The Internal Revenue Service (IRS) recently announced a new initiative aimed at encouraging the sale of clean vehicles. The agency has launched the IRS Energy Credits Online tool (IRS ECO), a free electronic service that allows sellers of clean vehicles to register and claim energy credits.
IRS ECO is secure, accurate, and requires no special software. It is available to businesses of all sizes but may be particularly beneficial to small businesses that sell clean vehicles. The tool will enable dealers and sellers to complete the entire process online and receive advance payments within 72 hours. The tool will generate a Time of Sale report, which taxpayers can use when filing their federal tax return to claim or report the credit.
IRS Commissioner Danny Werfel spoke about the new tool, saying, “This special online tool is designed to help dealers and sellers navigate this important new Clean Vehicle Credit and help taxpayers at tax time. Online tools like this are part of the larger effort taking place at the IRS with Inflation Reduction Act funding to make improvements and better serve both taxpayers and businesses.”
Starting in 2024, clean vehicle sellers and licensed dealers must use the tool for their customers to successfully claim or transfer the new or previously owned clean vehicle credit for vehicles placed in service from January 1, 2024, onwards.
The IRS issued proposed regulations, Revenue Procedure 2023-33, and frequently asked questions on October 6, 2023. These provide details to sellers on how to register with the IRS to be eligible to receive the credit transfers from taxpayers. To participate, a dealer must register through the IRS Energy Credits Online tool.
The IRS encourages any dealer or seller to register using Energy Credits Online to share in its benefits. These include:
- Advance payments to dealers typically occur within 72 hours of an accepted clean vehicle credit transfer Time of Sale report.
- The IRS acknowledges receipt and confirmation in real time that a qualified manufacturer has provided the Vehicle Identification Number (VIN) being sold as eligible when a Time of Sale report is submitted.
- Users can make corrections to information submitted through the tool.
- The tool retains issuer information from year to year.
Enrollment in the IRS Energy Credit Online tool is now open, and clean vehicle sellers are encouraged to begin the online enrollment process immediately.
Initially, only one individual representative of the dealer or seller who is currently authorized to legally bind the dealer or seller can complete the initial registration through IRS Energy Credits Online. However, starting December 2023, dealers and sellers will be able to authorize more than one employee to submit Time of Sale reports and advance payment requests.
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