New rules impact credit eligibility for EV charging stations and more

Executive summary: Section 30C alternative fuel vehicle refueling property credit guidance

The Department of the Treasury (Treasury) and Internal Revenue Service (IRS) issued Notice 2024-20 (Notice) on Jan. 19, 2024, providing guidance to taxpayers on determining whether their qualified alternative fuel vehicle refueling property is located in an eligible census tract for purposes of the credit under section 30C of the Internal Revenue Code. Treasury and the IRS intend to propose regulations addressing the requirements. Until such proposed regulations are issued, taxpayers may rely on the guidance in the Notice.

The Notice provides definitional and procedural guidance including:

• Applicable Census Bureau terminology
• Additional information on each type of eligible census tract
• Rules for determining whether a census tract is eligible
• Substantiation and documentation requirements

Electronic tools and two appendices are offered in the Notice to assist taxpayers in their efforts to confirm eligibility of a census tract.

Background

The credit for qualified alternative fuel vehicle refueling property was first enacted in 2005 and provides a one-time general business credit for the cost of the property in the year it is placed in service. The credit may also be claimed as a nonrefundable personal credit if the property is not used in a trade or business (e.g., nondepreciable, used at a personal residence). The Inflation Reduction Act of 2022 (IRA) made several amendments to the credit including:

• Applying the section 30C credit to “any single item” of qualified alternative fuel vehicle refueling property
• Increasing the credit limitation for depreciable property to $100,000; credit limitation for all other property remains $1,000
• Expanding the types of eligible property
• Imposing prevailing wage and apprenticeship requirements on qualified alternative fuel vehicle refueling property used in a trade or business to claim the full credit rate. See RSM US LLP’s prior coverage of the prevailing wage and apprenticeship requirements. Personal use property is not subject to this requirement
• Allowing monetization of the credit by a direct pay under IRC section 6417 or transferability under IRC section 6418
• Adding the requirement that the qualified alternative fuel vehicle refueling property must be placed in service in an eligible census tract

Notice 2024-20

An eligible census tract is any population census tract that is a low-income community as described in IRC section 45D(e) or that is not an urban area. It may include property located in the U.S. territories.

Low-income community population census tracts

The section 30C credit uses the same definition for a low-income community census tract as the section 45D new markets tax credit (NMTC). Section 45D(e)(1) defines a low-income community as:

• A population census tract for which the poverty rate is greater than 20%;
• In the case of a tract not located within a metropolitan area, the median family income (MFI) of such tract is 80% or less of the statewide MFI; or
• In the case of a tract located in a metropolitan area, the MFI for such tract is 80% or less of the greater of statewide MFI or the metropolitan area MFI.

Low-income community population census tracts are determined by the Community Development Financial Institutions Fund (CDFI Fund) based on the American Community Survey (ACS) five-year estimate. For purposes of the NMTC, the CDFI Fund offers a one-year transitionary period as new data on NMTC tracts becomes available. The IRS intends to offer a similar transitionary period for the section 30C credit. For qualified alternative fuel vehicle refueling property placed in service between Jan. 1, 2023 and Dec. 31, 2024, taxpayers are able to utilize either the 2011-2015 NMTC tracts or the 2016-2020 NMTC tracts to determine if the property is in a low-income community census tract. For qualified alternative fuel vehicle refueling property placed in service after 2024 taxpayers must use the 2016-2020 NMTC tracts, pending the release of a future ACS five-year estimate.

Non-urban census tracts

Section 30C defines the term “urban area” as a population census tract that has been designated as an urban area by the Secretary of Commerce in the most recent decennial census. The Notice provides that if at least 10% of the census blocks that compose the population census tract are not urban areas, then the population census tract is not urban and satisfies the eligible census tract requirement. The non-urban census tracts determined by the 2020 Census are valid until data on the 2030 Census are released, which may not be until 2033.

Procedures for determining whether location requirements are met

The Notice provides electronic tools for taxpayers to determine the GEOID of the address where the qualified alternative fuel vehicle refueling property is located. A GEOID is the unique identifier for each census tract in the United States. Taxpayers may then cross-reference the GEOID with the two appendices in the Notice.

Appendix A and Appendix B provide the listings of GEOIDs for low-income community population census tracts using the 2011-2015 NMTC census tracts and 2016-2020 NMTC census tracts, respectively. Appendix B also includes GEOIDs for the non-urban census tracts. Therefore, a census tract is eligible if the GEOID appears on:

• For property placed in service in 2023 or 2024: Appendix A or Appendix B.
• For property placed in service between 2025 and 2029: Appendix B only.

The section 30C credit sunsets after 2032.

Washington National Tax takeaways

The Notice provides clarity on the geographical requirements of eligible property for taxpayers planning an investment in qualified alternative fuel vehicle refueling property. The tools and appendices provided in the Notice allow taxpayers to scope credit eligibility using the Notice’s permitted geographical sources. Taxpayers should be aware that Treasury and the IRS intend to propose regulations on the section 30C credit, but may rely on this Notice until such regulations are issued.

Taxpayers should consult with their tax advisors and the resources in the new guidance prior to accounting for any section 30C tax credits.