Section 1.30D-5 - [Effective 7/5/2024] Transfer of credit(a)In general. This section provides rules related to the transfer and advance payment of the section 30D credit pursuant to section 30D(g) of the Internal Revenue Code (Code). Under the rules of section 30D(g) and this section, a taxpayer may elect to transfer a section 30D credit to an eligible entity, and the eligible entity may receive an advance payment for such credit, provided certain requirements are met. See paragraph (d) of this section for rules applicable to credit transfer elections. See paragraph (f) of this section for rules applicable to advance payments of transferred section 30D credits. Section 30D(g)(2) sets forth certain requirements that a dealer must satisfy to be an eligible entity for credit transfer and advance payment purposes. Section 30D(g)(2)(A) requires registration with the IRS. See paragraph (c) of this section for rules related to dealer registration. Section 30D(g)(2)(B) through (D) and paragraph (f)(2) of this section impose additional requirements that a registered dealer must satisfy in order to be an eligible entity for credit transfer and advance payment purposes.(b)Definitions. This paragraph (b) provides definitions that apply for purposes of section 30D(g) and this section. See§ 1.30D-2(b) for definitions that are generally applicable to section 30D and the section 30D regulations. (1)Advance payment program. Advance payment program means the program described in paragraph (f)(1) of this section.(2)Credit transfer election. Credit transfer election has the meaning provided in section 30D(g) and paragraph (d) of this section.(3)Dealer. Dealer has the meaning provided in section 30D(g)(8), except that, for purposes of this section, the term does not include persons licensed solely by a territory of the United States, and includes a dealer licensed by any jurisdiction (other than one licensed solely by a territory of the United States) that makes sales at sites outside of the jurisdiction in which it is licensed.(4)Dealer tax compliance. Dealer tax compliance means the dealer has filed all required Federal information and tax returns, including for Federal income and employment tax purposes, and the dealer has paid all Federal tax, penalties, and interest due as of the time of sale. A dealer that has entered into an installment agreement with the IRS for which a dealer is current on its obligations (including filing obligations) is treated as in dealer tax compliance.(5)Electing taxpayer. Electing taxpayer means an individual who purchases and places in service a new clean vehicle and elects to transfer the section 30D credit that would otherwise be allowable to such individual to an eligible entity pursuant to section 30D(g) and paragraph (d) of this section. A taxpayer is an electing taxpayer only if the taxpayer makes certain attestations to the registered dealer, pursuant to procedures provided in guidance published in the Internal Revenue Bulletin (see § 601.601 of this chapter), including that the taxpayer does not anticipate exceeding the modified adjusted gross income limitation of section 30D(b)(1) and § 1.30D-4(b) and that the taxpayer will use the vehicle predominantly for personal use.(6)Eligible entity. Eligible entity has the meaning provided in section 30D(g)(2) and paragraph (f)(2) of this section.(7)Incentive. For purposes of the eligible entity requirements of section 30D(g)(2)(B)(ii) and (D), incentive means any reduction in price available to the taxpayer from the dealer or manufacturer, including in combination with other incentives, other than a reduction in the form of a partial payment or down payment for the purchase of a new clean vehicle pursuant to section 30D(g)(2)(C).(8)Registered dealer. Registered dealer means a dealer that has completed registration with the IRS as provided in paragraph (c) of this section.(9)Sale price. The sale price of a new clean vehicle means the total price agreed upon by the taxpayer and dealer in a written contract at the time of sale, including any delivery charges and after the application of any incentives. The sale price of a new clean vehicle does not include separately stated taxes and fees required by State or local law. The sale price of a new clean vehicle is determined before the application of any trade-in value.(10)Time of sale. Time of sale means the date the new clean vehicle is placed in service, as defined in § 1.30D-2(b)(36).(c)Dealer registration - (1)In general. A dealer must register with the IRS in the manner set forth in guidance published in the Internal Revenue Bulletin (see § 601.601 of this chapter) for the dealer to receive credits transferred by an electing taxpayer pursuant to section 30D(g) and paragraph (d) of this section. (2)Dealer tax compliance required. A dealer must be in dealer tax compliance to complete and maintain its registration with the IRS and paragraph (d) of this section. If the dealer is not in dealer tax compliance for any of the taxable periods during the last five taxable years, then the dealer may complete its initial registration with the IRS, but the dealer will not be eligible for the advance payment program (and, therefore, the dealer will not be eligible to receive transferred section 30D credits) until the compliance issue is resolved. The IRS will notify the dealer in writing that the dealer is not in dealer tax compliance, and the dealer will have the opportunity to address any failure through regular procedures. If the failure is corrected, the IRS will complete the dealer's registration, and, provided all other requirements of section 30D(g) and this section are met, the dealer will then be allowed to receive transferred section 30D credits and participate in the advance payment program. Additional procedural guidance regarding this paragraph is set forth in guidance published in the Internal Revenue Bulletin (see § 601.601 of this chapter).