November 6, 2023
When the Inflation Reduction Act was passed last year, it called for significant investments in clean energy. It contained dozens of clean energy provisions which included 24 new tax incentives designed to accelerate clean energy investments. While many incentives were designed to benefit companies there were three new tax incentives introduced and updated that benefit individuals. Specifically, the Used Clean Vehicle and New Clean Vehicle tax deductions provide an incentive for purchasing qualified clean energy vehicles. Through the end of 2023, taxpayers interested in claiming the credit need to do so by filing Form 8936 along with the federal tax return. At the start of the new year these rules will change.
In 2024, taxpayers will be able to claim the deduction at the time of purchase resulting in an immediate price reduction. Last month, the IRS issued proposed regulations outlining the steps that auto dealerships will need to take to facilitate the process. This includes the requirement to register with the Energy Online Credit (EOC) tool to submit the required seller’s report. The good news is registration is now open. To help clients, prospects, and others, Wilson Lewis has provided a summary of the key details below.
To register an individual will need to have an ID.me account already registered with the IRS. For those who have an existing account they should simply sign in to get started. For those that do not, it will be necessary to register, which includes providing a photo identification as well as other information. Since these accounts are issued to individuals, and not businesses, it’s important to verify only personal information.
Once signed in there will be instructions on how to register a business. The process requires an authorized representative and other details including Employer ID number, business name and address, and dealership license number along with bank routing and account numbers. Remember to use the business tax account application to complete the process.
Auto dealerships and other sellers of clean vehicles are required to use the EOC tool to report eligible sales. This also includes car manufacturers that sell directly to the public. Remember, once registered all clean vehicles sales need to be reported through the EOC. It is the only way eligible buyers can receive the tax incentive at the time of purchase.
The tool allows a dealership to review registration details, update business information, designate authorized employees, receive transferred credits, and advance payments. A licensed dealer will be able to receive payments 15 days after registering. For this reason, dealers are encouraged to register immediately to ensure there are no delays in receiving payments. Finally, there will be additional updates made in the coming weeks that allow for the submission of time of sale reports for new vehicles, time of sale reports for used vehicles and ability to make updates/changes.
Despite increased prices and high interest rates, new car sales continue to rise due to the increase in available inventory. Concurrently, the demand for electric vehicles (EVs) continues to grow. It is estimated that automakers will sell over 4 million electric vehicles by the end of the third quarter 2024. The increasing demand means it is critical for both new and independent auto dealers to be registered and take advantage of the IRS program. It is likely to be a competitive disadvantage if a dealer is unable to provide the buyer with the appropriate tax savings.
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Most Atlanta dealerships will want to provide buyers with an immediate price reduction based on the available tax incentive. For this reason, it is important to register with the Energy Online Credit (EOC) tool immediately. If you have questions about the information outlined above or need assistance with a tax or accounting issue, Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.