury Department and the IRS
considered interpreting the ‘‘VIN
number’’ requirement in section 45W(e)
to mean a NHTSA-required VIN,
consistent with the established
definition of ‘‘vehicle identification
number’’ in DOT regulations. See 49
CFR 565.10 through 565.14. However,
the only vehicles regulated by NHTSA
are motor vehicles, which are vehicles
manufactured primarily for use on
public streets, roads, and highways. See
49 U.S.C. 30102(7). Thus, off-road
vehicles do not have NHTSA-required
VINs. Therefore, this interpretation
would effectively exclude all off-road
mobile machinery, which Congress may
have intended to include, as reflected in
the parenthetical of section
45W(c)(2)(B).
The Treasury Department and the IRS
considered alternatives to the recapture
rules provided in proposed § 1.45W–
4(c). Given that some taxpayers may
consider using vehicles for partial
business and partial personal use, the
Treasury Department and the IRS
determined it was necessary to provide
rules regarding when the value of the
section 45W credit can be recaptured
when the vehicle is used less than 100
percent for trade or business use, other
than incidental personal use. The
Treasury Department and the IRS also
considered the appropriate length of
time for which the vehicle must be used
in a trade or business. Longer and
shorter periods of time were considered.
Based on knowledge of commercial
vehicle leasing practices (fleet leasing),
the Treasury Department and the IRS
determined that it was appropriate to
require a qualified commercial clean
vehicle to be used for 100 percent trade
or business use for 18 months after it is
placed in service.
The Treasury Department and the IRS
considered issues raised by the
applicability of the section 45W credit
to used vehicles, since the statute does
not contain an original use requirement.
In particular, the Treasury Department

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and the IRS considered how best to
implement the statutory no double
benefit rules. Section 45W(d)(3)
provides that no credit is allowed with
respect to any vehicle for which a credit
was allowed under section 30D. Section
45W(d)(1), in turn, incorporates section
30D(f)(8), which provides in relevant
part that in the case of any vehicle, the
credit shall only be allowed once with
respect to such vehicle, as determined
based upon the vehicle identification
number of such vehicle. Section
45W(d)(1) also incorporates the no
double benefit rule in section 30D(f)(2).
Subsequent buyers of qualified
commercial clean vehicles generally
would not know if a prior tax credit for
clean vehicles had been claimed with
respect to a particular used vehicle. In
addition, the IRS generally is legally
prohibited from disclosing such
confidential tax information. Given
these constraints and to ensure
compliance with the no double benefit
rules, a taxpayer claiming such credit
must establish that they are entitled to
the credit by keeping evidence in their
books and records, which may be
provided to the IRS upon request,
sufficient to establish that no deduction
or other credit was previously allowed
on such vehicle.
3. Duplicative, Overlapping, or
Conflicting Federal Rules
The proposed regulations would not
duplicate, overlap, or conflict with any
relevant Federal rules. As discussed in
the Explanation of Provisions, the
proposed regulations would merely
provide requirements, procedures, and
definitions related to the section 45W
credit. The Treasury Department and
the IRS invite input from interested
members of the public about identifying
and avoiding overlapping, duplicative,
or conflicting requirements.
C. Section 7805(f)
Pursuant to section 7805(f), this
notice of proposed rulemaking has been
submitted to the Chief Counsel for the
Office of Advocacy of the Small
Business Administration for comment
on their impact on small business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded
Mandates Reform Act of 1995 requires
that agencies assess anticipated costs
and benefits and take certain other
actions before issuing a final rule that
includes any Federal mandate that may
result in expenditures in any one year
by a State, local, or Tribal government,
in the aggregate, or by the private sector,
of $100 million (updated annually for
inflation). These proposed regulations

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Federal Register / Vol. 90, No. 8 / Tuesday, January 14, 2025 / Proposed Rules
do not include any Federal mandate that
may result in expenditures by State,
local, or Tribal governments, or by the
private sector in excess of that
threshold.

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V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial,
direct compliance costs on State and
local governments, and is not required
by statute, or preempts State law, unless
the agency meets the consultation and
funding requirements of section 6 of the
Executive order. This proposed rule
does not have federalism implications
and does not impose substantial direct
compliance costs on State and local
governments or preempt State law
within the meaning of the Executive
order.
Comments and Public Hearing
Before these proposed amendments to
the regulations are adopted as final
regulations, consideration will be given
to comments regarding the notice of
proposed rulemaking that are submitted
timely to the IRS as prescribed in the
preamble under the ADDRESSES section.
The Treasury Department and the IRS
request comments on all aspects of the
proposed regulations. All comments
will be made available at https://
www.regulations.gov. Once submitted to
the Federal eRulemaking Portal,
comments cannot be edited or
withdrawn.
A public hearing with respect to this
notice of proposed rulemaking has been
scheduled for April 28, 2025, beginning
at 10 a.m. EST in the Auditorium at the
Internal Revenue Building, 1111
Constitution Avenue NW, Washington,
DC. Due to building security
procedures, visitors must enter at the
Constitution Avenue entrance. In
addition, all visitors must present photo
identification to enter the building.
Because of access restrictions, visitors
will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts.
Participants may alternatively attend the
public hearing by telephone.
The rules of 26 CFR 601.601(a)(3)
apply to the public hearing. Persons
who wish to present oral comments at
the public hearing must submit an
outline of the topics to be discussed and
the time to be devoted to each topic by
March 17, 2025. A period of 10 minutes
will be allotted to each person for
making comments. An agenda showing
the scheduling of the speakers will be
prepared after the deadline for receiving
outlines has passed. Copies of the

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agenda will be available free of charge
at the public hearing. If no outline of the
topics to be discussed at the public
hearing is received by March 17, 2025,
the public hearing will be cancelled. If
the public hearing is cancelled, a notice
of cancellation of the public hearing
will be published in the Federal
Register.
Individuals who want to testify in
person at the public hearing must send
an email to [email protected] to
have your name added to the building
access list. The subject line of the email
must contain the regulation number
REG–123525–23 and the language
TESTIFY In Person. For example, the
subject line may say: Request to
TESTIFY In Person at Hearing for REG–
123525–23.
Individuals who want to testify by
telephone at the public hearing must
send an email to [email protected]
to receive the telephone number and
access code for the public hearing. The
subject line of the email must contain
the regulation number REG–123525–23
and the language TESTIFY
Telephonically. For example, the
subject line may say: Request to
TESTIFY Telephonically at Hearing for
REG–123525–23.
Individuals who want to attend the
public hearing in person without
testifying must also send an email to
[email protected] to have your
name added to the building access list.
The subject line of the email must
contain the regulation number REG–
123525–23 and the language ATTEND
In Person. For example, the subject line
may say: Request to ATTEND Hearing In
Person for REG–123525–23. Requests to
attend the public hearing must be
received by 5 p.m. EST on April 24,
2025.
Individuals who want to attend the
public hearing by telephone without
testifying must also send an email to
[email protected] to receive the
telephone number and access code for
the public hearing. The subject line of
the email must contain the regulation
number REG–123525–23 and the
language ATTEND Hearing
Telephonically. For example, the
subject line may say: Request to
ATTEND Hearing Telephonically for
REG–123525–23. Requests to attend the
public hearing must be received by 5
p.m. EST on April 24, 2025.
Public hearings will be made
accessible to people with disabilities. To
request special assistance during a
public hearing please contact the
Publications and Regulations Section of
the Office of Associate Chief Counsel
(Procedure and Administration) by
sending an email to publichearings@

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irs.gov (preferred) or by telephone at
(202) 317–6901 (not a toll-free number)
and must be received by at least April
23, 2025.
Statement of Availability of IRS
Documents
Revenue procedures, revenue rulings,
notices, and other guidance cited in this
preamble is published in the Internal
Revenue Bulletin and is available from
the Superintendent of Documents, U.S.
Government Publishing Office,
Washington, DC 20402, or by visiting
the IRS website at https://www.irs.gov.
Drafting Information
The principal authors of these
proposed regulations are James
Williford, Iris Chung, David Villagrana,
and Rika Valdman of the Office of the
Associate Chief Counsel (Passthroughs
and Special Industries). However, other
personnel from the Treasury
Department, the DOE, and the IRS
participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries
in numerical order for §§ 1.45W–1
through 1.45W–5 to read in part as
follows:

■

Authority: 26 U.S.C. 7805 * * *

*

*

*

*

*

Section 1.45W–1 also issued under 26
U.S.C. 45W(f) and 30D(d)(3).
Section 1.45W–2 also issued under 26
U.S.C. 45W(f).
Section 1.45W–3 also issued under 26
U.S.C. 45W(f).
Section 1.45W–4 also issued under 26
U.S.C. 45W(f) and 30D(f)(5).
Section 1.45W–5 also issued under 26
U.S.C. 45W(f).