(3)Suspension of registration. A registered dealer's registration may be suspended pursuant to the procedures described in guidance published in the Internal Revenue Bulletin (see § 601.601 of this chapter). Any decision made by the IRS relating to the suspension of a registered dealer's registration is not subject to administrative appeal to the IRS Independent Office of Appeals unless the IRS and the IRS Independent Office of Appeals agree that such review is available and the IRS provides the time and manner for such review.(4)Revocation of registration. A registered dealer's registration may be revoked pursuant to the procedures described in guidance published in the Internal Revenue Bulletin (see § 601.601 ). Any decision made by the IRS relating to the revocation of a dealer's registration is not subject to administrative appeal to the IRS Independent Office of Appeals unless the IRS and the IRS Independent Office of Appeals agree that such review is available and the IRS provides the time and manner for such review.(d)Credit transfer election by electing taxpayer. For a new clean vehicle placed in service after December 31, 2023, an electing taxpayer may elect to apply the rules of section 30D(g) and this section to make a credit transfer election with respect to the vehicle so that the section 30D credit with respect to the vehicle is allowed to the eligible entity specified in the credit transfer election (and not to the electing taxpayer) pursuant to the advance payment program described in paragraph (f) of this section. The electing taxpayer, as part of the credit transfer election, must transfer the entire amount of the credit that would otherwise be allowable to the electing taxpayer under section 30D with respect to the vehicle, and the eligible entity specified in the credit transfer election must pay the electing taxpayer an amount equal to the amount of the credit included in the credit transfer election. A credit transfer election must be made no later than the time of sale, and must be made in the manner set forth in guidance published in the Internal Revenue Bulletin (see § 601.601 of this chapter). Once made, a credit transfer election is irrevocable. No credit transfer election may be made to transfer an amount of credit that would otherwise be allowed to the electing taxpayer under section 38.(e)Federal income tax consequences of the credit transfer election -(1)Tax consequences for electing taxpayer. In the case of a credit transfer election, the Federal income tax consequences for the electing taxpayer are as follows-(i) The credit amount under section 30D that the electing taxpayer elects to transfer to the eligible entity under section 30D(g) and paragraph (d) of this section may exceed the electing taxpayer's regular tax liability (as defined in section 26(b)(1) of the Code) for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture on the basis that it exceeded the electing taxpayer's regular tax liability;(ii) The payment made by an eligible entity to an electing taxpayer under section 30D(g)(2)(C) and paragraph (d) of this section to an electing taxpayer pursuant to the credit transfer election is not includible in the gross income of the electing taxpayer; and(iii) The payment made by an eligible entity to an electing taxpayer under section 30D(g)(2)(C) and paragraph (d) of this section is treated as repaid by the electing taxpayer to the eligible entity as partial payment of the sale price of the new clean vehicle. Thus, the repayment by the electing taxpayer is included in the electing taxpayer's basis in the new clean vehicle prior to the application of the basis reduction rule in section 30D(f)(1). (2)Tax consequences for eligible entity. In the case of a credit transfer election, the Federal income tax consequences for the eligible entity are as follows- (i) The eligible entity is allowed the section 30D credit with respect to the new clean vehicle and may receive an advance payment pursuant to section 30D(g)(7) and paragraph (f) of this section;(ii) Advance payments received by the eligible entity are not treated as a tax credit in the hands of the eligible entity and may exceed the eligible entity's regular tax liability (as defined in section 26(b)(1)) for the taxable year in which the sale occurs;(iii) An advance payment received by the eligible entity is not included in the gross income of the eligible entity;(iv) The payment made by an eligible entity under section 30D(g)(2)(C) and paragraph (d) of this section to an electing taxpayer is not deductible by the eligible entity;(v) The payment made by an eligible entity to an electing taxpayer under section 30D(g)(2)(C) and paragraph (d) of this section is treated as repaid by the electing taxpayer to the eligible entity as partial payment of the sale price of the new clean vehicle. Thus, the repayment by the electing taxpayer is treated as an amount realized by the eligible entity under section 1001 of the Code and the regulations under section 1001; and(vi) If the eligible entity is a partnership or an S corporation, then-(A) The IRS will make the advance payment to such partnership or S corporation equal to the amount of the section 30D credit allowed that is transferred to the eligible entity;(B) Such section 30D credit is reduced to zero and is, for any other purpose of the Code, deemed to have been allowed solely to such entity (and not allocated or otherwise allowed to its partners or shareholders) for such taxable year; and(C) The amount of the advance payment is not treated as tax exempt income to the partnership or S corporation for purposes of the Code.(3)Form of payment from eligible entity to electing taxpayer. The tax treatment of the payment made by the eligible entity to the electing taxpayer described in paragraphs (e)(1) and (2) of this section is the same regardless of whether the payment is made in cash, in the form of a partial payment or down payment for the purchase of the new clean vehicle, or as a reduction in sale price (without the payment of cash) of the new clean vehicle.(4)Additional requirements. In the case of a credit transfer election, the following additional rules apply- (i) The requirements of section 30D(f)(1) (regarding basis reduction) and 30D(f)(2) (regarding no double benefit) apply to the electing taxpayer as if the credit transfer election were not made (so, for example, the electing taxpayer must reduce the electing taxpayer's basis in the vehicle by the amount of the section 30D credit, regardless of the credit transfer election);(ii) Section 30D(f)(6) (regarding the election not to take the credit) will not apply (in other words, by electing to transfer the credit, the electing taxpayer is electing to take the credit);(iii) Section 30D(f)(9) (regarding the vehicle identification number requirement) will be treated as satisfied if the eligible entity provides the vehicle identification number of such vehicle to the IRS in the form and manner set forth in guidance published in the Internal Revenue Bulletin (see § 601.601 of this chapter). The electing taxpayer must also provide the vehicle identification number with their tax return for the taxable year in which the vehicle is placed in service. See section 6213(g)(2)(T) of the Code and § 301.6213-2 of this chapter for rules relating to the omission of a correct vehicle identification number.(5)Examples. The following examples illustrate the rules of paragraph (e) of this section. (i)Example 1: Electing taxpayer's regular tax liability less than amount of credit - (A) Facts. T, an individual, purchases a new clean sport utility vehicle from a dealer, D, which is a C corporation. T satisfies the requirements to be an electing taxpayer and elects to transfer the section 30D credit to D. D is a registered dealer and satisfies the requirements to be an eligible entity. The sale price of the vehicle is $57,500. The section 30D credit otherwise allowable to T is $7,500. D makes the payment required to be made to T in the form of a cash payment of $7,500. T uses the $7,500 as a partial payment for the vehicle. T pays D an additional $50,000 from other funds. T's regular tax liability for the year is less than $7,500.(B)Analysis. Under paragraph (e)(1)(i) of this section, T may transfer the credit to D, even though T's regular tax liability is less than $7,500, and no amount of the credit will be recaptured from T on the basis that the allowable credit exceeds T's regular tax liability. D's $7,500 payment to T is not included in T's gross income, and the sale price of the vehicle is $57,500 (including both the $7,500 payment and the additional $50,000 paid by T from other funds), prior to the application of the basis reduction rule of section 30D(f)(1). After application of the basis reduction rule, T's basis in the vehicle is $50,000. D is eligible to receive an advance payment of $7,500 for the transferred section 30D credit as provided in section 30D(g)(7) and paragraph (f) of this section. Under paragraph (e)(2) of this section, D may receive the advance payment irrespective of the fact that D's regular tax liability is less than $7,500. The advance payment is not treated as a credit toward D's tax liability (if any), nor is it included in D's gross income. Further, D's $7,500 payment to T is not deductible, and D's amount realized is $57,500 upon the sale of the vehicle (including both the $7,500 payment from D to T that T uses as a partial payment, and the additional $50,000 paid by T from other funds).(ii)Example 2: Non-cash payment by eligible entity to electing taxpayer-(A) Facts. The facts are the same as in paragraph (e)(5)(i)(A) of this section (facts of Example 1), except that D makes the payment to T in the form of a reduction in the sale price of the vehicle (rather than as a cash payment).