The IRS announced that it plans to issue regulations defining specific terms for the revised and renamed clean vehicle credit under IRC §30D in Notice 2023-1.[1] The notice even provides the expected content for these terms. But, interestingly, nowhere in the Notice does it say taxpayers may rely on these definitions until the regulations are issued.

Terms to Be Defined

The terms to be defined in these upcoming regulations are:

Final Assembly
North America
Manufacturer’s Suggested Retail Price
Vehicle Classifications for vans, sport utility vehicles, pickup trucks, and other vehicles
Placed in service[2]

As well, the Notice provides that the regulations “will provide guidance regarding the critical mineral and battery component requirements under § 30D(e).”

However, Section 4 notes:

For purposes of § 30D(e)(3)(B), the publication of this notice is not the publication of proposed guidance with respect to the critical mineral and battery component requirements under § 30D(e) and does not trigger the applicability of the requirements. The Treasury Department and the IRS will explicitly identify when they have published proposed guidance with respect to the critical mineral and battery component requirements under § 30D(e).[3]

Expected Content of the Regulations

The Notice provides:

The remainder of this section 3 describes a subset of the expected content of the forthcoming proposed regulations.[4]

Final Assembly

The expected content of the definition of the term “final assembly” reads as follows:

For purposes of § 30D(d)(5), “final assembly” means the process by which a manufacturer produces a new clean vehicle at, or through the use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle.

To establish where final assembly of a new clean vehicle occurred, the taxpayer may rely on the following information: (1) the vehicle’s plant of manufacture as reported in the vehicle identification number pursuant to 49 CFR 565; or (2) the final assembly point reported on the label affixed to the vehicle as described in 49 CFR 583.5(a)(3).[5]

North America

As that final assembly must take place in North America to obtain the credit, the regulations expect to define North America as follows:

For purposes of § 30D(d)(1)(G), “North America” means the territory of the United States, Canada, and Mexico as defined in 19 C.F.R. part 182, Appendix A, § 1(1).[6]

Manufacturer’s Suggested Retail Price

The revised credit under IRC §30D is only available for vehicles that have a manufacturer’s suggested retail price below certain levels. The IRS expects the regulations to define that price as follows:

For purposes of § 30D(f)(11)(A), “manufacturer’s suggested retail price” means the sum of: (A) the retail price of the automobile suggested by the manufacturer as described in 15 U.S.C. 1232(f)(1); and (B) the retail delivered price suggested by the manufacturer for each accessory or item of optional equipment, physically attached to such automobile at the time of its delivery to the dealer, which is not included within the price of such automobile as stated pursuant to 15 U.S.C. 1232(f)(1), as described in 15 U.S.C. 1232(f)(2). This information is reported on the label that is affixed to the windshield or side window of the vehicle, as described in 15 U.S.C. 1232.[7]

Vehicle Classifications

Revised §30D applies different price limits to different classes of vehicles. The regulations expect to address the vehicle classification issue as follows:

For purposes of § 30D(f)(11)(B), the applicable limitation for each vehicle classification is as follows: (A) in the case of a van, $80,000; (B) in the case of a sport utility vehicle, $80,000; (C) in the case of a pickup truck, $80,000; and (D) in the case of any other vehicle, $55,000.

For purposes of § 30D(f)(11)(B), a vehicle’s vehicle classification is to be determined consistent with the rules and definitions provided in 40 CFR 600.002 for vans, sport utility vehicles, and pickup trucks. A vehicle described in § 30D(f)(11)(B)(iv) is a vehicle that is not considered a van, sport utility vehicle, or pickup truck consistent with the rules and definitions provided in 40 CFR 600.002.[8]

Placed in Service

The credit under §30D applies different rules to vehicles placed in service in different years. The IRS expects the regulations to provide for determining when the vehicle is placed in service as follows:

For purposes of the § 30D credit, a new clean vehicle is considered to be placed in service on the date the taxpayer takes possession of the vehicle.[9]

Can Taxpayers Rely on These Definitions?

Conspicuously missing from this Notice is any statement that taxpayers may rely on this expected guidance found in the Notice prior to the actual issuance of the regulations, as well as any statement that taxpayers cannot rely on this guidance until regulations are finalized. So where does that leave taxpayers who may be looking to acquire a new clean vehicle in the near future?

Most likely taxpayers who rely on this guidance have a solid argument that they reasonably interpreted the guidance given that no guidance upon which they could rely had yet been published. Certainly, taxpayers should be counseled that there is some risk that taxpayers may find themselves not in compliance with what eventually becomes the guidance, but if the taxpayers wait for that guidance, they likely will also be subject to the critical mineral and battery component requirements on the vehicle they acquire.

The law provides that those battery rules do not apply until the IRS has issued guidance in the area, something this Notice takes care to point out has not happened yet. It is expected that many electric vehicles will be unable to meet one or both requirements once they take effect, resulting in either a reduced or nonexistent credit.

[1] Notice 2023-1, December 29, 2022, https://www.irs.gov/pub/irs-drop/n-23-01.pdf (retrieved December 29, 2022)

[2] Notice 2023-1, December 29, 2022, Section 3

[3] Notice 2023-1, December 29, 2022, Section 4

[4] Notice 2023-1, December 29, 2022, Section 3

[5] Notice 2023-1, December 29, 2022, Section 3

[6] Notice 2023-1, December 29, 2022, Section 3

[7] Notice 2023-1, December 29, 2022, Section 3

[8] Notice 2023-1, December 29, 2022, Section 3

[9] Notice 2023-1, December 29, 2022, Section 3