Posted by Robert Bryant, Esq., CPA on 06.27.24

The transition to sustainable energy sources has become a central focus for many industries, and the tax landscape is evolving to support this shift. One significant piece of legislation in this realm is the Inflation Reduction Act, particularly Section 30C, which addresses the Alternative Fuel Vehicle Refueling Property Credit. This credit is a crucial incentive for businesses and individuals investing in alternative fuel infrastructure.

What is the Alternative Fuel Vehicle Refueling Property Credit?

The Alternative Fuel Vehicle Refueling Property Credit, part of the Inflation Reduction Act, is a valuable tax incentive designed to promote the adoption of alternative fuel vehicles (AFVs) and the necessary refueling infrastructure. With a national push towards reducing carbon footprints and increasing energy independence, this credit is more relevant than ever. It offers both business and personal taxpayers the opportunity to claim credits on investments in electric vehicle (EV) charging stations and other alternative fuel refueling properties, aligning financial benefits with environmental goals.

Eligibility Criteria and Property Requirements

To qualify for the credit, the refueling property must be investment property, meaning it is depreciable. Notably, the credit does not apply to the building or related structural components and excludes costs associated with permitting and inspection fees. Moreover, if a Section 179 deduction is taken, the property's basis must first be reduced by the Section 179 amount to prevent any double tax benefit.

Types of Alternative Fuels Covered

The credit is broad in scope, covering a range of alternative fuels. These include:

- Ethanol (at least 85% of the volume)

- Natural gas (compressed or liquefied)

- Liquefied petroleum gas

- Hydrogen

- Electricity

- Mixtures involving biodiesel, diesel fuel, and kerosene

The credit is capped at $100,000 per property or device, making it essential for taxpayers to plan their investments strategically to maximize benefits.

How the Section 30C Credit is Computed

The credit can be either 6% or 30% of the allowable costs, with the higher rate available if prevailing wage and apprenticeship requirements are met. This differentiation incentivizes fair labor practices and the engagement of apprentices, thereby fostering workforce development alongside infrastructure expansion.

Transferability and Carryover Provisions

A notable feature of the Section 30C credit is its transferability to unrelated third parties, enhancing its flexibility. Additionally, the credit has a one-year carryback and a 20-year carryforward provision, allowing taxpayers to maximize their benefit by aligning with their tax liability schedules.

Examples Using EV Charger Credit

Location and Site Eligibility

Determining the eligibility of a project site is crucial. IRS Notice 2024-20 outlines that qualified sites must not be in an urban area but rather in census tracts where the poverty rate is at least 20% or where the median family income is below 80% of the state median. This focus aims to expand EV charging infrastructure to less populated and less affluent areas, promoting equitable access to sustainable energy solutions.

Meeting Prevailing Wage and Apprenticeship Requirements

To qualify for the 30% credit rate, projects must comply with prevailing wage and apprenticeship requirements:

            • Prevailing Wage: Wages must meet or exceed local standards as determined by the Secretary of Labor.

            • Apprenticeship: Projects must include qualified apprentices, with labor hour percentages increasing from 10% for projects beginning before January 2023 to 15% for those starting after 2023. Additionally, a specific ratio of apprentices to journey workers must be maintained.

Other Incentives

The US Department of Transportation’s National Electric Vehicle Infrastructure (NEVI) Formula Program is another significant incentive, providing $5 billion in funding to deploy EV charging stations and establish an interconnected network. Eligible projects can receive funding for up to 80% of costs, provided the chargers are assembled in the US and the cost of components exceeds 55% of the total.

Maximizing the Impact of Alternative Fuel Credits

The Alternative Fuel Vehicle Refueling Property Credit represents a powerful tool for businesses looking to invest in sustainable infrastructure. By understanding the eligibility criteria, credit computation, and associated requirements, businesses can strategically plan their investments to maximize benefits. Moreover, leveraging additional incentives such as the NEVI Program can further enhance the financial viability of these projects.

We are here to Help

The evolving tax landscape, spearheaded by firms like Tax Point Advisors, offers businesses not just a chance to reduce their tax liability, but also to contribute significantly to environmental sustainability. By embracing these opportunities, businesses can align their financial strategies with broader societal goals, driving both economic and ecological benefits.

To ensure you maximize your savings, it's important to consult with a tax professional like Tax Point Advisors. We can guide you through the process, help you understand the eligibility requirements, and assist in identifying all available incentives. By taking advantage of these tax credits, you can significantly lighten the financial burden of implementing EV charging installations and drive your business towards substantial savings.  

Tax Point Advisors applies our national expertise to your projects by being more hands on and cost-effective than many of our competitors. Tax Point Advisors have helped hundreds of companies successfully claim Federal and State tax benefits. On top of that, our accounting experts support your application and provide professional guidance throughout the process. 

Tax Point Advisors provides R&D tax credit study services and other specialty tax services to CPA firms and their clients throughout the U.S. To learn more about the Alternative Fuel Vehicle Refueling Property Credits from the experts at Tax Point Advisors, contact us at (800) 260-4138, or please leave us a message below.