The Department of Treasury and Internal Revenue Service released IR-2024-240 on 18 September 2024, announcing 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 31 December 2022 and before 1 January 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 USD 1,000 per item of non-depreciable property and USD 100,000 per item of depreciable property.

Property must be placed in service in an eligible 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 credit may also be claimed by tax-exempt and governmental entities using elective pay or, alternatively, by the sellers of eligible property to such entities. An eligible census tract is any population census tract that is a low-income community or that is not an urban area.

Approximately two-thirds of Americans live in eligible census tracts. Business and tax-exempt governmental entities claiming the Alternative Fuel Vehicle Refueling Property Credit can receive an enhanced credit if they are paying workers prevailing wages and using registered apprentices to install the equipment.

Treasury’s Office of Economic Policy estimates that, when discounting expected annual savings over the 15-year lifespan of a vehicle, owners of electric vehicles will save $18,000 to $24,000 more than if they had purchased a comparable gasoline vehicle instead, and fuel is the largest contributor to these savings.