*

*
*
*
*
Par. 2. Section 1.25E–2 is amended
by:
■ 1. Adding paragraph (b)(3); and
■ 2. Revising paragraph (i).
The addition and revision read as
follows:
■

§ 1.25E–2

Special rules.

*

*
*
*
*
(b) * * *
(3) Interaction between section 25E
and section 45W credits. A credit that
has been allowed under section 45W of

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the Code with respect to a vehicle in a
taxable year before the taxable year in
which a section 25E credit is allowable
for that vehicle does not reduce the
amount allowable under section 25E.
*
*
*
*
*
(i) Applicability dates—(1) In general.
Except as provided in paragraph (i)(2) of
this section, this section applies to
previously-owned clean vehicles placed
in service after December 31, 2022, in
taxable years ending after October 10,
2023.
(2) Paragraph (b)(3) of this section.
Paragraph (b)(3) of this section applies
to taxable years ending after [date of
publication of the final regulations in
the Federal Register].
■ Par. 3. Section 1.30D–2 is amended by
revising paragraphs (b)(28)(ii) and (d) to
read as follows:
§ 1.30D–2 Definitions for purposes of
section 30D.

*

*
*
*
*
(b) * * *
(28) * * *
(ii) Modification of a new motor
vehicle. If a manufacturer modifies a
new motor vehicle (as defined in 42
U.S.C. 7550(3)) that does not satisfy the
requirements of section 30D(d)(1)(F) or
(6) so that the new motor vehicle, after
modification, does satisfy such
requirements, then such manufacturer
may satisfy the requirements of section
30D(d)(3) if the modification occurred
prior to the new motor vehicle being
placed in service.
*
*
*
*
*
(d) Applicability dates—(1) In general.
Except as provided in paragraph (d)(2)
of this section, this section applies to
taxable years ending after December 4,
2023.
(2) Paragraph (b)(28)(ii) of this
section. Paragraph (b)(28)(ii) of this
section applies to taxable years ending
after [date of publication of the final
regulations in the Federal Register].
■ Par. 4. Sections 1.45W–0 through
1.45W–5 are added to read as follows:
Sec.

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*

*

*

*

*

1.45W–0 Table of contents.
1.45W–1 Credit for qualified commercial
clean vehicles; definitions.
1.45W–2 Amount of section 45W credit;
incremental cost.
1.45W–3 Qualified commercial clean
vehicle.
1.45W–4 Special rules.
1.45W–5 Reporting requirements.

*

*

§ 1.45W–0

*

*

*

Table of contents.

This section lists the captions
contained in §§ 1.45W–1 through
1.45W–5.

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§ 1.45W–1 Credit for qualified commercial
clean vehicles; definitions.
(a) In general.
(b) Definitions.
(1) Battery.
(2) Battery electric vehicle or BEV.
(3) Fuel cell electric vehicle of FCEV.
(4) Gross Vehicle Weight Rating or GVWR.
(5) Manufacturer.
(6) Placed in service.
(7) Plug-in hybrid electric vehicle or PHEV.
(8) Plug-in hybrid fuel cell electric vehicle
or PHFCEV.
(9) Qualified commercial clean vehicle.
(10) Qualified manufacturer.
(11) Secretary.
(12) Section 45W regulations.
(13) Statutory references.
(i) Chapter 1.
(ii) Code.
(iii) Subtitle A.
(c) Applicability date.
§ 1.45W–2 Amount of section 45W credit;
incremental cost.
(a) Per vehicle amount.
(b) Incremental cost.
(1) In general.
(2) Manufacturer’s cost.
(3) Retail price equivalent.
(i) In general.
(ii) Retail price.
(iii) Retail delivered price.
(iv) Safe harbor.
(4) Comparable vehicle.
(i) In general.
(ii) Gasoline- or diesel-powered vehicle by
same manufacturer.
(iii) Vehicle comparable in size and use.
(iv) Example.
(A) Facts.
(B) Analysis.
(c) Incremental cost equations and
calculations.
(1) ICE powertrain cost.
(2) Battery electric vehicles.
(3) Plug-in hybrid electric vehicles.
(4) Fuel cell electric vehicles.
(5) Plug-in hybrid fuel cell electric
vehicles.
(6) Incremental cost determined exclusive
of auxiliary power units.
(7) Incremental cost determine inclusive of
additional batteries, fuel cells, or hydrogen
storage.
(8) Negative incremental cost treated as
zero.
(9) Incremental cost if no comparable
vehicle exists.
(10) Taxpayer reliance on qualified
manufacturer’s incremental cost
determination.
(11) Safe harbor.
(d) Definitions.
(1) Battery.
(2) Electric traction drive system and
components.
(3) Electrical accessories.
(4) Engine and engine components.
(5) Fuel cell.
(6) Hydrogen storage.
(7) Hydrogen storage cost.
(8) Mechanical accessories.
(9) Transmission.
(e) Examples.
(1) Example 1.
(i) Facts.

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(ii) Analysis.
(2) Example 2.
(i) Facts.
(ii) Analysis.
(3) Example 3.
(i) Facts.
(ii) Analysis.
(f) Incremental cost of qualified
commercial clean vehicle previously placed
in service by another person or entity.
(1) In general.
(2) Age of a qualified commercial clean
vehicle previously placed in service by
another person or entity.
(3) Residual value factor.
(4) Example.
(i) Facts.
(ii) Analysis.
(g) Applicability date.
§ 1.45W–3 Qualified commercial clean
vehicle.
(a) In general.
(b) Acquired for use or lease and not for
resale by the taxpayer.
(1) In general.
(2) Recharacterization of lease.
(c) Type of vehicle.
(1) In general.
(2) On-road vehicle.
(3) Mobile machinery.
(d) Electric motor and battery
requirements.
(1) In general.
(2) Battery capable of being recharged from
an external source of electricity.
(e) Applicability date.
§ 1.45W–4 Special rules.
(a) No double benefit.
(1) Previous allowance of section 45W or
30D credit.
(2) Allowance of other deduction or credit.
(b) Credit ineligibility resulting from
certain transactions and uses.
(1) In general.
(2) Cancelled sale.
(3) Vehicle return.
(4) Resale.
(5) Less than 100 percent trade or business
use in taxable year vehicle is placed in
service.
(c) Recapture.
(1) In general.
(2) Recapture in the case of less than 10
percent trade or business use.
(i) In general.
(ii) Applicability to vehicles placed in
service by a tax-exempt entity.
(d) Elective payment elections.
(e) Leases.
(f) Applicability date.
§ 1.45W–5 Reporting requirements.
(a) Requirement to file return.
(b) Credit may generally be claimed on
only one tax return.
(1) In general.
(2) Grantor trusts.
(3) Partnerships and S corporations.
(c) Taxpayer reliance on manufacturer
certifications and periodic written reports to
the IRS.
(d) Applicability date.

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§ 1.45W–1 Credit for qualified commercial
clean vehicles; definitions.

(a) In general. The section 45W
regulations (defined in paragraph (b)(12)
of this section) apply for purposes of
determining the availability and amount
of any credit under section 45W of the
Internal Revenue Code (Code) with
respect to a qualified commercial clean
vehicle placed in service by a taxpayer
during such taxpayer’s taxable year
(section 45W credit). Paragraph (b) of
this section provides definitions of
terms for purposes of applying section
45W and the section 45W regulations.
Section 1.45W–2 provides rules for
determining the per-vehicle credit
amount under section 45W(b). Section
1.45W–3 provides rules related to the
definition of qualified commercial clean
vehicle under section 45W(c). Section
1.45W–4 provides special rules related
to section 45W(d). Section 1.45W–5
provides reporting requirements for
purposes of section 45W.
(b) Definitions. The following
definitions apply for purposes of section
45W and the section 45W regulations.
For definitions specific to incremental
cost calculations, see § 1.45W–2(d).
(1) Battery. Battery means a collection
of one or more battery modules, each of
which has two or more battery cells,
electrically configured in series or
parallel, to create voltage or current. The
term battery does not include items
such as thermal management systems or
other parts of a battery cell or module
that do not directly contribute to the
electrochemical storage of energy within
the battery, such as battery cell cases,
cans, or pouches.
(2) Battery electric vehicle or BEV.
Battery electric vehicle or BEV means a
vehicle propelled solely by an electric
motor that draws electricity from
batteries capable of being recharged
from an external source of electricity.
(3) Fuel cell electric vehicle or FCEV.
Fuel cell electric vehicle or FCEV means
a vehicle—
(i) That is propelled by power derived
from one or more cells that convert
chemical energy directly into electricity
by combining oxygen with hydrogen
fuel that is stored on board the vehicle
in any form and may or may not require
reformation prior to use; and
(ii) That, in the case of a light-duty
vehicle (that is, a passenger automobile
or light truck), has received on or after
August 8, 2005 (the date of the
enactment of section 30B of the Code),
a certificate indicating that such vehicle
meets or exceeds the Bin 5 Tier II
emission level established in regulations
in 40 CFR chapter I prescribed by the
Administrator of the Environmental
Protection Agency (EPA) under section

