Last week, the U.S. Department of the Treasury (Treasury) and Internal Revenue Service (IRS) released a notice of proposed rulemaking (NPRM) that modifies the regulations applicable to the Energy Credit under Section 48 of the Internal Revenue Code (Code). The NPRM also withdraws and repurposes portions of an August proposal on the rules governing the increased credit amount available for taxpayers satisfying prevailing wage and registered apprenticeship requirements established by the Inflation Reduction Act (IRA). This post summarizes a few key aspects of the NPRM below:
Commerce Final Rule Heightens Uncertainty as to How Treasury Will Interpret “Foreign Entity of Concern” for EV Credits Under Section 30D of the Inflation Reduction Act
On September 22, the Commerce Department published a final rule implementing the national security-related restrictions and obligations on recipients of incentive funds under the CHIPS and Science Act of 2022 (the “CHIPS Act”). The final rule clarifies in some respects, and substantially expands in other respects, the definition of “foreign entity of concern” that appeared in Commerce’s proposed rule, issued in March.
When Commerce issued its proposed rule, the Treasury Department cross-referenced Commerce’s definition of “foreign entity of concern” in Treasury’s concurrently proposed regulations for the CHIPS Act’s tax credit under section 48D of the Internal Revenue Code. We commented at the time that if Treasury were to adopt that same definition for the section 30D electric vehicle (EV) credit under the Inflation Reduction Act (the “IRA”), there could be a significant reduction in the number of vehicles eligible for such credits relative to market expectations. Treasury issued proposed regulations for other aspects of the 30D credit one week after the CHIPS Act guidance, but did not include an interpretation of the term “foreign entity of concern,” and to date has yet to do so (though it has signaled an intent to do so later this year).
Global Spotlight: the IRA’s Implications for Key U.S. Allies
Funding incentives under the U.S. Inflation Reduction Act of 2022 (IRA) to transition to a clean energy economy are unleashing opportunities for key U.S. allies and partners around the world. In particular, tax credits exceeding 10% of the price of average electric vehicle (EV) sold in the United States are leading to new investments in Mexico and Canada, and have triggered high-level political negotiations from U.S. partners such as the European Union and Japan.
Continue Reading Global Spotlight: the IRA’s Implications for Key U.S. Allies
Treasury and the IRS provide a safe harbor for determining the incremental cost of a clean vehicle for the commercial clean vehicle credit
Notice 2023-9, “Section 45W Commercial Clean Vehicles and Incremental Cost for 2023”
Concurrent with the white paper and Notice 2023-1, discussed in a separate blog, on December 29, 2022, the IRS released Notice 2023-9, which provides a safe harbor for determining the incremental cost of qualified commercial clean vehicles for the section 45W credit.
Treasury and the IRS provide its first set of proposed guidance and a white paper on the clean vehicle credit
On December 29, 2022, Treasury released a white paper indicating the anticipated direction of proposed guidance on the critical mineral and battery component requirements for the new clean vehicle credit under section 30D. The guidance will be critical to automakers and consumers seeking to qualify for tax credits available for purchase of EVs under the Inflation Reduction Act.
Continue Reading Treasury and the IRS provide its first set of proposed guidance and a white paper on the clean vehicle credit