Internal Revenue Bulletin 2025-6 (PDF rendition): IRS Revenue Procedures

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Bulletin No. 2025–6
February 3, 2025
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE,
EXEMPT ORGANIZATIONS
Rev. Proc. 2025-6, page 713.
This revenue procedure provides the exclusive procedures
for certain applicable entities, as defined in § 6417(d)(1)(A)
of the Internal Revenue Code and the regulations thereun-
der that are not required to file either a federal income tax
return under § 6011 or an annual information return under
§ 6033(a), but previously filed a Form 990-T solely to make
an elective payment election under § 6417, to change their
annual accounting period.
ADMINISTRATIVE, INCOME TAX
T.D. 10028, page 660.
This document contains final regulations that identify certain
partnership related-party basis adjustment transactions and
substantially similar transactions as transactions of interest,
a type of reportable transaction. Material advisors and cer-
tain participants in these transactions are required to file dis-
closures with the IRS and are subject to penalties for failure
to disclose. The regulations affect participants in these trans-
actions as well as material advisors.
EMPLOYEE PLANS
Notice 2025-13, page 710.
This notice sets forth updates on the corporate bond
monthly yield curve, the corresponding spot segment rates
for December 2024 used under § 417(e)(3)(D), the 24-month
average segment rates applicable for January 2025, and the
30-year Treasury rates, as reflected by the application of §
430(h)(2)(C)(iv).
EXCISE TAX
REG-115560-23, page 716.
Section 5000D of the Internal Revenue Code imposes
an excise tax on applicable sales of designated drugs by
manufacturers, producers, and importers during statutorily
defined periods. This Notice of Proposed Rulemaking con-
tains proposed rules relating to the imposition and calcula-
tion of that excise tax.
INCOME TAX
Notice 2025-9, page 681.
This notice provides safe harbors regarding the incremental
cost and retail price equivalent of certain qualified commercial
clean vehicles for purposes of the credit for qualified commer-
cial clean vehicles under section 45W of the Internal Revenue
Code.
Notice 2025-10, page 682.
Notice 2025-10 announces forthcoming proposed regulations
on the clean fuel production credit under § 45Z (§ 45Z credit),
enacted under the Inflation Reduction Act of 2022. In addi-
tion to providing background on the § 45Z credit, the notice
explains the forthcoming proposed regulations and requests
public comments on the draft text of the forthcoming pro-
posed regulations contained in the appendix.
Finding Lists begin on page ii.

Notice 2025-11, page 704.
Notice 2025-11 provides taxpayers with guidance about
emissions rates, including the initial emissions rate table,
for the clean fuel production credit. For a transportation
fuel established on the emissions rate table that is not
a sustainable aviation fuel, this notice directs a taxpayer
producing such fuel to calculate emissions rates using the
most recent determinations under the new 45ZCF-GREET
model. For a transportation fuel established on the emis-
sions rate table that is a sustainable aviation fuel, this
notice directs a taxpayer producing such fuel to calcu-
late emissions rates using either determinations from fuel
pathways approved under the most recent version of the
CORSIA Program or the most recent determinations under
the 45ZCF-GREET model. This notice also requests public
comments.
REG-123525-23, page 726.
Section 45W of the Internal Revenue Code provides a credit
against the tax imposed by chapter 1 of the Code with respect
to each qualified commercial clean vehicle placed in service
by a taxpayer during the taxable year. This Notice of Proposed
Rulemaking proposes rules under section 45W relating to vehi-
cle credit eligibility, credit amount determination, and credit
reporting.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing offi-
cial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
February 3, 2025 Bulletin No. 2025–6