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202(i) of the Clean Air Act (CAA) (42
U.S.C. 7521(i)) for that make and model
year vehicle.
(4) Gross vehicle weight rating or
GVWR. Gross vehicle weight rating or
GVWR has the meaning provided in 40
CFR 86.082–2 and 49 CFR 571.3(b).
(5) Manufacturer—(i) In general.
Manufacturer means any manufacturer
within the meaning of the regulations in
40 CFR chapter I prescribed by the
Administrator of the EPA for purposes
of the administration of title II of the
CAA (42 U.S.C. 7521 et seq.) and as
defined in 42 U.S.C. 7550(1). If multiple
manufacturers are involved in the
production of a vehicle, the
requirements of section 30D(d)(3) must
be met by the manufacturer that satisfies
the reporting requirements of the
greenhouse gas emissions standards set
by the EPA under the CAA (42 U.S.C.
7521 et seq.) for the subject vehicle.
(ii) Modification of a new motor
vehicle. If a manufacturer modifies a
new motor vehicle (as defined in 42
U.S.C. 7550(3)) that does not satisfy the
requirements of section 45W(c)(3) so
that the vehicle, after modification, does
satisfy such requirements, then such
manufacturer may satisfy the
requirements of section 30D(d)(3) of the
Code and § 1.30D–2(b)(28)(i) for
purposes of paragraph (b)(5)(i) of this
section if the modification occurs prior
to the vehicle being placed in service.
(6) Placed in service. A qualified
commercial clean vehicle is considered
to be placed in service on the date the
taxpayer takes possession of the vehicle.
(7) Plug-in hybrid electric vehicle or
PHEV. Plug-in hybrid electric vehicle or
PHEV means a vehicle that uses
batteries that can be recharged from an
external source of electricity to power
an electric motor that propels the
vehicle to a significant extent, and
another fuel, such as gasoline or diesel,
to power an internal combustion engine
or other propulsion source.
(8) Plug-in hybrid fuel cell electric
vehicle or PHFCEV. Plug-in hybrid fuel
cell electric vehicle or PHFCEV means a
vehicle that uses batteries that can be
recharged from an external source of
electricity to power an electric motor
that propels the vehicle to a significant
extent and a hydrogen fuel source that
powers an electric motor through the
fuel cell system.
(9) Qualified commercial clean
vehicle. Qualified commercial clean
vehicle means a vehicle that meets the
requirements of section 45W(c) and
§ 1.45W–3(b) through (d). Vehicles that
may qualify as qualified commercial
clean vehicles include BEVs, FCEVs,
PHEVs, and PHFCEVs. A vehicle does

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not meet the requirements of section
45W(c) if—
(i) The qualified manufacturer fails to
provide a periodic written report for
such vehicle prior to the vehicle being
placed in service by the taxpayer
claiming the credit that reports the
vehicle identification number of such
vehicle and certifies compliance with
the requirements of section 45W(c);
(ii) The qualified manufacturer
provides incorrect information with
respect to the periodic written report for
such vehicle; or
(iii) The qualified manufacturer fails
to update its periodic written report in
the event of a material change with
respect to such vehicle.
(10) Qualified manufacturer.
Qualified manufacturer means a
manufacturer that meets the
requirements described in section
30D(d)(3) at the time the manufacturer
submits a periodic written report to the
Internal Revenue Service (IRS) under a
written agreement described in section
30D(d)(3). The term qualified
manufacturer does not include any
manufacturer whose qualified
manufacturer status has been terminated
by the IRS. The IRS may terminate
qualified manufacturer status for fraud,
intentional disregard, or gross
negligence with respect to any
requirements of section 45W, the
section 45W regulations, or any
guidance under section 45W, including
with respect to the periodic written
reports described in section 30D(d)(3)
and this paragraph (b)(10). The IRS may
also terminate qualified manufacturer
status for fraud, intentional disregard, or
gross negligence with respect to any
requirement of section 25E or 30D or
any regulations in this chapter or
guidance thereunder.
(11) Secretary. Secretary has the
meaning provided in section
7701(a)(11)(B) of the Code.
(12) Section 45W regulations. Section
45W regulations means this section and
§§ 1.45W–2 through 1.45W–5.
(13) Statutory references—(i) Chapter
1. Chapter 1 means chapter 1 of the
Code.
(ii) Code. Code means the Internal
Revenue Code.
(iii) Subtitle A. Subtitle A means
subtitle A of the Code.
(c) Applicability date. This section
applies to qualified commercial clean
vehicles placed in service in taxable
years ending after [date of publication of
the final regulations in the Federal
Register].

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§ 1.45W–2 Amount of section 45W credit;
incremental cost.

(a) Per-vehicle credit amount. Subject
to the limitation in section 45W(b)(4) of
the Code, the per-vehicle credit amount
under section 45W(b)(1) with respect to
any qualified commercial clean vehicle
is the lesser of 15 percent of the basis
of such vehicle (or 30 percent in the
case of a vehicle not powered by a
gasoline or diesel internal combustion
engine (ICE)), or the incremental cost of
such vehicle.
(b) Incremental cost—(1) In general.
For purposes of section 45W(b)(2), the
incremental cost of any qualified
commercial clean vehicle is determined
using the incremental cost calculations
and equations in paragraph (c) of this
section to determine the amount equal
to the excess of—
(i) The product of the qualified
manufacturer’s cost of components
necessary for the BEV powertrain, FCEV
powertrain, PHEV powertrain, or
PHFCEV powertrain used in the vehicle
and the retail price equivalent (RPE) of
such vehicle; minus
(ii) The product of the manufacturer’s
cost of components necessary for the
powertrain of a comparable vehicle
powered solely by a gasoline or diesel
ICE and the RPE of such comparable
vehicle.
(2) Manufacturer’s cost. For purposes
of this section, a manufacturer’s cost
includes only its direct manufacturing
costs, which may include, but are not
limited to, the costs of materials and
labor.
(3) Retail price equivalent—(i) In
general. The RPE is the ratio of the
manufacturer’s suggested retail price
(MSRP) of a vehicle to the
manufacturer’s cost to manufacture such
vehicle. The MSRP is the sum of the
retail price and the retail delivered
price.
(ii) Retail price. For purposes of
paragraph (b)(3)(i) of this section, retail
price is the retail price of the vehicle
suggested by the manufacturer as
described in 15 U.S.C. 1232(f)(1).
(iii) Retail delivered price. Retail
delivered price, for purposes of
paragraph (b)(3)(i) of this section, is the
retail delivered price suggested by the
manufacturer for each accessory or item
of optional equipment physically
attached to such vehicle at the time of
its delivery to the dealer that is not
included within the price of such
vehicle as stated pursuant to 15 U.S.C.
1232(f)(1), as described in 15 U.S.C.
1232(f)(2).
(iv) Safe harbor. The Secretary may
publish guidance in the Internal
Revenue Bulletin (see § 601.601 of this
chapter) no more frequently than

