Auto dealers: Know the rules for clean vehicle tax credits

On Dec. 12, 2022, the IRS released Revenue Procedure 2022-42, providing guidance on the reports that auto dealers must furnish for vehicles to become eligible for the new clean vehicle credit or the previously owned clean vehicle credit.

These reporting requirements are effective for otherwise qualifying electric vehicles sold as of Jan. 1, 2023, so it’s important that auto dealerships understand what to report, who to report it to and when to report it.

Any dealer who sells a vehicle for which either of the noncommercial electric vehicle tax credits will be claimed must provide certain information to the vehicle’s purchaser (the taxpayer) and to the IRS. This information has to be reported to the taxpayer no later than the date of the vehicle’s sale, and the IRS will require information on all such sales to be provided to them as of the 15th day after the end of the applicable calendar year.

This means that the first reports will be due to the IRS on Jan. 15, 2024.

Information requirements

Reports provided to the taxpayer and to the IRS must contain the following information:

• The name and taxpayer identification number of the dealer
• The name and taxpayer identification number of the taxpayer
• The vehicle identification number
• The battery capacity of the vehicle
• For new clean vehicle credit sales, verification that the original use of vehicle begins with the taxpayer
• The date of sale, sales price and maximum credit amount available for the applicable credit
• For sales made after Dec. 31, 2023, if an election was made to transfer the credit to the dealer, any credit amount paid or allowed as down payment or partial payment to the taxpayer
• An applicable declaration statement signed by an individual who is allowed to bind the dealer in such IRS-related matters

In the future, the IRS is expected to provide further information about how to report this information to them. In the meantime, it’s important for auto dealers to immediately begin providing these reports to taxpayers purchasing electric vehicles for which they are planning to claim a tax credit, and to retain the same reports so that the necessary information can be provided to the IRS as required.

Dealers can reference report templates provided by the National Automobile Dealers Association and by local dealership advocacy groups.

For reporting requirements for vehicle manufacturers, refer to Revenue Process 2022-42 for further information.

How Wipfli can help

If you’d like to learn more or need assistance with the electric vehicle tax credit and determining any extra state or local incentives, contact us. Wipfli’s experienced team is staying on top of all the legislative changes and how they affect tax liability.

Sign up to receive additional tax and legislative content in your inbox, or continue reading on:

• Key features of the Inflation Reduction Act of 2022
• How you can claim the Inflation Reduction Act’s green building tax incentives
• PPP considerations for dealerships: Cash flow planning
• How dealers are faring in the wake of COVID-19

This article was co-authored by Hayley Honeychurch, senior accountant.