IR-2023-228, Dec. 1, 2023 WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued two items of guidance on the excluded entity restriction of the section 30D clean vehicle credit, as amended by the Inflation Reduction Act. Under the excluded entity restriction, vehicles are not eligible for the clean vehicle credit if the battery contains battery components manufactured or assembled or applicable critical minerals extracted, processed or recycled by a foreign entity of concern (FEOC). The proposed regulations provide definitions and proposed rules for qualified manufacturers of vehicles to determine eligibility for the clean vehicle credit regarding the excluded entity restrictions. In particular, the proposed regulations provide rules for determining whether applicable critical minerals (and their associated constituent materials) and battery components are FEOC compliant, meaning such materials do not violate the excluded entity provision. Revenue Procedure 2023-38PDF provides procedural rules for qualified manufacturers of new clean vehicles to comply with the reporting, certification, and attestation requirements regarding the excluded entity restriction, under which the IRS, with analytical assistance from the Department of Energy, will review compliance with the excluded entity restrictions. In addition, this revenue procedure updates and consolidates the procedural rules for qualified manufacturers with respect to the clean vehicle credit, the previously-owned clean vehicle credit, and the qualified commercial clean vehicle credit. Excluded Entity Restrictions Section 30D provides a credit for new clean vehicles that are placed in service by the taxpayer during the taxable year, worth a maximum credit of $7,500 per vehicle, consisting of $3,750 if certain critical minerals requirements are met and $3,750 if certain battery components requirements are met. Under the excluded entity restriction, in order to be eligible for the section 30D credit, vehicles placed in service beginning in 2024 must not have batteries containing battery components manufactured or assembled by a FEOC. In addition, vehicles placed in service beginning in 2025 must have not batteries containing applicable critical minerals extracted, processed, or recycled by a FEOC. The proposed regulations regarding the section 30D credit incorporate the statutory definition of FEOC from the IIJA, which is administered by the Department of Energy (DOE), as well as implementing guidance promulgated by the DOE. In addition, the proposed regulations provide due diligence requirements for qualified manufacturers; specific rules for the determination of when applicable critical minerals (and associated constituent materials), battery components, battery cells, and batteries are compliant with the FEOC rules; a regime for review of FEOC-compliance determinations; and penalty rules. For more information about tax benefits from the Inflation Reduction Act, go to Inflation Reduction Act of 2022.