IRS Issues Guidance on Alternative Fuel Vehicle Refueling Property Credit

The Department of Treasury and Internal Revenue Service recently issued proposed regulations to provide guidance for the Alternative Fuel Vehicle Refueling Property Credit. The Inflation Reduction Act amended the credit for qualified alternative fuel vehicle refueling property. The changes apply to qualified alternative fuel vehicle refueling property placed in service after Dec. 31, 2022, and before Jan. 1, 2033.

The credit amount for property not subject to depreciation is 30% of the cost of the qualified property placed in service during the tax year. The credit amount for depreciable property is 6% of the cost of the qualified property placed in service during the tax year but may be increased to 30% of the cost of the qualified property if the prevailing wage and apprenticeship requirements are met. The credit is limited to $1,000 per item of non-depreciable property and $100,000 per item of depreciable property. Property must be placed in service in an eligible rural area census tract to qualify for the credit. An eligible census tract is any population census tract that is a low-income community or any population census tract that is not an urban area. The proposed regulations provide guidance for determining whether a population census tract is an eligible census tract.

The proposed regulations also provide guidance on how to calculate the credit, including what constitutes an “item” of qualified alternative fuel vehicle refueling property, the additional costs considered in determining the cost of the item, and how to treat dual-use property.

Additionally, the guidance provides definitions, general rules, and special rules, including basis reduction, recapture, and apportionment of the credit between business-use and personal-use property. The Treasury Department and the IRS also issued Notice 2024-64 providing guidance on rural areas that qualify for the EV fueling credit. Appendix A and Appendix B in the notice, contain. More information about the alternative fuel vehicle refueling property credit may be found on the Inflation Reduction Act of 2022 page on IRS.gov.