Today, the IRS released Revenue Procedure 2022-42 to address the reporting requirements for vehicle manufacturers and sellers.  These reporting requirements are prerequisites for purchasers’ eligibility for clean vehicle tax credits under Sections 25E, 30D, and 45W.  Section 30D(d)(3) requires that a manufacturer enter into a written agreement to become a qualified manufacturer, which requires periodic written reports to the IRS.  Similarly, Section 30D(1)(H) requires that the person who sells a vehicle furnish a report to purchasers and the IRS.

A vehicle manufacturer must submit a monthly report to the IRS that would demonstrate that its vehicles satisfy the credit eligibility.  Specifically, a manufacturer needs to include in the report:

(a) The make, model, model year, and any other appropriate identifiers of the motor vehicle;

(b) Certification that the motor vehicle is made by a qualified manufacturer, within the meaning of Section 30D(d)(3);

(c) Certification that the motor vehicle is treated as a motor vehicle for purposes of title II of the Clean Air Act;

(d) The gross vehicle weight rating of the motor vehicle;

(e) The battery capacity of the motor vehicle;

(f) The motor vehicle’s vehicle identification number; and

(g) Such other information as the Secretary may provide on irs.gov.

With respect to the Section 30D credit, the following additional information needs to be provided:

(a) Certification that the motor vehicle is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 7 kilowatt hours and the battery is capable of being recharged from an external source of electricity, or the motor vehicle is a new qualified fuel cell motor vehicle;

(b) Certification that the motor vehicle is manufactured primarily for use on public streets, roads and highways (not including a vehicle operated exclusively on a rail or rails) and has at least four wheels;

(c) Certification that the final assembly of the motor vehicle occurred within North America;

(d) Certification of the percentage of the value of the applicable critical minerals contained in the electric vehicle’s battery that were (i) extracted or processed in the United States or a FTA partner country, or (ii) recycled in North America;

(e) Certification of the percentage of the value of the EV battery components that were manufactured or assembled in North America;

(f) Whether the motor vehicle is a van, sport utility vehicle, pickup truck, or other vehicle; and

(g) The motor vehicle’s manufacturer’s suggested retail price.

Similarly, with respect to Section 25E and 45W credits, the manufacturer must provide additional information to show that vehicles satisfy the statutory qualifications for credit eligibility.

A vehicle seller, such as a dealer, must furnish a report to a purchaser not later than the purchase date and an annual report to the IRS, including the following information:

(a) The name and taxpayer identification number of the seller;

(b) The name and taxpayer identification number of the purchaser;

(c) The vehicle identification number, if assigned, of the vehicle;

(d) The battery capacity of the vehicle;

(e) For new clean vehicles, verification that original use of the vehicle commences with the purchaser;

(f) The date of sale, sale price of the vehicle, and maximum credit allowable to the purchaser; and

(g) If a purchaser makes an election to transfer the credit to the selling dealer that satisfies certain requirements for sales after December 31, 2023, any amount paid or allowable as a partial payment or down payment.

This revenue procedure notably does not require qualified manufacturers to certify as to a vehicle’s satisfaction of the requirements in Section 30D(d)(7)—that the critical minerals in the battery have not been extracted, processed, or recycled by a “foreign entity of concern” and that the components contained in the battery have not been manufactured or assembled by a foreign entity of concern.  This would seem to impose less of a diligence burden on manufacturers.  However, by the same token, the revenue procedure does not address how vehicle purchasers will be able to get certainty as to the vehicle’s satisfaction of such requirements.  We note that the IRS may add this additional certification requirement as part of “such other information as the Secretary may provide” before 2024 or 2025, when the rules regarding foreign entities of concern become effective.

It appears that the report needs to address each vehicle’s qualifications for credits.  As such, two vehicles of the identical make, model, and year may not always have the same credit eligibility, which will vary depending on the composition of critical minerals and components and the location of final assembly.

