Section 30D of the U.S. Code establishes a new clean vehicle tax credit of up to $7,500 (unindexed) and limits the price of applicable vehicles. The ceiling is $80,000 (unindexed) for a “van,” “sport utility vehicle,” and “pickup truck,” while the price restriction is $55,000 (unindexed) for “any other vehicle” that otherwise qualifies.[1] The price referred to by the section is the manufacturer suggested retail price.[2] The statute also requires the IRS to define these designations of vehicles “using criteria similar to that employed by the Environmental Protection Agency and the Department of the Energy to determine size and class of vehicles.”[3] At this time there is no regulation defining these terms, but the publication of the pertinent Notice of Proposed Rulemaking is scheduled for March of this year.
The IRS did release interim guidance on December 29, 2023. This interim guidance, Notice 2023-1, defined the vehicle designations by cross-citing to 40 CFR § 600.002 and serves as the operative rule until a more permanent decision is made. Notice 2023-16 changes the cross-citation to 40 CFR § 600.315-08(a) and is retroactive to January 1, 2023. The relevant FAQs were also updated. There is an otherwise comprehensive list of qualifying vehicles, but it is currently applicable only to vehicles “placed in service before January 1, 2023.” The IRS released a list of potentially qualifying manufacturers and models yet insists that the only way to be certain is through verifying the Vehicle Identification Number online. The new definitions effectively leave the task of classification of the vehicles to the Administrator of the EPA based on consumer expectations as part of the fuel economy label system.[4]
(Old) Notice 2023-1 | (Current) Notice 2023-16 | |
Van | “[A]ny light truck having an integral enclosure fully enclosing the driver compartment and load carrying compartment. The distance from the leading edge of the windshield to the foremost body section of vans is typically shorter than that of pickup trucks and SUVs.” | · “Vans” and “[m]inivans.”[5] · Vehicles classified as vans by the Administrator of the EPA.[6] |
Sport Utility Vehicle | “[A] light truck with an extended roof line to increase cargo or passenger capacity, cargo compartment open to the passenger compartment, and one or more rear seats readily removed or folded to facilitate cargo carrying.” | · “Small sport utility vehicles. Sport utility vehicles with a GVWR below 6,000 pounds. Standard sport utility vehicles. Sport utility vehicles with a GVWR at or above 6,000 pounds and at or below 10,000 pounds.”[7] · Vehicles classified as sports utility vehicles by the Administrator of the EPA.[8] |
Pickup Truck | “[A] nonpassenger automobile which has a passenger compartment and an open cargo bed.” | · “Small pickup trucks. Pickup trucks with a GVWR below 6,000 pounds. Standard pickup trucks. Pickup trucks with a GVWR at or above 6,000 pounds and at or below 8,500 pounds.”[9] · Vehicles classified as pickup trucks by the Administrator of the EPA.[10] |
Any Other Vehicle | “[A] vehicle that is not considered a van, sport utility vehicle, or pickup truck consistent with the rules and definitions provided” above. | · “Cars” and “station wagons.”[11] · Vehicles classified as such other vehicles by the Administrator of the EPA.[12] |
Last month, Elon Musk tweeted that the prior rules were “messed up” and advocated for new definitions during a meeting with Biden Administration officials last week. Other automakers lobbied for change as well.
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[1] § 30D(f)(11)(B).
[2] § 30D(f)(11)(A).
[3] § 30D(f)(11)(C).
[4] Notice 2023-16 pursuant to 40 CFR 600.315-08(a)(3)(ii)
[5] 40 CFR 600.315-08(a)(2)(iii) & (iv).
[6] Notice 2023-16 pursuant to 40 CFR 600.315-08(a)(3)(ii)
[7] 40 CFR 600.315-08(a)(2)(v)& (vi).
[8] Notice 2023-16 pursuant to 40 CFR 600.315-08(a)(3)(ii)
[9] 40 CFR 600.315-08(a)(2)(i)& (ii).
[10] Notice 2023-16 pursuant to 40 CFR 600.315-08(a)(3)(ii)
[11] In full:
The Administrator will classify passenger automobiles by car line into one of the following classes based on interior volume index or seating capacity except for those passenger automobiles which the Administrator determines are most appropriately placed in a different classification or classed as special purpose vehicles as provided in paragraph (a)(3) of this section.
(i) Two seaters. A car line shall be classed as “Two Seater” if the majority of the vehicles in that car line have no more than two designated seating positions as such term is defined in the regulations of the National Highway Traffic Safety Administration, Department of Transportation (DOT), 49 CFR 571.3.
(ii) Minicompact cars. Interior volume index less than 85 cubic feet.
(iii) Subcompact cars. Interior volume index greater than or equal to 85 cubic feet but less than 100 cubic feet.
(iv) Compact cars. Interior volume index greater than or equal to 100 cubic feet but less than 110 cubic feet.
(v) Midsize cars. Interior volume index greater than or equal to 110 cubic feet but less than 120 cubic feet.
(vi) Large cars. Interior volume index greater than or equal to 120 cubic feet.
(vii) Small station wagons. Station wagons with interior volume index less than 130 cubic feet.
(viii) Midsize station wagons. Station wagons with interior volume index greater than or equal to 130 cubic feet but less than 160 cubic feet.
(ix) Large station wagons. Station wagons with interior volume index greater than or equal to 160 cubic feet. 40 CFR 600.315-08(a)(1).
[12] Notice 2023-16 pursuant to 40 CFR 600.315-08(a)(3)(ii)
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California has required employers to “indemnify” employees for “necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer” in substantially the same terms since 1937 under Labor Code § 2802.
