Notice 2023-9, “Section 45W Commercial Clean Vehicles and Incremental Cost for 2023”

Concurrent with the white paper and Notice 2023-1, discussed in a separate blog, on December 29, 2022, the IRS released Notice 2023-9, which provides a safe harbor for determining the incremental cost of qualified commercial clean vehicles for the section 45W credit.

The amount of the commercial clean vehicle credit under section 45W is the lesser of (1) 30 percent of the taxpayer’s basis in a vehicle if the vehicle is not powered by a gasoline or diesel internal combustion engine (or else 15 percent) or (2) the incremental cost of the vehicle. In addition, the section 45W credit is subject to a cap of either $7,500 (for vehicles with a gross vehicle weight rating (GVWR) of less than 14,000 pounds) or $40,000 (for vehicles with a GVWR of 14,000 pounds or more).

For compact car PHEVs and vehicles with a GVWR of 14,000 pounds or more, a taxpayer may use on the incremental cost published in the DOE Analysis in http://www.energy.gov/node/4825009/. For all other street vehicles with a GVWR of less than 14,000 pounds, a taxpayer may use $7,500 as the incremental cost.