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annually that will provide RPE safe
harbors for different segments of the
vehicle market. Any taxpayer that uses
an RPE provided in safe harbor
guidance published in the Internal
Revenue Bulletin (see § 601.601 of this
chapter) to determine the cost of a BEV,
PHEV, FCEV, PHFCEV, or ICE
powertrain will be deemed to have
satisfied the requirements of this
paragraph (b)(3), provided all
requirements specified in the applicable
RPE safe harbor guidance have been
met. No formal election is required for
a taxpayer to use a safe harbor RPE.
(4) Comparable vehicle—(i) In
general. A comparable vehicle is any
vehicle that is powered solely by a
gasoline or diesel ICE and is comparable
in size and use to the qualified
commercial clean vehicle. Except as
provided in paragraph (b)(4)(ii) of this
section, the manufacturer of the
comparable vehicle need not be the
manufacturer of the qualified
commercial clean vehicle.
(ii) Gasoline- or diesel-powered
vehicle by same manufacturer. If the
qualified manufacturer of a qualified
commercial clean vehicle also
manufactures a solely gasoline- or
diesel-powered ICE version of such
vehicle, meaning a vehicle of the same
model, produced in the same model
year, and with features substantially
similar to those of the qualified
commercial clean vehicle, such solely
gasoline- or diesel-powered vehicle is
the only comparable vehicle with
respect to such qualified commercial
clean vehicle.
(iii) Vehicle comparable in size and
use. A vehicle is comparable to a
qualified commercial clean vehicle in
size and use if, as relevant to the
particular qualified commercial clean
vehicle, it has substantially similar
features, such as GVWR, number of
doors, towing capacity, passenger
capacity, cargo capacity, mounted
equipment, drivetrain type, overall
width, height and ground clearance, and
trim level.
(iv) Example: Comparable vehicle—
(A) Facts. A passenger car with a BEV
powertrain (BEV X) that is a qualified
commercial clean vehicle has a GVWR
of 4,800 pounds, four doors, fivepassenger seating capacity, a mid-range
trim level, and a 250-horsepower
powertrain. A passenger car with an ICE
powertrain (ICE Car 1) has a GVWR of
4,500 pounds, four doors, five-passenger
seating capacity, a mid-range trim level,
and a 200-horsepower powertrain. A
second passenger car with an ICE
powertrain (ICE Car 2) has a GVWR of
4,500 pounds, two doors, two-passenger

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seating capacity, a high-end trim level,
and a 250-horsepower powertrain.
(B) Analysis. ICE Car 1 is comparable
to BEV X because ICE Car 1 and BEV X
have substantially similar GVWRs
(4,800 pounds compared to 4,500
pounds), numbers of doors (4),
passenger capacity (5), and trim levels
(mid-range). The fact that ICE Car 1 and
BEV X have dissimilar horsepower is
not determinative because whether two
vehicles are comparable vehicles under
the rules of paragraph (b)(4) of this
section is not entirely dependent on the
performance characteristics of the
powertrains. ICE Car 2 and BEV X,
which have different numbers of doors
(4 compared to 2), passenger capacities
(5 compared to 2), and trim levels (midrange compared to high-end), are not
comparable. Therefore, ICE Car 1 is a
comparable vehicle for purposes of
calculating the incremental cost of BEV
X, but ICE Car 2 is not.
(c) Incremental cost equations and
calculations. The incremental cost
equations and calculations set forth in
this paragraph (c) apply to determine
the incremental cost of a qualified
commercial clean vehicle for purposes
of section 45W(b)(2) and this section.
(1) ICE powertrain cost. For purposes
of the equations and calculations in this
paragraph (c), the ICE powertrain cost is
the sum of the cost of the engine, the
ICE transmission, and the mechanical
accessories.
(2) Battery electric vehicles. In the
case of a BEV, the incremental cost of
the BEV is the product of the
manufacturer’s cost of the BEV
powertrain and the RPE of such vehicle,
less the product of the manufacturer’s
cost of the comparable vehicle ICE
powertrain and the RPE of such vehicle.
The BEV powertrain cost is the sum of
the cost of the electric traction drive
system (which, for purposes of equation
1 to this paragraph (c)(2), includes the
BEV transmission), the battery, and the
electrical accessories. Expressed
formulaically, the rule is as follows:
Equation 1 to Paragraph (c)(2)
Incremental cost of BEV = (BEV
powertrain cost × RPE)¥(ICE
powertrain cost × RPE)
(3) Plug-in hybrid electric vehicles. In
the case of a PHEV, the incremental cost
of the PHEV is the product of the
manufacturer’s cost of the PHEV
powertrain and the RPE of such vehicle,
less the product of the manufacturer’s
cost of the comparable vehicle ICE
powertrain and the RPE of such vehicle.
The PHEV powertrain cost is the sum of
the cost of the engine, the electric
traction drive system (which, for

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purposes of equation 2 to this paragraph
(c)(3), includes the PHEV transmission),
the battery, and the electrical
accessories. Expressed formulaically,
the rule is as follows:
Equation 2 to Paragraph (c)(3)
Incremental cost of PHEV = (PHEV
powertrain cost × RPE)¥(ICE
powertrain cost × RPE)
(4) Fuel cell electric vehicles. In the
case of a FCEV, the incremental cost of
the FCEV is the product of the
manufacturer’s cost of the FCEV
powertrain and the RPE of such vehicle,
less the product of the manufacturer’s
cost of the comparable vehicle ICE
powertrain and the RPE of such vehicle.
The FCEV powertrain cost is the sum of
the cost of the fuel cell system, the
hydrogen storage, the electric traction
drive system (which, for purposes of
equation 3 to this paragraph (c)(4),
includes the FCEV transmission), the
battery, and the electrical accessories.
Expressed formulaically, the rule is as
follows:

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Equation 3 to Paragraph (c)(4)
Incremental cost of FCEV = (FCEV
powertrain cost × RPE)¥(ICE
powertrain cost × RPE)
(5) Plug-in hybrid fuel cell electric
vehicles. In the case of a PHFCEV, the
incremental cost of the PHFCEV is the
product of the manufacturer’s cost of the
PHFCEV powertrain and the RPE of
such vehicle, less the product of the
manufacturer’s cost of the comparable
vehicle ICE powertrain and the RPE of
such vehicle. The PHFCEV powertrain
cost is the sum of the cost of the fuel
cell system, the hydrogen storage, the
electric traction drive system (which, for
purposes of equation 4 to this paragraph
(c)(5), includes the PHFCEV
transmission), the battery, and the
electrical accessories. Expressed
formulaically, the rule is as follows:
Equation 4 to Paragraph (c)(5)
Incremental cost of PHFCEV = (PHFCEV
powertrain cost × RPE)¥(ICE
powertrain cost × RPE)
(6) Incremental cost determined
exclusive of auxiliary power units. The
incremental cost of a qualified
commercial clean vehicle is determined
without regard to any auxiliary power
unit installed on such vehicle or on a
comparable vehicle.
(7) Incremental cost determined
inclusive of additional batteries, fuel
cells, or hydrogen storage. The
incremental cost of a qualified
commercial clean vehicle is determined
by adding to the cost of the BEV, FCEV,
PHEV, or PHFCEV powertrain the cost

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of additional batteries installed on such
vehicle, regardless of whether such
additional batteries are required by a
power takeoff, as well as additional fuel
cells or additional hydrogen storage
installed on such vehicle, regardless of
whether such additional fuel cells are
required by a power takeoff.
(8) Negative incremental cost treated
as zero. If the incremental cost
calculation results in a negative number,
meaning that the cost of the BEV, FCEV,
PHEV, or PHFCEV powertrain used in
the qualified commercial clean vehicle
is less than the cost of the ICE
powertrain of a comparable vehicle,
then the incremental cost of the
qualified commercial vehicle is zero.
This paragraph (c)(8) does not affect the
availability of the safe harbor described
in paragraph (c)(11) of this section.
(9) Incremental cost if no comparable
vehicle exists. If a taxpayer or
manufacturer cannot identify a
comparable vehicle with respect to a
particular qualified commercial clean
vehicle, then the incremental cost of
such qualified commercial clean vehicle
is zero. This paragraph (c)(9) does not
affect the availability of the safe harbor
described in paragraph (c)(11) of this
section.
(10) Taxpayer reliance on qualified
manufacturer’s incremental cost
determination. If a qualified
manufacturer provides a taxpayer with
written documentation of the
incremental cost of a qualified
commercial clean vehicle that identifies
the comparable vehicle such
manufacturer used for the incremental
cost calculation and the taxpayer keeps
such incremental cost documentation in
the taxpayer’s records for as long as the
period of limitations for the taxable
period in which the credit was claimed
is open, the taxpayer may rely on such
incremental cost for purposes of
calculating the amount of the section
45W credit (defined in § 1.45W–1(a))
with respect to such vehicle. See
§ 1.45W–1(b)(9) for consequences of
qualified manufacturer fraud,
intentional disregard, or gross
negligence with respect to any
requirements of section 45W, the
section 45W regulations (defined in
§ 1.45W–1(b)(12)), or any guidance
issued by the Secretary under section
45W.
(11) Safe harbor. The Secretary may
publish guidance in the Internal
Revenue Bulletin (see § 601.601 of this
chapter) no more frequently than
annually that will provide incremental
cost safe harbors for different types and
classes of qualified commercial clean
vehicles placed in service during a
specified period. Any taxpayer that uses

