Charging Forward: Proposed Regulations Issued for EV Charging & Alternative Fuel Refueling Property

As background, the Inflation Reduction Act of 2022 (the “IRA”),³ amended the 30C Credit to allow taxpayers to claim a credit for up to 30% of the cost of qualified “alternative fuel vehicle refueling property” (“30C Property”) placed in service after 2022 and before 2033.⁴ The IRA also increased the general business credit limitation on the credit from the prior per location limitation of $30,000 to $100,000 with respect to any single item of 30C Property.⁵ Finally, the IRA made the credit only available with respect to property placed in service in an eligible census tract – a census tract in either a low-income community or a non-urban area.

30C Property is generally property that is (1) for the storage or dispensing of a clean-burning fuel (i.e., certain natural gases, fuel mixtures, electricity, or transportation fuels) into the fuel tank of a motor vehicle propelled by such fuel or (2) for the recharging of motor vehicles propelled by electricity.

The Proposed Regulations provide fairly detailed guidance and numerous examples with respect to the 30C Credit. As described below, the Proposed Regulations also pose a few questions for taxpayer feedback. We have highlighted certain notable items in the Proposed Regulations below:

30C Property

• 30C Property includes functionally interdependent property and any property that is an integral part of refueling or recharging property if it is directly attributable and traceable to the single item of 30C Property.
• Bidirectional charging equipment may be included as 30C Property if the charger also allows discharging of electricity from the motor vehicle’s battery, but to avoid credit duplication, the Proposed Regulations exclude from the definition of recharging property components that are located within a motor vehicle.
• An apportionment rule based on relative cost is provided for any associated property that is traceable to more than one item of 30C Property and the Proposed Regulations generally adopt the approach taken by Notice 2007-43 with respect to dual-use property by providing that the creditable portion of the cost of such property is limited to the increase in the cost of the dual-use property over the cost of equivalent property used only for the non-creditable use.

“Single Item of Property”

• A single item of 30C Property for purposes of the $100,000 cap is each charging port (i.e., the system within a charger that charges one motor vehicle at the port’s rated electrical outlet), each fuel dispenser (i.e., the unit through which fuel is dispensed into the tank of a motor vehicle if such unit is capable of fueling at or above the dispenser’s minimum rate of fueling and has at least one hose and nozzle (optionally, it may also include a meter, valve, controller, and enclosure)), or each storage property.⁶

Eligible Census Tracts & US Territories

• IRS will periodically publish lists of specific census tracts that are low-income or non-urban along with instructions on how taxpayers may determine their census tract identifying numbers.
• For low-income census tracts for which the 30C Credit is available, the Proposed Regulations generally looks to the requirements of the New Markets Tax Credit in section 45D(e) – namely, the census tract must either have a poverty rate of at least 20%, or, if not in a metropolitan area, the median family income cannot exceed 80% of the greater of the statewide or metropolitan area median family income.⁷
  • Treasury and IRS have requested comments on whether and how census tracts discussed in sections 45D(e)(2) (targeted populations) and 45D(e)(4) (low population tracts) on could be identified accurately to qualify as eligible census tracts for the 30C Credit.
• A census tract is treated as non-urban if at least 10 percent of the census blocks in such tract are not designated as urban areas.
• The 30C Credit is not available for 30C Property located in a territory of the United States.
• Treasury and the IRS have requested comments on how mobile charging equipment could satisfy the eligible census tract requirement.

Prevailing Wage and Apprenticeship Requirements

• For purposes of satisfying the prevailing wage and apprenticeship (“PWA”) requirements to be eligible for the full credit amount, multiple 30C Properties will generally be treated as a single project if: (1) the items are on a contiguous pieces of land; (2) owned by a single taxpayer (or related taxpayers); (3) placed in service in a single taxable year and (4) either there is a common environmental permit, a single master construction contract, or a single loan agreement.
• The Proposed Regulations specify that a seller of 30C Property that is treated as the taxpayer that placed such property in service is the taxpayer required to comply with the PWA recordkeeping requirements.

Credit Recapture

• Generally, recapture only occurs if, within 3 years of the property being placed in service, the taxpayer claiming the 30C Credit. modifies the property such that it no longer qualifies as 30C Property.
  • A sale of the 30C Property generally does not trigger recapture unless the taxpayer knows that the property will cease to qualify as Section 30C Property following sale.
  • 30C Property is not subject to recapture solely because it is placed in service in a location that subsequently ceases to be in a qualified census tract.

¹ The Notice replaces Section 5.02(2) of Notice 2024-20 and directs taxpayers to determine 11-digit census tract GEOID of a location by using: https://www.census.gov/data/data-tools/2015-census-tract.html census tract boundaries) and https://www.census.gov/data/data-tools/2020-census-tract.html (for 2020 census tract boundaries).  The Notice provides relief for taxpayers who rely on Notice 2024-20 if a tax return is filed before November 15, 2024, including a claim for the 30C Credit.

² Comments and requests for public hearing on the Proposed Regulations are due by November 18.

³ Our prior coverage of the IRA can be found here and here and further coverage and details can be found here.

⁴ For property placed in service after 2022, the credit is equal to 6% of the cost, but, if a taxpayer satisfies the prevailing wage and apprenticeship requirements or meets the beginning of construction exception, the credit is multiplied by five.

⁵ If the 30C Credit is taken as a personal credit, the cap is reduced to $1,000 and the 30C Property must be installed at a personal residence.

⁶ For purposes of the 30C Credit, storage property is a storage system comprised of multiple storage tanks (e.g., a cascade system).

⁷ The threshold is modified to 85% of statewide median family income for high migration rural counties.