November 19, 2023
By Barrie Charapp Beaty
Mahdavi Bacon Halfhill & Young, PLLC
Dealers who sell new and used Electric vehicles (EVs) and fuel cell vehicles (FCVs), known as “clean vehicles” need to register the dealership with the IRS for submissions of Time of Sale Reporting and any transfer EV tax credits that eligible buyers wish to use for towards the purchase of the vehicle.
Registration can be done here. For registration, Dealers must provide their EIN, dealer license issued by the state, and upload the license.
Time of Sale Reporting for Tax Credits Eligibility
For eligible clean vehicles purchased, qualifying buyers are only able to claim the tax credits if the dealer successfully provides, on the date of the sale, the Time of Sale Report. Dealers must provide a copy of the submitted report to the buyer on the date the vehicle is sold. Starting December 2023, dealers submit the Time of Sale Reporting through the portal. Due to the requirement to report through the portal, dealers must register for the portal regardless if they will accept the transfer tax credits at the time of sale.
What Buyers Qualify for Tax Credits?
Not all buyers qualify for the tax credits. Tax credit qualifications are as follows.
The buyers must:
- Buy it for their own use (not for resale) and
- Use it primarily in the U.S.
The buyer’s modified adjusted gross income (AGI) may not exceed:
- $300,000 for married couples filing jointly
- $225,000 for heads of households
- $150,000 for all other filers
Buyers use their modified AGI from the year they take delivery of the vehicle or the year before, whichever is less. If their modified AGI is below the threshold in 1 of the two years, buyers can claim the credit.
Dealers need not verify income requirements. However, it would be best practices to know whether the tax credit is available to the buyer before factoring that into the reduction of cost of the eligible vehicle to the buyer.
Transfer of Clean Vehicle Tax Credits
Starting January 1, 2024, qualifying buyers of eligible clean vehicles from dealers can use the tax credit at the time of sale towards the purchase of that vehicle in order to reduce the price of their eligible clean vehicle. For the dealers to receive the transferred clean vehicles tax credits to be used upfront to reduce the price of eligible vehicles for buyers, dealers should be registered with the portal. IRS will reimburse dealers within 72 hours of submitting the qualifying clean vehicle sale through the portal.
What Vehicles Qualify for the Tax Credit?
Eligible vehicles for the tax credit are:
- Not purchased for resale
- A motor vehicle (have 4 wheels and used on public streets, roads, and highways)
- Have a battery capacity of at least 7 kilowatt hours
- Have a gross vehicle weight rating of less than 14,000 pounds
- Be made by a qualified manufacturer.
- Undergo final assembly in North America
- Meet critical mineral and battery component requirements (as of April 18, 2023)
- For new vehicles purchased in 2023 and after, the MSRP cannot exceed:
- $80,000 for vans, sport utility vehicles and pickup trucks; and
- $55,000 for other vehicles
Eligible vehicles for the clean vehicle tax credits can be found here.
What do Dealers need to Provide to the Buyer at Time of Sale?
Dealers must provide the Time of Sale Report on the date the clean vehicle is purchased.
The reports provided to the buyer at the time of sale should contain the following information:
- Seller/Dealer name and taxpayer ID number
- Buyer’s name and taxpayer ID number
- Maximum credit allowable under IRC 30D for new vehicles or IRC 25E for previously owned vehicles
- Vehicle identification number (VIN), unless the vehicle is not assigned one
- Battery capacity
- Date of sale
- Sale price
- For new vehicles, verification that the buyer is the original user
Each report must include a declaration of accuracy signed by a representative of the dealership with binding authority. The declaration must read: “Under penalties of perjury, I declare that I have examined this report submitted to the IRS pursuant to Revenue Procedure 2022-42 by [insert name of Seller], and to the best of my knowledge and belief I certify that this report is true, correct, and complete.”