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an incremental cost safe harbor
provided in guidance published in the
Internal Revenue Bulletin (see § 601.601
of this chapter) will be deemed to have
satisfied the requirements of section
45W(b)(1)(B) and (2) and paragraphs (b)
and (c) of this section, provided all
requirements specified in the applicable
safe harbor guidance have been met. No
formal election is required for a
taxpayer to use an incremental cost safe
harbor.
(d) Definitions. This paragraph (d)
provides definitions related to the
incremental cost rules in section
45W(b)(1)(B) and paragraphs (b) and (c)
of this section.
(1) Battery. Battery has the meaning
provided in § 1.45W–1(b)(1).
(2) Electric traction drive system and
components—(i) Electric traction drive
system. Electric traction drive system
means a system used to provide vehicle
propulsion in BEVs, FCEVs, PHEVs, and
PHFCEVs by delivering torque to the
wheels and axle of the vehicle, and
includes, but is not limited to, an
electric motor, an inverter, and a
transmission.
(ii) Electric motor. Electric motor
means the component that includes the
stator, rotor, shaft, housing, bearings,
and lubrication elements. Multiple
electric motors may be used in a
vehicle.
(iii) Inverter. Inverter means a
component that converts direct current
(DC) from the battery into alternating
current (AC) to power the electric
motor, providing precise control over
motor operations.
(iv) BEV, FCEV, PHEV, and PHFCEV
transmission. For the definition of
transmission for BEVs, FCEVs, PHEVs,
and PHFCEVs, see paragraph (d)(9)(i) of
this section.
(3) Electrical accessories—(i) In
general. Electrical accessories means
accessories that support, but do not
independently facilitate, the function of
essential vehicle systems, and include,
but are not limited to, battery
enclosures, a compressor, an electric
steering pump, high voltage cables and
connections, thermal management
systems, and a vacuum pump.
(ii) Battery enclosures. Battery
enclosures means components that
consist of battery cases, cans or
pouches, or casings or packaging used to
enclose and protect battery cells and
modules into a pack.
(iii) Compressor. Compressor means a
component that powers the air
conditioning system, ensuring effective
climate control within the vehicle.
(iv) Electric steering pump. Electric
steering pump means a component that
provides hydraulic assistance for the

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steering mechanism, enhancing ease of
steering and vehicle maneuverability.
(v) High voltage cables and
connections. High voltage cables and
connections means components that
include all high voltage cables,
connections to electric drive units,
cables from the onboard charger, DC–DC
converter, air compressors, and the
charging cable from the charging port to
the onboard charger.
(vi) Thermal management systems.
Thermal management systems means
components that manage heating and
cooling loads to ensure the efficient
operation of the battery and electric
traction drive system.
(vii) Vacuum pump. Vacuum pump
means a component that is essential for
various vehicle systems that require
vacuum assistance, contributing to
overall system functionality.
(4) Engine and engine components—
(i) Engine. The engine generates power
by burning fuel with air inside the
engine. The engine includes, but is not
limited to, air intake and cooling
systems, assembly accessories, core
engine components, engine management
sensors and electronics, exhaust gas
regulator and breather systems, fuel
systems, induction air charging and fuel
induction systems, power distribution
and sensing for after-treatment, primary
exhaust and after-treatment modules,
and a valve train.
(ii) Air intake and cooling systems.
Air intake and cooling systems means
components that ensure adequate
airflow for combustion and regulate
engine temperature through the use of
pumps, pipes, and cooling fans.
(iii) Assembly accessories. Assembly
accessories means auxiliary components
that are necessary for the assembly and
integration of the powertrain system.
(iv) Core engine components. Core
engine components means components
that include the engine cylinder head,
crankshaft, and cylinder block, which
form the fundamental structure of the
engine, facilitating combustion and
power generation.
(v) Engine management sensors and
electronics. Engine management sensors
and electronics means control units and
sensors that monitor and adjust engine
parameters to maximize engine
performance and minimize emissions.
(vi) Exhaust gas regulator and
breather systems. Exhaust gas regulator
and breather systems means
components that control the release of
exhaust gases and maintain proper
ventilation of the engine crankcase.
(vii) Fuel system. Fuel system means
components that encompass fuel
storage, distribution, and evaporative

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control components, ensuring proper
fuel delivery and reducing emissions.
(viii) Induction air charging and fuel
induction systems. Induction air
charging and fuel induction systems
means components that regulate the
intake of air and fuel into the
combustion chambers, ensuring efficient
mixing and combustion.
(ix) Power distribution and sensing for
after-treatment. Power distribution and
sensing for after-treatment means
sensors and distribution mechanisms
that manage the after-treatment process,
ensuring effective emission control.
(x) Primary exhaust and aftertreatment modules. Primary exhaust
and after-treatment modules means
components that handle the initial
expulsion of exhaust gases and
subsequent treatment to meet emission
standards.
(xi) Valve train. Valve train means a
component that manages the timing and
operation of the engine’s intake and
exhaust valves, optimizing airflow and
exhaust processes.
(5) Fuel cell. Fuel cell means one or
more cells in a stack that convert
chemical energy directly into electricity
by combining oxygen with hydrogen
fuel that is stored on board the vehicle
in any form and may or may not require
reformation prior to use. The fuel cell
system includes the stack as well as
auxiliary components that include but
are not limited to pumps, sensors, heat
exchangers, gaskets, compressors,
recirculation blowers, or humidifiers.
(6) Hydrogen storage. Hydrogen
storage means storage of hydrogen on
board the vehicle in high-pressure tanks
as a gas or liquid.
(7) Hydrogen storage cost. Hydrogen
storage cost includes the cost of the tank
and the components that manage the
flow of hydrogen from the tank to the
fuel cell system (that is, hydrogen
supply and regulation).
(8) Mechanical accessories—(i) In
general. Mechanical accessories are
accessories that support, but do not
independently facilitate, the function of
essential vehicle systems, and include,
but are not limited to, a compressor, a
mechanical steering pump, and a water
pump.
(ii) Compressor. Compressor means a
component that powers the air
conditioning system, ensuring effective
climate control within the vehicle.
(iii) Mechanical steering pump.
Mechanical steering pump means a
component that provides hydraulic
assistance to the steering mechanism,
reducing the effort required by the
driver to turn the steering wheel.
(iv) Water pump. Water pump means
a component that circulates coolant

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throughout the engine to maintain
optimal operating temperatures and
prevent overheating.
(9) Transmission—(i) BEVs, FCEVs,
PHEVs and PHFCEVs. For BEVs, FCEVs,
PHEVs, and PHFCEVs, transmission
means a mechanical device that uses a
gear set—two or more gears working
together—to change the speed or
direction of rotation in a machine. For
BEVs and FCEVs (electric vehicles),
transmission means a component that
consists of a single- or multi-speed,
single- or multi-reduction gearbox that
transfers power from the electric
machine to the wheels. For PHEVs and
PHFCEVs (plug-in hybrid vehicles),
transmission components will depend
on the vehicle driveline and orientation
of the hybrid system (i.e., parallel or
series) and may include, but are not
limited to:
(A) Two transmissions (one ICE
transmission and one electric vehicle
transmission);
(B) One transmission with some
components of both ICE and EV
transmissions; and
(C) One electric vehicle transmission
only.
(ii) ICE vehicles—(A) In general. For
ICE vehicles, transmission means a
mechanical device that uses a gear set
(that is, two or more gears working
together) to change the speed or
direction of rotation in a machine. For
ICE vehicles, a transmission may
include, but is not limited to, a case, a
drivetrain and geartrain, an internal
clutch and torque converter, a
lubrication system, a mechanical
controls and electronic distribution
system, a park-brake mechanism, and a
transmission cooling system.
(B) Case, drivetrain, and geartrain.
Case, drivetrain, and geartrain means
the mechanical components within the
transmission that transfer power from
the engine to the wheels, including
gears and shafts.
(C) Internal clutch and torque
converter. Internal clutch and torque
converter means components that
facilitate smooth power transfer and
gear changes, enhancing drivability.
(D) Lubrication system. Lubrication
system means components that ensure
all moving parts within the transmission
are adequately lubricated, reducing
friction and wear.
(E) Mechanical controls and
electronic distribution system.
Mechanical controls and electronic
distribution system means components
that manage the operation of the
transmission, including gear selection
and shifting through both mechanical
and electronic means.