(B)Analysis. Paragraph (e)(3) of this section provides that the application of paragraphs (e)(1) and (2) of this section is not dependent on the form of payment from an eligible entity to an electing taxpayer (for example, a payment in cash or a payment in the form of a reduction in sale price). Thus, the analysis is the same as in paragraph (e)(5)(i)(B) of this section (analysis of Example 1).(iii)Example 3: Eligible entity is a partnership -(A)Facts. The facts are the same as in paragraph (e)(5)(i)(A) of this section (facts of Example 1), except that D is a partnership.(B)Analysis. The analysis as to T is the same as in paragraph (e)(5)(i)(B) of this section (analysis of Example 1). Because D is a partnership, paragraph (e)(2)(vi) of this section applies. Thus, the advance payment is made to the partnership, the credit is reduced to zero and is, for any other purpose of the Code, deemed to have been allowed solely to the partnership (and not allocated or otherwise allowed to its partners) for such taxable year. The amount of the advance payment is not treated as tax-exempt income to the partnership for purposes of the Code.(f)Advance payments received by eligible entities -(1)In general. An eligible entity may receive advance payments from the IRS (corresponding to the amount of the section 30D credit for which a credit transfer election was made by an electing taxpayer to transfer the credit to the eligible entity pursuant to section 30D(g) and paragraph (d) of this section) before the eligible entity files its Federal income tax return or information return, as appropriate, for the taxable year with respect to which the credit transfer election corresponds. This advance payment program is the exclusive mechanism for an eligible entity to receive the section 30D credit transferred pursuant to section 30D(g) and paragraph (d) of this section. An eligible entity receiving a transferred section 30D credit may not claim the credit on a tax return.(2)Requirements for a registered dealer to become an eligible entity. A registered dealer qualifies as an eligible entity, and may therefore receive an advance payment, in connection with a credit transfer election, if it meets the following requirements: (i) The registered dealer submits required registration information and is in dealer tax compliance;(ii) The registered dealer retains information regarding the credit transfer election for three calendar years beginning with the year immediately after the year in which the vehicle is placed in service, as described in guidance published in the Internal Revenue Bulletin (see § 601.601 of this chapter);(iii) The registered dealer meets any other requirements set forth in guidance published in the Internal Revenue Bulletin (see § 601.601 of this chapter) or in forms and instructions; and(iv) The registered dealer meets any other requirements of section 30D(g), including those in section 30D(g)(2)(B) through (E).(g)Increase in tax - (1)Recapture if electing taxpayer exceeds modified adjusted gross income limitation. If an electing taxpayer has modified adjusted gross income that exceeds the limitation in section 30D(f)(10) and § 1.30D-4(b), then the income tax imposed on such taxpayer under chapter 1 of the Code (chapter 1) for the taxable year in which such vehicle was placed in service is increased by the amount of the payment received by the taxpayer. The electing taxpayer must recapture such amounts on the return described in paragraph (h) of this section.(2)Excessive payments - (i)In general. This paragraph provides rules under section 30D(g)(7)(B), which provides that rules similar to the rules of section 6417(d)(6) of the Code apply to the advance payment program. In the case of any advance payment to an eligible entity that the IRS determines constitutes an excessive payment, the tax imposed on the eligible entity under chapter 1, regardless of whether such entity would otherwise be subject to tax under chapter 1, for the taxable year in which such determination is made will be increased by the sum of the following amounts- (A) The amount of the excessive payment; plus(B) An amount equal to 20 percent of such excessive payment.(ii)Reasonable cause. The amount described in paragraph (g)(2)(i)(B) of this section will not apply to an eligible entity if the eligible entity demonstrates to the satisfaction of the IRS that the excessive payment resulted from reasonable cause. In the case of a new clean vehicle (with respect to which a credit transfer election was made by the electing taxpayer) that is returned to the eligible entity within 30 days of being placed in service, the eligible entity will be treated as having demonstrated that the excessive payment resulted from reasonable cause.(iii)Excessive payment defined. Excessive payment means an advance payment made- (A) To a registered dealer that fails to meet the requirements to be an eligible entity provided in section 30D(g)(2) and paragraph (f)(2) of this section, or(B) Except as provided in paragraph (g)(2)(iv) of this section, to an eligible entity with respect to a new clean vehicle to the extent the payment exceeds the amount of the credit that, without application of section 30D(g) and this section, would be otherwise allowable to the electing taxpayer with respect to the vehicle for such tax year.