The Inflation Reduction Act of 2022 (IRA) amended Section 30C of the Internal Revenue Code to allow taxpayers to claim a credit of up to 30% of the cost of qualified alternative vehicle refueling property (including electric vehicle chargers) placed in service between Dec. 31, 2022, and Dec. 31, 2032. The base amount of the credit is 6%, multiplied by five if the IRA’s prevailing wage and apprenticeship requirements are met. On Sept. 18, 2024, the IRS issued proposed regulations on the Section 30C credit.
There are three basic requirements to claim the Section 30C credit. First, the property must be depreciable property (limited to a $100,000 credit per single unit of 30C property) or installed on property that is used as the principal residence of a taxpayer within the meaning of Section 121 of the code (limited to a $1,000 credit per single unit of 30C property). Second, the property’s original use must be with the taxpayer. Third, the property must be placed in service in an eligible census tract (i.e., a low-income community or non-urban community).
Single Unit of 30C Property
Prior to the enactment of the IRA, the 30C credit was calculated and limited by location rather than based on each single unit of 30C property. Significantly, the IRA changed the 30C credit to apply to each single unit of 30C property.
The proposed regulations define a single unit of 30C property as each charging port for recharging property, each fuel dispenser for refueling property, or each qualified alternative fuel storage property or electrical energy storage property.
If a single unit of 30C property has other “associated property” that is directly allocable or traceable to more than one single unit of 30C property, it may be allocated among the relevant items based on the cost of each single item of 30C property.
Placed in Service in a Low-Income or Nonurban Community
A census tract is considered a low-income community if the poverty rate is at least 20%. The proposed regulations provide detailed rules for making this determination.
A census tract is considered a nonurban community if it has been designated as such by the secretary of commerce. However, in the most recent census, the secretary of commerce only based urban and nonurban designations on census blocks, not census tracks. The proposed regulations adopt an approach that if 10% or more of the census blocks in a census tract are not designated as urban, the entire census tract will be considered nonurban for the purposes of Section 30C.
The IRS previously released Notice 2024-20, which identified low-income communities and nonurban census tracts for the purposes of Section 30C and provided information on a mapping tool, and Notice 2024-64, which updated mapping tool information.
Recapture
Section 30C property has a recapture period of three years. Recapture can occur if Section 30C property (1) is modified such that it no longer qualifies as Section 30C property, (2) is depreciable property that is no longer used in a trade or business, or (3) is sold or otherwise disposed of by the taxpayer to a party that the taxpayer knows or has reason to know will take actions that would trigger recapture under (1) or (2).