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(F) Park-brake mechanism. Parkbrake mechanism means a component
that ensures the vehicle remains
stationary when parked.
(G) Transmission cooling system.
Transmission cooling system means
components that prevent overheating of
the transmission components, ensuring
reliable performance under various
operating conditions.
(e) Examples—(1) Example 1:
Incremental cost calculation for a
qualified commercial clean vehicle—(i)
Facts. Manufacturer is the qualified
manufacturer of a model year 2024
battery electric sport utility vehicle
(BEV SUV). The BEV SUV is a qualified
commercial clean vehicle with a GVWR
of 4,600 pounds. Manufacturer is also
the manufacturer of a gasoline-powered
ICE SUV (ICE SUV) that, except for the
powertrain, is identical to the BEV SUV.
Manufacturer’s costs of the BEV SUV
powertrain components are: electric
traction drive system ($1,881.00),
battery ($12,060.00), and electrical
accessories ($1,437.00). The RPE of the
BEV SUV is 1.49. Manufacturer’s costs
of the ICE SUV powertrain components
are: engine ($5,757.00), transmission
($1,744.00), and mechanical accessories
($415.00). The RPE of the ICE SUV is
1.52. In 2025, Taxpayer purchases the
BEV SUV for $50,000 and places the
vehicle in service. At the time of
Taxpayer’s purchase, Manufacturer
provides Taxpayer with a written
disclosure of Manufacturer’s
incremental cost calculation, which
Manufacturer calculated as described in
paragraphs (b) and (c) of this section.
(ii) Analysis—(A) Calculation of
incremental cost. Under paragraph (b)(1)
of this section, the incremental cost of
the BEV SUV is the product of
Manufacturer’s cost of the BEV SUV
powertrain and the RPE of such vehicle,
less the product of Manufacturer’s cost
of the comparable vehicle ICE
powertrain and the RPE of such vehicle.
(1) Step 1. Under paragraph (c)(2) of
this section, the BEV SUV powertrain
cost is the sum of the cost of the electric
traction drive system ($1,881.00), the
battery ($12,060.00), and the electrical
accessories ($1,437.00), multiplied by
the RPE of the vehicle (1.49), or
$22,913.22.
(2) Step 2. Under paragraph (b)(4) of
this section, the ICE SUV is the
comparable vehicle with respect to the
BEV SUV. Under paragraph (c)(1) of this
section, the ICE SUV powertrain cost is
the sum of the cost of the engine
($5,757.00), the ICE transmission
($1,744.00), and the mechanical
accessories ($415.00), multiplied by the
RPE of the vehicle (1.52), or $12,032.32.

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(3) Step 3. Under paragraph (c)(2) of
this section, the incremental cost of the
BEV SUV is determined by subtracting
the cost of the ICE SUV powertrain in
step 2 ($12,032.32) from the cost of the
BEV SUV powertrain in step 1
($22,913.22), or $10,880.90
($22,913.22¥$12,032.32 = $10,880.90).
(B) Determination of credit amount.
Under paragraph (c)(10) of this section,
Taxpayer may rely on Manufacturer’s
incremental cost calculation, which is
described in paragraphs (b) and (c) of
this section, for purposes of determining
the amount of the section 45W credit
allowable for the BEV SUV. Subject to
the limitation in section 45W(b)(4), the
credit amount is the lesser of 30 percent
of Taxpayer’s basis in the BEV SUV
($50,000.00 × 30% = $15,000.00) or the
incremental cost of the BEV SUV
($10,880.90). Under section 45W(b)(4),
the taxpayer’s credit is limited to a
maximum of $7,500.00 because the
vehicle has a GVWR of less than 14,000
pounds. Therefore, the allowable
section 45W credit with respect to the
BEV SUV is $7,500.00.
(2) Example 2: Section 45W credit
equal to 30 percent of Taxpayer’s basis
in a qualified commercial clean
vehicle—(i) Facts. The facts are the same
as in paragraph (e)(1) of this section
(Example 1), except that Taxpayer
purchases the BEV SUV for $21,600.00
and the incremental cost calculated by
Manufacturer and provided in writing to
Taxpayer is $7,000.00.
(ii) Analysis. Under paragraph (c)(10)
of this section, Taxpayer may rely on
Manufacturer’s incremental cost
calculation, which is described in
paragraphs (b) and (c) of this section, for
purposes of determining the amount of
the section 45W credit allowable for the
BEV SUV. Subject to the limitation in
section 45W(b)(4), the credit amount
equals the lesser of 30 percent of
Taxpayer’s basis in the BEV SUV
($21,600.00 × 30% = $6,480.00) or the
incremental cost of the BEV SUV
($7,000.00). Because $6,480.00 is below
the $7,500 limitation in section
45W(b)(4), the allowable section 45W
credit with respect to the BEV SUV is
$6,840.00.
(3) Example 3: Incremental cost limit
for a BEV with a GVWR over 14,000
pounds—(i) Facts. Manufacturer is the
qualified manufacturer of a model year
2025 battery electric bus (BEV Bus). The
BEV Bus has a GVWR of 14,500 pounds
and is a qualified commercial clean
vehicle. Manufacturer is also the
manufacturer of an ICE Bus that, except
for the powertrain, is substantially
similar to the BEV Bus. Manufacturer’s
costs of the BEV Bus powertrain
components are: electric traction drive

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system ($4,586.00), battery ($18,535.00),
and electrical accessories ($2,150.00).
The RPE of the BEV Bus is 1.49.
Manufacturer’s costs of the ICE Bus
powertrain components are: engine
($7,350.00), ICE transmission
($4,730.00), and mechanical accessories
($780.00). The RPE of the ICE Bus is
1.52. In 2025, Taxpayer purchases the
BEV Bus for $105,500.00, takes
possession of the vehicle, and places it
in service that same year. At the time
Taxpayer purchases the BEV Bus,
Manufacturer provides Taxpayer with a
written disclosure of Manufacturer’s
incremental cost calculation, which
Manufacturer calculated in the manner
described in paragraphs (b) and (c) of
this section.
(ii) Analysis—(A) Calculation of
incremental cost. Under paragraph (c)(2)
of this section, the incremental cost of
the BEV Bus is the product of
Manufacturer’s cost of the BEV Bus
powertrain and the RPE of such vehicle,
less the product of Manufacturer’s cost
of the comparable vehicle ICE
powertrain and the RPE of such vehicle.
(1) Step 1. Under paragraph (c)(2) of
this section, the BEV Bus powertrain
cost is the sum of the cost of the electric
traction drive system ($4,586.00), the
battery ($18,535.00), and the electrical
accessories ($2,150.00) multiplied by
the RPE of the vehicle (1.49), or
$37,653.79.
(2) Step 2. Under paragraph (b)(4) of
this section, the ICE Bus is the
comparable vehicle with respect to the
BEV Bus. Under paragraph (c)(1) of this
section, the ICE Bus powertrain cost is
the sum of the cost of the engine
($7,350.00), the ICE transmission
($4,730.00), and the mechanical
accessories ($780.00) multiplied by the
RPE of the vehicle (1.52), or $19,547.20.
(3) Step 3. Under paragraph (c)(2) of
this section, the incremental cost of the
BEV Bus is determined by subtracting
the cost of the ICE Bus powertrain
($19,547.20) from the cost of the BEV
Bus powertrain ($37,653.79), or
$18,106.59 ($37,653.79 ¥ $19,547.20 =
$18,106.59).
(B) Determination of credit amount.
Under paragraph (c)(1) of this section,
Taxpayer may rely on Manufacturer’s
incremental cost calculation, which is
described in paragraphs (b) and (c) of
this section. Subject to the limitation in
section 45W(b)(4), the credit amount is
the lesser of 30 percent of Taxpayer’s
basis in the BEV Bus ($105,500 × 30%
= $31,650.00) or the incremental cost of
the BEV Bus ($18,106.59). Under section
45W(b)(4), the section 45W credit is
limited to $40,000 for the BEV Bus
because it has a GVWR of more than
14,000 pounds. Because $18,106.59 is

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below the $40,000.00 limitation in
section 45W(b)(4), the allowable section
45W credit with respect to the BEV Bus
is $18,106.59.
(f) Incremental cost of qualified
commercial clean vehicle previously
placed in service by another person or
entity—(1) In general. The incremental
cost of a qualified commercial clean
vehicle previously placed in service by
another person or entity is the product
of the incremental cost of the qualified
commercial clean vehicle as calculated
under paragraphs (b) and (c) of this

section (that is, the incremental cost of
such vehicle when new) and the
residual value factor that corresponds to
the age of the qualified commercial
clean vehicle as determined under
paragraph (f)(2) of this section.
(2) Age of a qualified commercial
clean vehicle previously placed in
service by another person or entity. The
age of a qualified commercial clean
vehicle previously placed in service by
another person or entity is determined
by subtracting the model year of the
vehicle from the calendar year in which

the taxpayer places the vehicle in
service. For purposes of this paragraph
(f)(2) and paragraph (f)(3) of this section,
a negative age (for example, a case in
which a model year vehicle is sold
twice prior to the calendar year that
corresponds to that model year) is
treated as zero.
(3) Residual value factor. The residual
value factor described in paragraph
(f)(1) of this section applicable to
relevant vehicle classes, based on
GVWR, is as provided in the following
tables:

TABLE 1 TO PARAGRAPH (f)(3)
GVWR
(lbs.)

