Update on Transferring Clean Energy and Vehicle Tax Credits

On July 1st, the IRS’s final regulations on clean vehicle credits and the transfer of eligible credits took effect and Haefele Flanagan is available to help you take full advantage of these tax incentives.

With the detailed final regulations, the IRS has issued more readable guidance on these provisions and others in the Inflation Reduction Act, including clear, concise overviews, charts, tables, checklists, and user guides. This helps taxpayers understand the process without having to read through complex regulations.

This information is readily available on IRS.gov. The website also provides details on the elective pay and direct pay mechanisms in the IRA for transferring clean energy tax credits, useful for tax-exempt and governmental entities.

The final regulations include guidelines on transferring clean vehicle tax credits, such as for electric cars, allowing different entities to use the credits. For clean vehicles, there’s a provision for transfer or advance payment of the credit via the dealership, so buyers can receive the full credit at the time of sale.

Credit brokers facilitate exchanges where taxpayers can buy and sell clean energy tax credits, with the final regulations addressing broker fees and the tax implications of these transactions. For the transferring entities, it’s a tax-free transaction, with cash payments not included in the seller’s gross income and not deductible by the buyer. Broker payments are taxable to the broker.

Timeliness is critical for claiming these tax credits under the Inflation Reduction Act. To utilize elective pay or credit transfer, you must complete a pre-filing registration process, declaring your intention to the IRS via their online portal before claiming the credit.

If you have questions about eligibility and how to make a claim, reach out to your accounting professional.

Source: Accounting Today