Part I
26 CFR 1.6011-18: Certain partnership relat-
ed-party basis adjustment transactions as transac-
tions of interest.
T.D. 10028
DEPARTMENT OF THE
TREASURY
Internal Revenue Service
26 CFR Part 1
Certain Partnership
Related-Party Basis
Adjustment Transactions as
Transactions of Interest
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Final rule.
SUMMARY: This document contains
final regulations that identify certain part-
nership related-party basis adjustment
transactions and substantially similar
transactions as transactions of interest,
a type of reportable transaction. Mate-
rial advisors and certain participants in
these transactions are required to file dis-
closures with the IRS and are subject to
penalties for failure to disclose. The final
regulations affect participants in these
transactions as well as material advisors.
DATES: Effective date: These regulations
are effective on January 14, 2025.
Applicability date: For the date of
applicability, see § 1.6011-18(h) and (i).
FOR FURTHER INFORMATION
CONTACT: Concerning these final
regulations, contact Elizabeth Zanet of
the Office of Associate Chief Counsel
(Passthroughs and Special Industries),
(202) 317-6007 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
Authority
This document amends the Income Tax
Regulations (26 CFR part 1) by adding
final regulations under section 6011 of the
Internal Revenue Code (Code). The docu-
ment adds § 1.6011-18 to identify certain
partnership related-party basis adjustment
transactions and substantially similar
transactions as transactions of interest, a
type of reportable transaction (final reg-
ulations). These regulations are issued
pursuant to the authority conferred on the
Secretary of the Treasury or her delegate
(Secretary) under the following provisions
of the Code.
Section 6001 of the Code provides
an express delegation of authority to the
Secretary of the Treasury or her delegate
(Secretary), requiring every taxpayer to
keep the records, render the statements,
make the returns, and comply with the
rules and regulations that the Secretary
deems necessary to demonstrate tax liabil-
ity, as prescribed, either by notice served
or by regulations.
Section 6011(a) provides an express
grant of regulatory authority for the Sec-
retary to prescribe regulations requir-
ing any person who is liable for any tax
imposed by the Code, or with respect to
the collection thereof, to make a return or
statement according to the forms and reg-
ulations prescribed by the Secretary. Sec-
tion 6011(a) adds that every person who
is required to make a return or statement
must include the information required by
forms or regulations.
In addition, section 6707A(c)(1) of the
Code defines the term “reportable transac-
tion” for purposes of imposing penalties
under section 6707A(a) relating to per-
sons who fail to include on any return or
statement any information with respect to
a reportable transaction that is required
under section 6011 to be included with
such return or statement. In doing so, it
provides an express delegation of author-
ity to the Secretary, stating that, “[t]he
term ‘reportable transaction’ means any
transaction with respect to which infor-
mation is required to be included with
a return or statement because, as deter-
mined under regulations prescribed under
section 6011, such transaction is of a type
which the Secretary determines as having
a potential for tax avoidance or evasion.”
Section 6111(a) provides an express
grant of regulatory authority for the Sec-
retary to require that each material advisor
with respect to any reportable transaction
make a return setting forth any informa-
tion as the Secretary may prescribe. Such
return must be filed not later than the date
specified by the Secretary.
Finally, section 7805(a) of the Code
authorizes the Secretary to “prescribe
all needful rules and regulations for the
enforcement of [the Code], including all
rules and regulations as may be necessary
by reason of any alteration of law in rela-
tion to internal revenue.”
Background
I. Basis Adjustments under Subchapter K
A. In general
Under subchapter K of chapter 1 of the
Code (subchapter K), a distribution by a
partnership of the partnership’s property
(partnership property) or a transfer of
an interest in a partnership (partnership
interest) may result in an adjustment to
the basis of the distributed property, part-
nership property, or both. A key factor
is whether an election made by the part-
nership in accordance with regulations
prescribed by the Secretary under section
754 of the Code (section 754 election) is
in effect.
Section 754 provides that if a section
754 election is in effect for a partnership,
the basis of its partnership property will
be adjusted, in the case of a distribution
of property, in the manner provided by
section 734 of the Code, and in the case
of a transfer of a partnership interest, in
the manner provided in section 743 of
the Code. Unless a section 754 election
is revoked in accordance with the reg-
ulations under section 754, the section
754 election applies to all distributions
of property by the partnership and to all
transfers of interests in the partnership in
the taxable year for which the section 754
election was properly made and all subse-
quent taxable years.
In the case of a distribution of partner-
ship property to a partner by a partner-
ship for which a section 754 election is
in effect, or with respect to which there is
a substantial basis reduction as described
February 3, 2025 660 Bulletin No. 2025–6

