Sec. 30D credit not allowed in 2019 for vehicle purchased in 2013

The Tax Court held that taxpayers were not entitled to a Sec. 30D credit in 2019 for a qualified plug–in electric drive vehicle that they purchased and began to use in 2013.

Background

In 2013, Artena and Kenneth Moon purchased a new Chevrolet Volt and began driving it that year. The Volt is a plug–in electric drive motor vehicle manufactured primarily for use on public streets, roads, and highways. For each year 2013 through 2019, the taxpayers claimed a Sec. 30D new qualified plug–in electric drive vehicle credit of $7,500 for the Volt.

In May 2021, the IRS issued a notice of deficiency disallowing the new plug–in electric drive vehicle credit the Moons claimed in 2019. The notice determined a deficiency amount of $7,500 and a 20% accuracy–related penalty pursuant to Sec. 6662(a) for the 2019 tax year. The IRS later conceded that the accuracy–related penalty did not apply.

In June 2021, the Moons filed a timely petition challenging the IRS’s deficiency determination in Tax Court. The couple claimed that they were entitled to the Sec. 30D new qualified plug–in electric drive vehicle credit for 2019.

Sec. 30D: New qualified plug-in electric drive motor vehicle credit

As effective for the tax years 2013 through 2019, Sec. 30D(a) provided:

There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credit amounts determined under [Sec. 30(b)] with respect to each new qualified plug–in electric drive motor vehicle placed in service by the taxpayer during the taxable year.

Under Sec. 30D(b), the credit amount a taxpayer could take was a base credit of $2,500 plus $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours, up to $5,000. Thus, the maximum Sec. 30D credit a taxpayer could take for a new qualified electric plug–in electric vehicle per year in the years 2013 through 2019 was $7,500.

The Tax Court’s decision

The Tax Court held that the Moons were not entitled to the Sec. 30D credit in 2019 for their Volt because the vehicle was not placed in service in that year.

Meaning of “placed in service”: As the Tax Court explained, Sec. 30D provided a one–time credit of up to $7,500 for new qualified plug–in electric drive motor vehicles “placed in service by the taxpayer during the taxable year.” While Sec. 30D does not define “placed in service,” the phrase is defined in regulations relating to other Code sections. For example, under Regs. Sec. 1.48–1(a), the Sec. 38 general business credit is allowed only for the tax year in which the taxpayer first places Sec. 38 property in service. Under Regs. Sec. 1.46–3(d)(1), Sec. 38 property is placed in service the earlier of when “the period for depreciation with respect to such property begins” or the property “is placed in a condition or state of readiness and availability for a specifically assigned function.”

With respect to the Sec. 38 general business credit, the Tax Court noted that it has held that property is placed in service when it is in a condition to be regularly used for its specifically assigned function. The court gave as examples three cases: Consumers Power Co., 89 T.C. 710, 724 (1987), in which it held that a hydroelectric power plant was placed in service only once it had passed all required inspections and was regularly generating power; Noell, 66 T.C. 718, 729 (1976), in which it held that an airport runway was placed in service when it was fully paved and available for regular service; and Madison Newspapers, Inc., 47 T.C. 630, 637 (1967), in which it held that a printing press was placed in service when the unit was installed and regularly publishing newspapers.

Application to the Moons’ 2019 Sec. 30D credit claim: The Tax Court found that when the Moons purchased their Volt in 2013, it was “ready, available, and used consistently with its specifically assigned function.” Thus, the court concluded that the Moons placed the Volt in service in 2013. As the court had already found, the credit is allowable only for the year a vehicle that qualifies for the credit is placed in service. Consequently, the court held that the Moons were not entitled to a credit in 2019 because they did not place the Volt in service in that tax year.

Reflections

The Inflation Reduction Act of 2022, P.L. 117–169, renamed Sec. 30D to “Clean Vehicle Credit” and amended the statute to apply to a “new clean vehicle” (as defined in Sec. 30D(d)) rather than a “new qualified plug–in electric drive motor vehicle.” The act also added Sec. 30D(f)(8), which specifically provides that for any vehicle, the Sec. 30D credit “shall only be allowed once with respect to such vehicle.” However, H.R. 1, P.L. 119–21, commonly known as the One Big Beautiful Bill Act, terminated the credit for vehicles acquired after Sept. 30, 2025 (Sec. 30D(h)).

Moon, 165 T.C. No. 4 (2025)

Contributor

James A. Beavers, CPA, CGMA, J.D., LL.M., is The Tax Adviser’s tax technical content manager. For more information about this column, contact thetaxadviser@aicpa.org.