Vehicle class and description
Class
Class
Class
Class
Class
Class

1 Passenger car ..................................................................................................................................................................
1 or 2–3 Light Truck (Van, Sport Utility Vehicle, Pickup Truck) .........................................................................................
4–5 .......................................................................................................................................................................................
6 ...........................................................................................................................................................................................
7–8 Box/Other .....................................................................................................................................................................
8 Day Cab/Sleeper ..............................................................................................................................................................

<14,000
<14,000
14,000–19,500
19,500–26,000
26,000–60,000
>33,000

TABLE 2 TO PARAGRAPH (f)(3)
Class 1
passenger
car
(%)

Vehicle class/vehicle age

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0 years .............................................................................
1 year ...............................................................................
2 years .............................................................................
3 years .............................................................................
4 years .............................................................................
5 years .............................................................................
6 years .............................................................................
7 years .............................................................................
8 years .............................................................................
9 years .............................................................................
10 years ...........................................................................
11 years ...........................................................................
12 years ...........................................................................
13 years ...........................................................................
14 or more years .............................................................

(4) Example—(i) Facts. In December
2024, X purchases and places in service
a model year 2025 battery electric car
(BEV car). The BEV car is a qualified
commercial clean vehicle and has a
GVWR of 3,900 pounds and an
incremental cost of $15,000. X did not
claim a section 45W credit with respect
to the BEV car. X sells the BEV car to
Y in December 2025 for $40,000. Y is a
fiscal year taxpayer whose taxable year
begins on October 1.
(ii) Analysis. Under paragraph (f)(2) of
this section, the BEV car is 0 years old
because the model year of the BEV car
(2025) subtracted from the calendar year
Y placed the BEV car in service (2025)
equals 0. Neither the calendar year in
which X places the BEV car in service
nor Y’s fiscal year is relevant to

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Class 1 or
2–3 light
truck
(%)

70
60
55
50
40
40
35
30
25
25
20
20
15
15
10

Class 4–5
(%)

75
70
60
55
45
40
35
35
30
25
25
20
20
15
15

determining the age of the BEV car for
purposes of paragraph (f)(2) of this
section. The applicable residual value
factor under paragraph (f)(3) of this
section is therefore 70%. The
incremental cost of the BEV car is
$10,500 ($15,000 × 70%). Because the
incremental cost of the BEV car
($10,500) is less than 30% of Y’s basis
in the vehicle ($40,000 × 30% =
$12,000), $10,500 is the amount
determined under section 45W(b)(1).
Under section 45W(b)(4), the allowable
section 45W credit for the BEV car is
limited to $7,500 because the BEV car
has a GVWR of less than 14,000 pounds.
Therefore, Y’s allowable section 45W
credit with respect to the BEV car is
$7,500.

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Class 6 box
(%)

95
85
80
75
70
65
60
55
50
45
45
40
40
35
35

90
80
70
60
55
45
40
35
35
30
25
25
20
20
15

Class 7–8
box/other
(%)

Class 8 day
cab/sleeper
(%)

95
85
80
70
65
60
55
50
45
45
40
35
35
30
30

85
75
60
55
45
40
35
30
25
25
20
20
15
15
15

(g) Applicability date. This section
applies to qualified commercial clean
vehicles placed in service in taxable
years ending after [date of publication of
the final regulations in the Federal
Register].
§ 1.45W–3
vehicle.

Qualified commercial clean

(a) In general. To qualify as a qualified
commercial clean vehicle for purposes
of section 45W of the Code, a vehicle
must meet the requirements of section
45W(c) and paragraphs (b) through (d)
of this section.
(b) Acquired for use or lease and not
for resale by the taxpayer—(1) In
general. Under section 45W(c)(1), a
qualified commercial clean vehicle must
be acquired for use or lease and not for

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resale by the taxpayer. For purposes of
section 45W(c)(1), a taxpayer that is not
a tax-exempt entity described in section
168(h)(2)(A)(i), (ii), or (iv) of the Code
acquires a vehicle for use or lease if the
taxpayer acquires the vehicle for use or
lease in a trade or business of the
taxpayer.
(2) Recharacterization of lease. If a
lease of a qualified commercial clean
vehicle would be treated as a sale rather
than a lease for purposes of subtitle A,
such lease will not be respected for
purposes of section 45W(c)(1). In such
case, the lessor will be treated as having
acquired the vehicle for resale, and no
credit will be allowed to such lessor
under section 45W with respect to the
vehicle. To the extent the lessor has
claimed a section 45W credit (defined in
§ 1.45W–1(a)) with respect to such
vehicle, the recapture rules in § 1.45W–
4(c) apply.
(c) Type of vehicle—(1) In general.
Under section 45W(c)(2), a qualified
commercial clean vehicle must be either
an on-road vehicle, as described in
section 45W(c)(2)(A) and paragraph
(c)(2) of this section, or mobile
machinery, as described in section
45W(c)(2)(B) and paragraph (c)(3) of this
section. Some vehicles, such as a digger
derrick truck, may qualify as both an onroad vehicle and mobile machinery.
(2) On-road vehicle. An on-road
vehicle is a vehicle that meets the
requirements of section 30D(d)(1)(D) of
the Code (that is, the vehicle is treated
as a motor vehicle for purposes of title
II of the Clean Air Act), is manufactured
primarily for use on public streets,
roads, and highways (not including a
vehicle operated exclusively on a rail or
rails).
(3) Mobile machinery. Mobile
machinery has the meaning provided in
section 4053(8) of the Code.
(d) Electric motor and battery
requirements—(1) In general. Under
section 45W(c)(3), a qualified
commercial clean vehicle must be
propelled to a significant extent by an
electric motor that draws electricity
from a battery that has a capacity of not
less than 15 kilowatt hours (or, in the
case of a vehicle that has a gross vehicle
weight rating of less than 14,000
pounds, 7 kilowatt hours) and is capable
of being recharged from an external
source of electricity, or is a motor
vehicle that satisfies the requirements
under section 30B(b)(3)(A) and (B).
(2) Battery capable of being recharged
from an external source of electricity.
For purposes of section 45W(c)(3)(A), a
battery is capable of being recharged
from an external source of electricity if
such source of electricity is not an
integral part of the vehicle. For example,

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a regenerative braking system, in which
the kinetic energy generated by the
motion of the vehicle is used to recharge
a battery, is not an external source of
electricity for purposes of section
45W(c)(3)(A) and this paragraph (d)(2).
(e) Applicability date. This section
applies to taxable years ending after
[date of publication of the final
regulations in the Federal Register].
§ 1.45W–4

Special rules.

(a) No double benefit—(1) Previous
allowance of section 45W or 30D credit.
No credit is allowed under section
45W(a) of the Code (section 45W credit)
with respect to any vehicle for which a
section 45W credit or a section 30D
credit was previously allowed for such
vehicle.
(2) Allowance of other deduction or
credit. Under sections 45W(d)(1) and
30D(f)(2) of the Code, the amount of any
deduction or other credit allowable
under chapter 1 of the Code (chapter 1)
for a vehicle for which a section 45W
credit is allowable must be reduced by
the amount of the section 45W credit
allowed for such vehicle. See also
§ 1.25E–2(b)(1).
(3) Recordkeeping for the qualified
commercial clean vehicle credit. In
accordance with § 1.6001–1, a taxpayer
claiming a credit under section 45W
must keep permanent books of account
or records sufficient to establish the
amount of any such credit required to be
shown by such taxpayer in any return
of tax or information return. Such
records must be sufficient to establish,
for example, that the section 45W credit
claimed is not disallowed by paragraph
(a)(1) of this section, subject to
reduction under § 1.25E–2(b)(1), or, if
any such reduction is required, the
amount of such reduction.
(b) Credit ineligibility resulting from
certain transactions and uses—(1) In
general. This paragraph (b) provides
rules that apply to certain transactions
involving qualified commercial clean
vehicles and certain uses of such
vehicles, including cancelled sales,
vehicle returns, resales, or less than 100
percent use in a trade or business.
(2) Cancelled sale. If a sale of a
qualified commercial clean vehicle is
cancelled before the taxpayer places the
vehicle in service, then—
(i) The taxpayer may not claim the
section 45W credit with respect to the
vehicle;
(ii) The vehicle may still be eligible
for the section 45W credit; and
(iii) A subsequent buyer of the vehicle
will not be required to apply the
residual value rules of § 1.45W–2(f) to
determine the incremental cost of the
vehicle.

