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Latest Guidance on New Clean Vehicle Credit Requirements

New guidance was issued on the critical minerals and battery components requirements for the New Clean Vehicle Credit, published on April 17, 2023. Read more.
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On Friday, March 31, 2023, the IRS released a notice of proposed rulemaking (proposed regulations) for Section 30D–New Clean Vehicle Credit and updated previously issued FAQs with FS 2023-08. Although the proposed regulations are generally effective once the proposed regulations are finalized and published in the Federal Register, the critical minerals and battery components requirements are effective April 18, 2023. As such, taxpayers will need to determine the rules in effect at the time the new clean vehicle is placed in service to properly determine the amount of the credit.

Included in this guidance are regulations on the following topics:

  1. General rules
  2. Definitions
  3. Requirements for critical minerals and battery components
  4. Various special rules

General Rules

Section 30D provides a $3,750 tax credit for purchasers of clean vehicles meeting certain critical mineral requirements. An additional $3,750 credit is available for vehicles meeting the required threshold percentage of battery components manufactured or assembled in North America. Vehicles must meet other requirements, including final assembly in North America and manufacturer’s suggested retail price (MSRP) limits (generally $55,000 for vans/SUVs and $80,000 for pickups).

The new clean vehicle credit can be either a personal credit or a general business credit, depending upon the use of the vehicle. In the case of a qualifying vehicle used less than 50% of the time for business purposes, the credit must be apportioned between personal and business use. For the credit to qualify as a general business credit, the new clean vehicle must be depreciable property. A personal credit is not refundable and is limited to the sum of the taxpayer’s regular tax liability after being reduced for any foreign tax credit and the alternative minimum tax.


The proposed regulations provide definitions for: final assembly, North America, MSRP, vehicle classifications, and placed in service. These terms were previously defined in Notice 2023-1 and modified by Notice 2023-16. The definitions are largely similar to prior guidance.

Requirements for Critical Minerals & Battery Components

Manufacturers must follow the multistep processes in the proposed regulations to determine whether a new clean vehicle meets the critical mineral and/or the battery component requirements. The critical minerals requirement is subject to a three-step process:

  1. Determine procurement chains;
  2. Identify qualifying critical minerals; and
  3. Calculate qualifying critical mineral content.

The battery components requirement is subject to a four-step process:

  1. Identify components that are manufactured or assembled in North America;
  2. Determine the incremental value of each battery component and North American battery component;
  3. Determine the total incremental value of battery components; and
  4. Calculate the qualifying battery component content.

Critical Minerals Requirement

The critical minerals requirement process as laid out by the proposed regulations indicates a single critical mineral can have multiple “procurement chains” based upon the location(s) at which the critical mineral is extracted, processed, and recycled. Currently, the proposed regulations provide that a qualifying critical mineral—that is, a critical mineral that is either extracted or produced in the United States or any country the United States has a free trade agreement with or recycled in North America—if it qualifies under the "50% of value added test." This test is applied on a procurement chain by procurement chain basis.

A critical mineral is considered a qualifying critical mineral if 50% or more of the value that is added to the critical mineral as a result of either extracting or processing the critical mineral occurs in the United States or in a country the United States has a free trade agreement with; or if 50% or more of the value that is added to the critical mineral from being recycled comes from the part of the recycling process that occurs within North America.

The “50% of value added test” is in effect for at least 2023 and 2024. Treasury and the IRS plan to move toward a higher percentage of value added requirement after 2024.

The critical mineral process also includes definitions for the following terms: extraction, processing, constituent materials, recycling, value, value added, North America, and country with which the United States has a free trade agreement in effect.

The most noteworthy of these terms is “constituent materials,” as these are defined to include critical minerals that are used in the manufacturing process of any battery component. However, while constituent materials would be relevant for purposes of calculating the value of critical minerals within a battery, they would not be considered a battery component for purposes of the battery components requirement process. This is important because it appears that the value of the constituent materials would be included in the overall value of the battery components, but would not be separately accounted for otherwise during the battery components requirement process.

For purposes of determining whether or not the United States has a free trade agreement in effect with a country, the proposed criteria is:

  1. Whether or not the agreement reduces or eliminates any trade barriers on a preferential basis;
  2. Any requirement that the countries will not impose any new trade barriers;
  3. The presence of high-standard disciplines that impact trade in key areas; and
  4. Any reduction in or elimination of restrictions involving exports or any commitment not to place restrictions on exports.

The current list of countries that have a qualifying free trade agreement with the United States includes: Australia, Bahrain, Canada, Chile, Columbia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Japan, Jordan, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and Singapore. This list will be updated periodically as countries need to be added or removed.

