Explaining the Transfer/Advance Payment of Clean Energy Credits and Energy Credits Online Registration

The U.S. Department of the Treasury has issued long-awaited guidance on how customers can elect to transfer New Clean Vehicle Credits and/or Previously Owned Clean Vehicle Credits to auto dealers at the time of purchase.

This election is available to buyers of eligible clean vehicles purchased on or after January 1, 2024. 

The purpose of the election is to provide a taxpayer/buyer with the financial benefit of an allowable clean vehicle credit at the time of purchase (via purchase price reduction) rather than waiting until they file their income tax return for that year. While the buyer still has the option to wait until filing to claim the credit, we don’t expect many will choose that option once advance payments are permitted. 

What Auto Dealers Need to Do Prior to January 1, 2024

1. Register your dealership using the new IRS Energy Credits Online tool. All dealers MUST complete the Time of Sale Registration on this portal in order to sell clean vehicles eligible for the New Clean Vehicle Credits and/or Previously Owned Clean Vehicle Credits on or after January 1, 2024. Seller reports will be required to be submitted electronically through this portal at the time of sale, effective January 1, 2024.

2. Dealers are not required to but can also register for the Advance Payment Program on the same IRS Credits Online tool after the Time of Sale Registration is complete. This second registration will allow dealers to offer the credits to customers at the time of purchase and be reimbursed by the IRS.

Once fully registered, dealers will be able to offer the advance payment of the clean vehicle credits to customers and receive reimbursement from the IRS beginning January 1, 2024. When selling an eligible vehicle, the IRS Credits Online tool will provide real-time confirmation as to whether the advance payment request was accepted or rejected so a dealer will know before the sale is complete. The IRS will promptly issue advance payment reimbursements to dealers via direct deposit within 48 to 72 hours of a successfully submitted seller report and advance payment request.

As these rules were being considered over the last year, many dealers were concerned that they would need to obtain and verify taxpayer tax return data as part of the program. The good news is that it is not necessary to do so in this process. The dealer will simply be required to disclose to the buyer what modified adjusted gross income (AGI) limitations are applicable to the credit they are seeking.

Adjusted Gross Income (AGI) Limitations

• New Clean Vehicle Credit (30D): MFJ - $300k; HoH - $225k; Single/MJS - $150k
• Previously Owned Clean Vehicles Credit (25E): MFJ - $150k; HoH - $112.5k; Single/MFS - $75k

The buyer must then attest that his or her prior-year modified AGI did not, or their current-year modified AGI will not, exceed the modified AGI thresholds. If it does, the buyer will be required to pay the credit back to the IRS when filing their income tax return for the year. 

There are various other dealer disclosures and buyer attestations required to be captured on the seller report/time of sale report, but the modified AGI limit attestation is one that’s new to the credit transfer program in the most recent guidance.

You may have noticed that the Commercial Clean Vehicle Credit, also enacted within the Inflation Reduction Act, was not referenced above. That was not a mistake. The credit transfer/advance payment option is not available for the Commercial Clean Vehicle Credit, nor is a seller report required to be completed. Taxpayers purchasing a vehicle eligible for the Commercial Clean Vehicle Credit must wait until the filing of their income tax returns to claim and realize the benefit of the credit. The Commercial Clean Vehicle Credit is only available to taxpayers purchasing an eligible clean vehicle that’s subject to depreciation in the taxpayer’s trade or business.

As a reminder, Schneider Downs has developed an EV Tax Credit Guide to help dealers navigate these complex credits. For more information, or if you need any assistance registering for the IRS Energy Credits Online tool, please reach out to Brett Cubellis, Steve Barber or any of our SD Auto Advisors. 

About Schneider Downs Industry Groups

Schneider Downs recognizes that every industry is different, often presenting unique challenges that require individualized insight, innovation and experience. Our experience in these industries is enhanced through participation in focus groups, which address the characteristics that make these industries unique. 

For more information on additional industries we serve please visit www.schneiderdowns.com/industries or contact us at [email protected].