Treasury, IRS Release Section 30C Alternative Fuel Vehicle Refueling Property Credit Guidance
The U.S. Department of the Treasury and IRS on Jan. 19, 2024, released Notice 2024-20, stating their intent to issue proposed regulations regarding the Alternative Fuel Vehicle Refueling Property Credit under Section 30C of the Internal Revenue Code and providing guidance on the requirement that property be located in an eligible census tract.
Modifications to Section 30C
As it relates to businesses, the Inflation Reduction Act (IRA) made several modifications to Section 30C, which provides a tax credit for 30 percent of the cost of alternative fuel vehicle refueling property. Those modifications include the following:
- First, the credit is subject to prevailing wage and apprenticeship requirements. (See Holland & Knight's previous alert, "Highlights of the Proposed Regulations on IRA Prevailing Wage and Apprenticeship Requirements," Sept. 6, 2023.) If the prevailing wage and apprenticeship requirements are not met, the credit is reduced from 30 percent to 6 percent.
- Second, the IRA modified the credit from a per-location to a per-item basis and increased the maximum credit amount to $100,000. The Treasury Department and the IRS have not yet provided guidance regarding how to determine what constitutes a "single item" of property.
- Finally, Section 30C also requires that the refueling property be located in an eligible census tract, which is addressed in the Notice.
Eligible Census Tracts
The Notice provides taxpayers helpful guidance on identifying eligible census tracts, defined in the statute as either not an urban area or one described in Section 45D(e).
- Non-Urban Census Tracts: The Notice establishes that a census tract is deemed non-urban if at least 10 percent of the census blocks within the census tract are not designated as urban areas. Stated differently, if 10 percent or more blocks that make up the census tract are rural, the tract is an eligible census tract under Section 30C.
- Low-Income Community Census Tracts: Section 30C defines a qualifying census tract as one described in Section 45D(e), which defines the term low-income community for the New Markets Tax Credit (NMTC). The Notice relies on designations made under Section 45D(e) but notes that the underlying data informing these designations was recently updated. The Notice provides a transition rule under which taxpayers can rely on designations using the older or more recent data.
- Refueling Property Located in U.S. Territories: The Notice provides that refueling property located in U.S. territories qualifies for the credit if it is owned by a U.S. citizen (other than a citizen who is a bona fide resident of a territory), a U.S. corporation or U.S. territory corporation.
Helpfully, the Notice includes two appendices. These appendices identify which particular census tract numbers are considered qualifying census tracts. The date the refueling property is placed in service dictates which appendix should be used. In addition to the Notice, the IRS also issued frequently asked questions under Section 30C.
The Holland & Knight Energy Tax Team is available for questions regarding the guidance. To receive additional analysis from the team, please subscribe to our alerts.
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