Manufacturers and sellers must submit a declaration under penalties of perjury that the facts presented in support of this certification are true, correct, and complete.  A purchaser of a vehicle can rely on the manufacturer’s certification for the Section 30D, 45W, and 25E credits.

This revenue procedure does not provide any guidance on how to determine the value of critical minerals and components.  The revenue procedure expressly notes that it does not constitute the guidance the IRS is required to propose regarding Section 30D(e)(1) (Critical Minerals Requirement) and Section 30D(e)(2) (Battery Components).  Such guidance is due to be published separately, by no later than December 31, 2022.  

Finally, we note that the revenue procedure contains no indication that the government will relax the statutory timelines for the credit scheme—e.g., by providing a transition period—as many manufacturers have requested.

We will continue to monitor and report on these developments.

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Photo of Jamin Koo Jamin Koo

Jamin Koo advises clients across a broad range of tax issues, including international and domestic tax planning and acquisition and financing transactions. He works with numerous U.S. and non-U.S. clients (in particular, several Asia-based clients) on cross-border investments, joint ventures, and restructurings. His…

Jamin Koo advises clients across a broad range of tax issues, including international and domestic tax planning and acquisition and financing transactions. He works with numerous U.S. and non-U.S. clients (in particular, several Asia-based clients) on cross-border investments, joint ventures, and restructurings. His expertise includes taxation of debt instruments, derivatives, and other financial instruments, and he has been providing tax advice related to digital assets to a number of clients.

Most recently, with his background in engineering and environmental science, Jamin has been advising clients in a number of industries on various issues involving tax credits and other tax provisions of the Chips & Science Act and the Inflation Reduction Act and drafting comments to Treasury and the IRS.

Photo of Daniel B. Levine Daniel B. Levine

Dan Levine has advised clients in strategic and financial transactions, principally involving China, for more than 17 years. He focuses his practice on inbound and outbound M&A, joint ventures, private equity and venture capital investments, and technology licensing transactions.

Dan provides strategic and…

Dan Levine has advised clients in strategic and financial transactions, principally involving China, for more than 17 years. He focuses his practice on inbound and outbound M&A, joint ventures, private equity and venture capital investments, and technology licensing transactions.

Dan provides strategic and transactional advice to Chinese and Western clients navigating critical political, legal, and regulatory hurdles to their international strategies—including national security reviews conducted by the Committee on Foreign Investment in the United States (CFIUS), China’s outbound investment review process, the U.S.’s proposed outbound investment screening regime, China’s overseas listing rules, and export controls.

Dan has extensive experience in the clean energy, life sciences, and technology sectors. In recent years this has included:

  • counseling leading global electric vehicle battery and energy storage companies with respect to incentive programs under the Bipartisan Infrastructure Law and Inflation Reduction Act;
  • advising a leading global medical device company in a joint venture with a Chinese state-owned entity to develop and commercialize imaging equipment in China; and
  • advising a Chinese gene therapy company in a complex pre-IPO outbound acquisition.

Dan’s pro bono work includes representing U.S. health care professionals and Chinese companies to procure and supply personal protective equipment from China to the United States during the COVID-19 pandemic.

Dan reads, writes, and speaks Mandarin and has lived in China for extended periods since 2001, including when resident in Covington’s Shanghai office from 2013-2022.

Photo of W. Andrew Jack W. Andrew Jack

Andrew Jack has a diverse corporate and securities practice with clients principally in the energy, industrial manufacturing, technology and sports and entertainment industries. He regularly represents corporations, board committees, and other forms of enterprises in mergers and acquisitions, strategic alliances, financing activities, securities…

Andrew Jack has a diverse corporate and securities practice with clients principally in the energy, industrial manufacturing, technology and sports and entertainment industries. He regularly represents corporations, board committees, and other forms of enterprises in mergers and acquisitions, strategic alliances, financing activities, securities law compliance, corporate governance counseling, and executive compensation arrangements. Mr. Jack also co-chairs the firm’s Energy Industry Group.