The Internal Revenue Service (“IRS”) released Rev. Proc. 2023-33 on October 6, 2023, with additional information on how individuals buying used or new electric vehicles (EVs) can transfer a federal income tax credit to the auto dealership at the time of purchase, as opposed to claiming the credit on their federal income tax return. In a recent IRS National Automobile Dealers Association webinar, the IRS encouraged all auto dealerships to register on the IRS Energy Credits Online Portal which was launched on November 1, 2023.
The clean vehicle credit provides a maximum credit of $7,500 per new EV, consisting of $3,750 if certain critical minerals requirements are met and $3,750 if certain battery components requirements are met. The used EV credit provides an income tax credit equal to the lesser of $4,000 or the amount equal to 30% of the sales price. Under the Inflation Reduction Act, taxpayers are able to elect to transfer the credit directly to the dealer for qualified EV vehicles placed in service after December 31, 2023. This allows eligible buyers to receive the credit amount upfront when purchasing the EV vehicle, as opposed to waiting to claim their EV credit on their federal income tax returns.
The transfer of EV new and used clean vehicle credits is elective on the part of the taxpayer, and dealerships can decide whether to offer to the taxpayer the ability to transfer the credits (thereby participating in the advance payment program). Alternatively, taxpayers instead may choose to wait and claim the new and used clean vehicle credits on their tax return.
Dealers will not be able to claim or transfer a credit starting January 1, 2024, unless the dealer is registered with the IRS Energy Credits Online Portal. A dealer must register 15 days prior to being able to receive any advanced payments.
In November, only one person will be allowed to register the dealership through the IRS Energy Credits Online Portal.
- The single person registering the dealer must be completed by an individual representative who is currently authorized to legally bind the dealer with the IRS.
- To complete the registration, the IRS will validate the personal identity of the individual representative. This individual representative should have their government-issued ID ready.
- If the individual already has an ID.me account, they should merely sign into their account and not create a new ID.me account for the dealership.
- It is anticipated that in December, additional persons will be able to be added to the Portal.
If a dealer has multiple locations or dealerships, the requirement to register in the Portal will be based on EINs. For example, if a dealership has multiple locations with only one EIN, it will only register once in the Portal. However, if a dealer has multiple locations with multiple EINs, it will be required to register each dealership with a separate and distinct EIN in the Portal.
At the time of registration, the dealer will need to provide the following:
- Dealer name, business address, phone number, and email address
- Dealer Taxpayer Identification Number (TIN) or Employer Identification Number (EIN)
- Dealer state license number (if applicable) and associated proof of license
- Bank account information of the dealer, for purposes of receiving electronic payments. Please note that additional users added to the Portal in December will not be able to alter this bank account information. In addition, a foreign bank account is not permitted.
- Authorized individual’s official name, mailing address, phone number, and email information.
In addition, the taxpayer must certify that the dealer will provide the buyer with the following information:
- Certification that, in the event a buyer returns a vehicle within 30 days of the time of sale, the seller will update the seller report.
- In the case of a previously-owned clean vehicle, certification that the seller will provide each taxpayer the model year of the vehicle that is at least two years prior to the calendar year of sale; and that the transfer is the first transfer of the vehicle since August 16, 2022, to a person other than the person with whom the original use of such vehicle commenced, excluding transfers to or between dealers.
- For purposes of the new EV credit, the manufacturer’s suggested retail price (MSRP) of the new clean vehicle, or, for purposes of the used EV credit, the sale price of the previously-owned clean vehicle
- The maximum amount of the credit allowable and any other incentive available for the purchase of such vehicle
- The amount provided by the dealer to such taxpayer as a condition of the taxpayer making the transfer election. This amount must equal the amount of the credit potentially allowable as to the purchase of the vehicle, and such amount may be provided in the form of cash, a down payment, or partial payment for the purchase of the vehicle
- The modified adjusted gross income (modified AGI) limitations provided in §§ 30D(f)(10) (in the case of the § 30D credit) or 25E(b)(2) (in the case of the § 25E credit), as applicable
- Certification that, no later than the time of sale of the vehicle, the dealer will make the payment to the taxpayer (whether in cash or in the form of a partial payment or down payment for the purchase of such vehicle) in an amount equal to the credit otherwise allowable to such taxpayer.
- Certification that the dealer, with respect to any incentive otherwise available for the purchase of a vehicle for which a new EV credit or used EV credit is allowed, including any incentive in the form of a rebate or discount provided by the dealer or manufacturer, ensured that:
- The availability or use of such incentive does not limit the ability of a taxpayer to make a transfer election.
- Such election does not limit the value or use of such incentive.
- Certification that, in the event a buyer returns a vehicle within 30 days of the time of sale, and the dealer fails to report such return through the IRS Energy Credits Online Portal, the dealer will have an excessive payment of any advance payment amount received for the sale of such vehicle.
The IRS will validate the dealership’s business tax information, including the North American Industry Classification System (NAICS) Code and tax compliance (e.g., the most recent required federal income tax returns of the dealership has been filed). If the IRS has validated the registration information, a registration ID will be provided to the dealership. Once the dealership has a valid registration ID, it will be allowed to transfer the buyer’s credit to the dealership, and after 15 days, will be able to receive advanced payments for the credit transfer amounts.
In the event the dealership fails the validation process, the dealership will be notified by the IRS. If a dealer’s registration is rejected, the dealer will have the opportunity to request administrative review of the IRS’s determination to the IRS. During the period that the issue is pending, the dealer cannot participate in the advance payment program.
Once a dealership is registered on the IRS Energy Credit Online Portal, they will be able to add additional users in December. In addition, eligible EV buyers will be able to claim the clean vehicle credit on January 1, 2024, or after, provided the dealer is registered in the Portal.
The IRS may suspend a registered dealer’s eligibility to participate in the advance payment program for any of the following reasons:
- The IRS determines that the registered dealer provided inaccurate information to the taxpayer regarding the vehicle’s eligibility or the taxpayer’s eligibility for the advance payment program.
- The IRS determines that the registered dealer provided inaccurate information to the IRS regarding the vehicle’s eligibility or taxpayer’s eligibility for the advance payment program.
- The IRS determines that the registered dealer provided inaccurate information to the IRS regarding its eligibility for the advance payment program.
- The registered dealer fails to satisfy the dealer tax compliance.
- The IRS determines that the bank account information that the dealer provided through the IRS Energy Credits Online Portal is not valid.
- The dealer fails to report the return of a vehicle through the IRS Energy Credits Online Portal.
To monitor the IRS guidance regarding dealership registration, please consider performing the following tasks:
- Visit: Clean Vehicle Credit Seller or Dealer Requirements
- Look for further information on the IRS Dealer Registration User Guide (soon to be released)
- Sign up to receive updates via an IRS e-News Subscriptions here, locate e-News for Businesses and click on e-News For Clean Vehicle Industry