Driving electric vehicle adoption

U.S. Treasury, IRS Open Registration for Car Dealers to Offer Clean Vehicle Tax Credit at Point of Sale

Beginning in January 2024, the Inflation Reduction Act Provision will enable consumers to transfer credit to car dealers, in turn lowering the purchase price of both new and pre-owned eco-friendly vehicles at the point of sale. It is imperative for car dealers to register with the IRS to receive these payments. This initiative is a significant step towards promoting sustainability and reducing fiscal pressure on consumers, thereby making clean vehicles more accessible and affordable. The new Energy Credits Online portal is now available for car dealers.

(Image by (Joenomias) Menno de Jong from Pixabay)

As part of the Biden-Harris Administration’s investing in America agenda, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) initiated the IRS Energy Credits Online portal on November 1, 2023. This strategic move is to implement a crucial provision of the Inflation Reduction Act. The portal will not only decrease the financial burden on consumers, but it will also serve as a growth engine for car dealers by broadening access to tax credits at the point of sale for both new and pre-owned eco-friendly vehicles.

Energy Credits Online Portal will allow advance payments to dealers within 72 hours

Beginning January 1, 2024, the Inflation Reduction Act (IRA) will introduce a significant change to the clean vehicle credit system. Consumers will have the option to transfer their new clean vehicle credit—up to $7,500—and their previously owned clean vehicle credit—up to $4,000—to a registered car dealer. This provision essentially turns these credits into an immediate rebate at the point of sale, serving as an upfront down payment on the vehicle. As a result, the purchase price of the vehicle is effectively lowered, an advantageous alternative to waiting for a tax return the following year. However, it is essential to note that this benefit only applies to vehicles purchased under the consumer clean vehicle credits.

The new Energy Credits Online portal is set to revolutionize the credit transfer process for clean vehicles. This online platform allows registered dealers to submit sales information directly to the IRS, facilitating a near-instantaneous payment for transferred credits. Alongside this, dealers will also utilize the portal to submit “time of sale” reports. These reports are critical in verifying a vehicle’s eligibility for a credit, regardless of whether the buyer opts to transfer their credit to the dealer. By introducing Energy Credits Online, the IRS underscores its commitment to enhancing customer service and ensuring taxpayers can seamlessly access the credits and deductions for which they qualify. This digital platform is a testament to the IRS’s dedication to modernizing tax administration. Furthermore, it is instrumental in achieving the economic, energy security, and climate objectives underscored by the Inflation Reduction Act.

When a buyer chooses to transfer the credit, registered dealers will reduce the purchase price of the vehicle or provide cash to the buyer. The amount provided must equal the full amount of the credit available for the eligible vehicle. When completing the sale, the dealer will electronically submit information regarding the transfer, including a time of sale report, to receive an advance payment for the value of the credit. The IRS expects to issue advance payments within 72 hours. To provide clarity and certainty, the dealer will provide buyers with required disclosures as part of the credit transfer and electronic time-of-sale submission process and with written confirmation that the vehicle they’re buying is eligible for a credit and the credit amount.