(iv)Special rule for cases in which the electing taxpayer's modified adjusted gross income exceeds the limitation. Any excess described in paragraph (g)(2)(iii)(B) of this section that arises due to the electing taxpayer exceeding the limitation based on modified adjusted gross income in section 30D(f)(10) and § 1.30D-4(b) is not an excessive payment. Instead, the amount of the advance payment is recaptured from the electing taxpayer under section 30D(g)(10) and paragraph (g)(1) of this section.(3)Examples. The following examples illustrate the excessive payment rules in paragraph (g)(2) of this section. (i)Example 1: Registered dealer is not an eligible entity-(A)Facts. In 2024, D, a registered dealer, receives an advance payment of $7,500 with respect to a credit transferred under section 30D(g)(1) and paragraph (d) of this section for a new clean vehicle V. In 2025, the IRS determines that D was not an eligible entity with respect to new clean vehicle V at the time of the receipt of the advance payment in 2024, because D failed to satisfy one of the requirements of section 30D(g)(2) and paragraph (f)(2) of this section. D is unable to show reasonable cause for the failure.(B)Analysis. Under paragraph (g)(2)(i) of this section, the tax imposed on D is increased by the amount of the excessive payment if the advance payment received by D constitutes an excessive payment. Under paragraph (g)(2)(iii) of this section, the entire amount of the $7,500 advance payment received by D is an excessive payment because D did not meet the requirements to be an eligible entity under section 30D(g)(2) and paragraph (f)(2) of this section. Additionally, because D cannot show reasonable cause for its failure to meet these requirements, the tax imposed under chapter 1 on D is increased by $9,000 in 2025 (the taxable year of the IRS determination). This is comprised of the $7,500 value of the credit plus the $1,500 penalty, calculated as a 20% penalty on such $7,500 (20% * $7,500 = $1,500). This treatment applies regardless of whether D is otherwise subject to tax under chapter 1 (for example, if D is a partnership).(ii)Example 2: Incorrect manufacturer certifications-(A)Facts. In 2024, T, a taxpayer, makes an election to transfer a credit under section 30D(g)(1) and paragraph (d) of this section to E, a registered dealer, for a new clean vehicle V. M, the manufacturer of such vehicle, certified to the IRS that vehicle V was eligible for a $7,500 credit because it met both the critical minerals and the battery components requirements. T transfers the $7,500 credit to E. Subsequent to T's purchase and election to transfer the $7,500 credit to E, M reports to the IRS that vehicle V was only eligible for a $3,750 credit because it did not meet the critical minerals requirement.(B)Analysis. Under § 1.30D-4(h), T may rely on the information and certifications provided in M's written report to the IRS regarding vehicle V's eligibility for the section 30D credit. Under paragraph (g)(2)(iii)(B) of this section, an advance payment to an eligible entity with respect to a vehicle is an excessive payment to the extent the payment exceeds the amount of the credit that, without a credit transfer election, would be otherwise allowable to the electing taxpayer with respect to the vehicle for such taxable year. Because the amount of the credit that would be allowable to T for 2024 is $7,500, and T transferred the $7,500 credit to E, there is no excessive payment with respect to E.(h)Return requirement. An electing taxpayer that makes a credit transfer election must file a Federal income tax return or information return, as appropriate, for the taxable year in which the credit transfer election is made and indicate such election on the return in accordance with the instructions to the form on which the return is made. The electing taxpayer must attach a completed Form 8936, Clean Vehicle Credits, or successor form, and a completed Schedule A (Form 8936), Clean Vehicle Credit Amount, or successor form or schedule, including the vehicle identification number of the new clean vehicle and such other information as provided in forms and instructions.(i)Two credit transfer elections per year. A taxpayer may make no more than two credit transfer elections per taxable year, consisting of either two elections to transfer section 30D credits, or one election to transfer a section 30D credit and one election to transfer a section 25E credit. In the case of taxpayers who file a joint return, each individual taxpayer may make no more than two credit transfer elections per taxable year.(j)Severability. The provisions of this section are separate and severable from one another. If any provision of this section is stayed or determined to be invalid, it is the agencies' intention that the remaining provisions will continue in effect.(k)Applicability date. This section applies to new clean vehicles placed in service after December 31, 2023, in taxable years ending after December 31, 2023.