Alternative Fuel Vehicle Refueling Property Tax Credit (Corporate)

September 15, 2023

Summary

Note: Section 13404 of The Inflation Reduction Act of 2022 (H.R. 5376) modified and extended the expiration date for the Alternative Fuel Vehicle Refueling Property Credit. Among other changes, it reduced the base tax credit from 30% to 6%, but allows the full 30% for projects that meet certain labor standards. The summary below described the credit as modified by H.R. 5376. 

Qualified alternative fuel vehicle refueling equipment, including electric vehicle charging equipment, is eligible for a tax credit of 6% up to $100,000 for each single item of property. Projects that meet the following wage and apprenticeship requirements are entitled to a larger tax credit of 30%. The taxpayer must ensure that all laborers and mechanics employed by the taxpayer or any contractor or subcontractor engaged in building the project be paid prevailing wages. The project must also employ a certain percentage of apprentices. The project must also be located in a census tract described in section 45D(e) of the IRS Code, or not in an urban area. The Department of the Treasury issued Initial Guidance on these requirements on November 30, 2022.  According to law, the labor provisions apply to projects for which construction begins 60 days or more after Treasury publishes its guidance. Given the publishing date of November 30, 2022, the effective date for the labor provisions is January 30, 2023. 

Section 13801 of The Inflation Reduction Act of 2022 also established procedures for other parties to monetize certain tax credits, including this one, for equipment placed in service on or after January 1, 2023 and through December 31, 2032. 

The direct pay option allows non-taxable entities to directly monetize certain tax credits. The provisions apply to nonprofits, a state or political subdivision thereof, the Tennessee Valley Authority, Indian tribal governments (as defined in Section 30D(g)(9)), any Alaska Native Corporation (as defined in Section 3 of the Alaska Native Claims Settlement Act), or any corporation operating on a cooperative basis which is engaged in furnishing electric energy to persons in rural areas. Such applicable entities can elect to be treated as having made a tax payment equal to the value of the tax credit they would otherwise be eligible to claim. The entity can then claim a refund for the excess taxes they are deemed to have paid. The option effectively makes this tax credit refundable for these entities. 

The act also allows eligible taxpayers to transfer all or a portion of their eligible tax credits to an unrelated taxpayer. Transfers must be reported to IRS and only one transfer is permitted. Must be elected no later than the due date for tax filing for the tax year the tax credit is claimed.