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(3) Vehicle return. If a taxpayer
returns a qualified commercial clean
vehicle to the seller within 30 days of
placing such vehicle in service, then—
(i) The taxpayer may not claim the
section 45W credit with respect to the
vehicle;
(ii) The vehicle may still be eligible
for the section 45W credit; and
(iii) A subsequent buyer of the vehicle
must apply the residual value rules of
§ 1.45W–2(f) to determine the
incremental cost of the vehicle.
(4) Resale. If a taxpayer resells a
qualified commercial clean vehicle
within 30 days of placing the vehicle in
service, then—
(i) The taxpayer is treated as having
acquired such vehicle with the intent to
resell;
(ii) The taxpayer may not claim the
section 45W credit with respect to the
vehicle;
(iii) The vehicle may still be eligible
for the section 45W credit; and
(iv) A subsequent buyer of the vehicle
must apply the residual value rules of
§ 1.45W–2(f) to determine the
incremental cost of the vehicle.
(5) Less than 100 percent trade or
business use in taxable year vehicle is
placed in service. If a taxpayer’s trade or
business use of a qualified commercial
clean vehicle for the taxable year such
vehicle is placed in service by the
taxpayer is less than 100 percent of the
taxpayer’s total use of that vehicle for
that taxable year (other than incidental
personal use, such as a stop for lunch
on the way between two job sites),
including because the vehicle is sold or
otherwise disposed of, the vehicle is
ineligible for the section 45W credit.
This rule also applies to a qualified
commercial clean vehicle placed in
service by a tax-exempt entity, except
that 100 percent trade or business use
means the tax-exempt entity’s use that
is related to an exempt purpose or an
unrelated trade or business purpose.
(c) Recapture—(1) In general. This
paragraph (c) provides rules regarding
the recapture of the section 45W credit
pursuant to sections 45W(d)(1) and
30D(f)(5).
(2) Recapture in the case of less than
100 percent trade or business use—(i) In
general. Except as provided in
paragraph (c)(2)(ii) of this section, if a
taxpayer ceases to use a qualified
commercial clean vehicle for 100
percent trade or business use (other than
incidental personal use) during the 18month period beginning on the date the
vehicle is placed in service, including
because the vehicle is sold or otherwise
disposed of, then—
(A) The taxpayer may not claim the
section 45W credit with respect to the

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vehicle. If the taxpayer has already
claimed the section 45W credit, the
credit is recaptured as a tax under
chapter 1.
(B) The vehicle may still be eligible
for the section 45W credit; and
(C) A subsequent buyer must apply
the residual value rules of § 1.45W–
2(f)(3) to determine the incremental cost
of the vehicle.
(ii) Applicability to vehicles placed in
service by a tax-exempt entity. For a
qualified commercial clean vehicle
placed in service by a tax-exempt entity,
the 100 percent trade or business use
rule in paragraph (c)(2)(i) of this section
applies, except that, as provided in
paragraph (b)(5) of this section, 100
percent trade or business use means the
tax-exempt entity’s use that is related to
an exempt purpose or an unrelated trade
or business purpose.
(d) Elective payment elections. In the
case of an applicable entity, as
described in section 6417(d)(1) of the
Code and § 1.6417–1(c) with respect to
which an applicable credit listed in
section 6417(b) is determined for a
taxable year, section 6417(a) allows the
applicable entity to make an election to
treat the applicable entity as making a
payment against the tax imposed by
subtitle A of the Code equal to the
amount of the applicable credit. Section
6417(b)(6) and § 1.6417–1(d)(6) include
the section 45W credit as an applicable
credit, but only with respect to a section
45W credit determined by reason of
section 45W(d)(2) by a tax-exempt entity
described in section 168(h)(2)(A)(i), (ii),
or (iv) that is also an applicable entity
listed in section 6417(d)(1) and
§ 1.6417–1(c).
(e) Leases. For purposes of section
45W(d)(2), a vehicle is subject to a lease
if it is leased within 30 days of being
placed in service by a tax-exempt entity.
(f) Applicability date. This section
applies to taxable years ending after
[date of publication of the final
regulations in the Federal Register].

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§ 1.45W–5

Reporting requirements.

(a) Requirement to file return. No
section 45W credit (defined in § 1.45W–
1(a)) can be determined unless the
taxpayer claiming such credit files a
Federal income tax return or
information return, as appropriate, for
the taxable year in which the qualified
commercial clean vehicle is placed in
service. The taxpayer must attach to
such return a completed Form 8936,
Clean Vehicle Credits, or successor
form, that includes all information

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required by the form and instructions.
The taxpayer must also attach a
completed Schedule A (Form 8936),
Clean Vehicle Credit Amount, or
successor form or schedule, that
includes all information required by the
schedule and instructions, including the
vehicle identification number of the
qualified commercial clean vehicle.
(b) Credit may generally be claimed
on only one tax return—(1) In general.
Except as provided in paragraphs (b)(2)
and (3) of this section, the amount of the
section 45W credit attributable to a
qualified commercial clean vehicle may
be claimed on only one Federal income
tax return, including on a joint return in
which one of the spouses or the
spouse’s wholly-owned business entity
is listed on the title as the sole owner
of the vehicle. In the event a qualified
commercial clean vehicle is placed in
service by multiple taxpayers that do
not file a joint tax return (for example,
in the case of married individuals filing
separate returns), no allocation or
proration of the section 45W credit is
available.
(2) Grantor trusts. In the case of a
qualified commercial clean vehicle
placed in service by a trust, to the extent
the grantor or another person is treated
as owning all or part of the trust under
sections 671 through 679 of the Code,
the section 45W credit is allocated to
such grantor or other person in
accordance with § 1.671–3(a)(1).
(3) Partnerships and S corporations.
In the case of a qualified commercial
clean vehicle placed in service by a
partnership or S corporation, the section
45W credit is allocated among the
partners of the partnership under
§ 1.704–1(b)(4)(ii) or among the
shareholders of the S corporation under
sections 1366(a) and 1377(a) of the Code
and claimed on the tax returns of the
ultimate partners or of the S corporation
shareholder(s).
(c) Taxpayer reliance on
manufacturer certifications and
periodic written reports to the IRS. A
taxpayer that acquires a qualified
commercial clean vehicle and places it
in service may rely on the information
and certifications contained in the
qualified manufacturer’s written reports
to the IRS. The procedures for such
periodic written reports are established
in guidance published in the Internal
Revenue Bulletin (see § 601.601 of this
chapter). To the extent a taxpayer relies
on certifications or attestations from the
qualified manufacturer, the qualified
commercial clean vehicle the taxpayer

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acquires will be deemed to meet the
requirements of sections 30D(d)(1)(C)
and 45W(c)(1) of the Code.
(d) Applicability date. This section
applies to taxable years ending after
[date of publication of the final
regulations in the Federal Register].
■ Par. 5. Section 1.6417–6 is amended
by:
■ 1. Adding two sentences to the end of
paragraph (b)(1); and
■ 2. Revising paragraph (e).
The addition and revision read as
follows:
§ 1.6417–6

Special rules.

*

*
*
*
*
(b) * * *
(1) * * * For purposes of this
paragraph (b)(1), if an applicable credit
is subject to section 50, then section 50
applies without regard to section
50(b)(3) and (b)(4)(A)(i). If another
provision of the Code contains a basis
reduction and/or recapture provision
outside of section 50 that impacts the
available credit (such as sections 30C(e),
45Q(f)(4), 45W(d)(1), and 48(a)(10)),
then the rules of that provision of the
Code and the regulations in this chapter
issued under that provision of the Code
apply, except that any applicable credit
continues to be determined without
regard to section 50(b)(3) and (b)(4)(A)(i)
and by treating any property with
respect to which such credit is
determined as used in a trade or
business of the applicable entity,
consistent with section 6417(d)(2) and
§ 1.6417–2(c).
*
*
*
*
*
(e) Applicability dates—(1) In general.
Except as provided in paragraph (e)(2)
of this section, this section applies to
taxable years ending on or after March
11, 2024. For taxable years ending
before March 11, 2024, taxpayers,
however, may choose to apply the rules
of §§ 1.6417–1 through 1.6417–4 and
this section, provided the taxpayers
apply the rules in their entirety and in
a consistent manner.
(2) Paragraph (b)(1) of this section.
The second and third sentences of
paragraph (b)(1) of this section apply to
property placed in service in taxable
years ending after [date of publication of
the final regulations in the Federal
Register].
Douglas W. O’Donnell,
Deputy Commissioner.
[FR Doc. 2025–00256 Filed 1–10–25; 8:45 am]
BILLING CODE 4830–01–P

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14JAP3