For purposes of calculating the qualifying critical mineral content, a qualified manufacturer will need to select and consistently apply a date to make the determination of the value of both qualifying critical minerals and total critical minerals contained within a battery. The value of qualifying critical minerals should be determined for each separate procurement chain. The date used must be after all the processing and recycling steps have occurred for the critical minerals that must be considered for certifying this requirement is met.

Due to the volume of batteries that must be tested, the proposed regulations allow a qualified manufacturer to choose between applying this process on a battery-by-battery basis or on a group-by-group of batteries basis. The group can be from a run of batteries from a period which, for example, could be from a specific year, quarter, or month of vehicles from the same manufacturing plant, model line of vehicle, class, or any reasonable combination thereof, so long as the final assembly of the vehicles included takes place within North America.

Battery Components Requirement

For purposes of this requirement, qualified manufacturers need to first determine whether the individual battery components that make up a battery were either manufactured or assembled within North America. Where the individual components of a battery component were first manufactured or assembled need not be considered. This process only applies to the battery module and not, for example, to any thermal management system or parts of a battery that do not play a role in the electrochemical storage of energy by the battery.

The total incremental value of battery components can be calculated one of two ways:

  1. The total incremental value of all battery components within a battery; or
  2. The total value of each battery module contained within a battery.

Similar to the critical minerals requirement, qualified manufacturers must select and consistently apply a date to determine incremental value of all battery components. The date used must be after all manufacturing and assembly steps related to the battery components considered for this requirement have been completed.

Starting in 2024, a vehicle will not be able to qualify as a new clean vehicle if any battery component is manufactured or assembled in a foreign entity of concern. Starting in 2025, a vehicle with a battery that contains any critical minerals that were extracted, processed, or recycled in a foreign entity of concern will not be able to qualify as a new client vehicle. The definition of a foreign entity of concern, per the proposed regulations, will be issued at an unspecified date in the future.

No Double Benefit

Any other deduction or credit allowed under Chapter 1 of the Internal Revenue Code that is allowed for a vehicle must generally be reduced by the amount of any new clean vehicle credit allowed. This reduction occurs without considering whether the credit is claimed as a personal or general business credit. However, the proposed regulations do not require a subsequent credit claimed under Section 25E, previously owned clean vehicles, to be reduced for any new clean vehicle credit allowed. In addition, no credit under Section 45W, Credit for Qualified Commercial Clean Vehicles, will be allowed if a credit was previously allowed under Section 30D.

Modified Adjusted Gross Income Limitation

For purposes of determining if a taxpayer can claim a new clean vehicle tax credit, the taxpayer must generally have modified adjusted gross income (MAGI) under the threshold either in the year immediately preceding the year a qualifying new clean vehicle is placed in service or the year the vehicle is placed in service. The tax credit is not available for taxpayers with MAGI above $300,000 (couples), $225,000 (heads of household), and $150,000 (singles). These amounts will not be adjusted for inflation.

These limitations will not apply to corporate and non-individual taxpayers since these types of taxpayers do not calculate adjusted gross income. However, direct or indirect individual owners of a partnership or S corporation will be subject to the limitation in connection with determining whether they can claim their share of any new clean vehicle credit. Treasury and the IRS are requesting comments on the application of the MAGI limitation to trusts and other entity types.

Multiple Owners of One New Clean Vehicle

Generally, only one taxpayer can claim a new clean vehicle credit per vehicle. Thus, unless the new clean vehicle is being acquired by a partnership or S corporation, the parties involved in the purchase must indicate to the seller who will be the owner to claim the credit and the seller will only include that specific owner’s information on the required seller’s report. For this purpose, the partnership or S corporation would be considered the owner of the new clean vehicle, not the partners or shareholders, so the partnership or S corporation information would be listed on the seller’s report.

Effective Date

The rules in the proposed regulations are generally effective once the proposed regulations are finalized and published in the Federal Register. However, the proposed critical minerals and battery component rules discussed above are effective for new clean vehicles placed in service after April 17, 2023. The definitions outlined in the proposed regulations are in effect beginning January 1, 2023. The final assembly requirement is in effect for vehicles sold after August 16, 2022. 

Note, for new clean vehicles subject to written binding contracts in effect prior to August 16, 2022, the taxpayer will need to claim the credit on their 2022 tax return even if placed in service after December 31, 2022 and should reference the updated FAQs, specifically Q8 in Topic C, for specific guidance as the credit may need to be claimed through either an original, superseded, or amended return based upon the facts and circumstances.

Our Approach

Professionals at Forvis Mazars can help you:

  • Determine if a new vehicle you are considering may qualify for a new clean vehicle credit
  • Determine the amount of the new clean vehicle credit that may be available

If you have any questions or need assistance, please reach out to a professional at Forvis Mazars or submit the Contact Us form below.


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