The Internal Revenue Service recently released updates to frequently asked questions related to commercial clean vehicle credits. The revisions supersede earlier FAQs posted on April 16.
The full release can be found in Fact Sheet 2024-26, but here are a few highlights based on inquiries we’ve received from dealers:
- If an individual leases an EV from a dealership, can they claim the clean vehicle credit?
- No; leased vehicles are not eligible. Only EV owners are eligible for a new, previously owned or commercial clean vehicle credit. The lessor (the leasing business receiving compensation for use of the EV) is the owner of the vehicle, not the lessee. Since leased vehicles are not eligible for the credit, a time-of-sale report doesn’t need to be completed through the IRS Energy Credits Online.
- A change is needed to a time-of-sale report already submitted; what does a dealer do?
- The initial time-of-sale report should be voided within the 48-hour void window. Once that occurs, a second time-of-sale report can be submitted. Clarification has not yet been provided related to reports outside the 48 hours. Per the FAQs, the IRS plans to provide additional information in the coming months. We suggest keeping a record of any reports that need to be changed until that info is made available.
- What if the new clean vehicle sale is cancelled or the vehicle is returned shortly after purchase?
- If a sale is cancelled before the taxpayer takes possession of the EV, the buyer is not eligible to claim a credit and the vehicle would be eligible for a credit when sold to another taxpayer. As for a return within 30 days of possession, the taxpayer may not claim a credit and the vehicle would not be eligible for a credit when sold to a subsequent taxpayer. Likewise, in the case of a resale within 30 days of possession, the taxpayer cannot claim a credit. Since the vehicle was already placed in service, it would not be eligible for a credit when sold to a subsequent buyer.
- What if a previously owned clean vehicle sale is cancelled or returned/resold shortly after purchase?
- Similar to the above clarification, if a sale is cancelled before the taxpayer takes possession of the EV, the buyer is not eligible to claim a credit. The vehicle may be eligible for a credit when sold to another taxpayer. For a return within 30 days of possession, the vehicle generally would not be eligible for a credit when sold to a subsequent taxpayer, and the “new” taxpayer cannot claim a credit. The vehicle history report may help determine eligibility. For resale within 30 days of possession, the taxpayer cannot claim a credit. Since the vehicle was already placed in service, it would not be eligible for a credit when sold to a subsequent buyer.
As any dealer knows, each sale is unique and can pose unique questions. Additionally, the upcoming election could potentially bring policy changes related to these credits. In the meantime, our automotive advisors will continue to monitor and provide any updates from the IRS. If you have specific questions or need assistance, please contact us.
About Schneider Downs Automotive Industry Group
The Schneider Downs Automotive industry group serves dealers of all sizes, from single-point locations to mega-dealerships. Our members cross departments and meet regularly to ensure efficiencies in the services provided to our clients and discuss issues, regulations and trends affecting the automotive industry.
To learn more, visit our Automotive Industry Group page.