in section 734(d), the distribution may
result in an adjustment to the basis of the
partnership’s remaining property (remain-
ing partnership property) under section
734(b). A distribution of partnership prop-
erty may also result in an adjustment to
the basis of the distributed property under
section 732(a), (b), or (d) of the Code.
If a partnership interest is transferred
by sale or exchange or on the death of a
partner, and the partnership either has
a section 754 election in effect or has a
substantial built-in loss with respect to
the transfer of the partnership interest as
described in section 743(d), the transfer
may result in an adjustment to the basis of
partnership property under section 743(b)
with respect to the transferee partner.
B. Basis adjustments under section 732
Section 732 applies to determine a
distributee partner’s basis in distributed
property other than money. In the case
of a distribution of partnership property
other than in liquidation of the distributee
partner’s partnership interest (current dis-
tribution), and except as provided under
section 732(a)(2), section 732(a)(1) pro-
vides that the distributee partner’s basis
in distributed property (other than money)
is equal to the partnership’s adjusted basis
in the distributed property immediately
before the distribution. Under section
732(a)(2), however, a distributee partner’s
basis in distributed property is limited to
the adjusted basis of the distributee part-
ner’s partnership interest reduced by any
money distributed to such partner in the
same transaction.
In the case of a distribution of part-
nership property in liquidation of the
distributee partner’s partnership interest
(liquidating distribution), section 732(b)
provides that the distributee partner’s
basis in distributed property (other than
money) is equal to the adjusted basis of
the distributee partner’s partnership inter-
est reduced by any money distributed to
such partner in the same transaction.
In the case of a distribution of more
than one property from a partnership, the
basis of the distributed properties to which
section 732(a)(2) and (b) apply must be
allocated among the distributed properties
under the rules of section 732(c). Section
732(d) through (f) provide additional rules
applicable to certain distributed property.
See also §§ 1.732-1 through 1.732-3.
C. Basis adjustments under section 734
In the case of a distribution of prop-
erty by a partnership for which a section
754 election is in effect, and for which
either the distributee partner recognizes
gain or loss on the distribution, or for
which the basis of the distributed prop-
erty in the distributee partner’s hands,
as determined under section 732, differs
from the partnership’s adjusted basis in
the distributed property immediately
before the distribution, section 734(b)
requires the partnership to increase or
decrease (as applicable) the basis of its
remaining partnership property. Also, in
the case of a distribution of property by
a partnership that results in a substantial
basis reduction under section 734(d), the
basis of remaining partnership property
must be adjusted under section 734(b),
even if no section 754 election is in effect
for the partnership.
Section 734(b)(1) requires a partner-
ship to increase the basis of its remaining
partnership property if a distribution of
partnership property by the partnership
results in the distributee partner recog-
nizing gain under section 731(a)(1) of the
Code, or if property (other than money)
to which section 732(a)(2) or (b) applies
is distributed to the distributee partner
and the property’s adjusted basis to the
partnership immediately before the dis-
tribution is greater than the distributee
partner’s basis in the distributed property
as determined under section 732. Section
731(a)(1) requires a distributee partner to
recognize gain in a current or liquidating
distribution to the extent that any money
distributed to that partner in the distri-
bution exceeds the adjusted basis of that
partner’s partnership interest immediately
before the distribution. The amount of the
basis increase to the partnership’s remain-
ing property under section 734(b)(1) fol-
lowing a distribution of partnership prop-
erty to a partner is equal to the amount of
gain recognized by the distributee partner
in the distribution under section 731(a)
(1), and the excess of the partnership’s
adjusted basis in the distributed property
immediately before the distribution, over
the distributee partner’s basis in the dis-
tributed property as determined under sec-
tion 732.
Section 734(b)(2) requires a partner-
ship to decrease the basis of its remain-
ing property if a distribution of property
by the partnership results in the distrib-
utee partner recognizing loss under sec-
tion 731(a)(2), or if property (other than
money) is distributed to the distributee
partner in a distribution to which section
732(b) applies and the property’s adjusted
basis to the partnership immediately
before the distribution is less than the dis-
tributee partner’s basis in the distributed
property as determined under section 732.
Under section 731(a)(2), a distributee
partner may recognize a loss in a liquidat-
ing distribution of that partner’s interest
in the partnership to the extent that such
partner received in the distribution only
money, unrealized receivables described
in section 751(c) of the Code, or inven-
tory items described in section 751(d).
In such a case, the distributee partner is
required to recognize a loss to the extent
that such partner’s adjusted basis in the
partnership interest exceeds the sum of
any money distributed to that partner in
the distribution and the basis to the dis-
tributee partner (determined under sec-
tion 732) of any unrealized receivables or
inventory items received by that partner in
the distribution. The amount of the basis
decrease to the partnership’s remaining
property under section 734(b)(2) follow-
ing a distribution of partnership property
to a partner is equal to the amount of loss
recognized by the distributee partner in
the distribution under section 731(a)(2),
and the excess of the distributee partner’s
basis in the distributed property as deter-
mined under section 732, over the part-
nership’s adjusted basis in the distributed
property immediately before the distribu-
tion.
A partnership for which no section 754
election is in effect is subject to a manda-
tory basis adjustment under section 734(b)
(2) if there is a substantial basis reduction
with respect to a distribution of partner-
ship property. Under section 734(d), a
substantial basis reduction with respect
to a distribution of partnership property
occurs if the sum of the amount of loss
recognized to the distributee partner on
the distribution, plus any increase in basis
in the distributed property to the distribu-
Bulletin No. 2025–6 661 February 3, 2025

February 3, 2025 662 Bulletin No. 2025–6
tee partner under section 732(b), exceeds
$250,000.
D. Basis adjustments under section
743(b)
Generally, if a partnership interest is
transferred in a sale or exchange or on the
death of a partner, the transferee partner’s
basis in the transferred partnership inter-
est is determined under section 742 of the
Code and the basis of partnership property
is determined under section 743(a). Section
742 provides that the transferee partner’s
basis in a partnership interest acquired
other than by contribution is determined
under part II of subchapter O of chapter 1
of the Code, beginning at section 1011 of
the Code and following. Thus, for example,
a transferee partner’s basis in a partnership
interest acquired by purchase generally is
the transferee partner’s cost basis under
section 1012 of the Code. Section 743(a)
provides that, in the case of a transfer of
a partnership interest by sale or exchange
or on the death of a partner, the basis of
partnership property is not adjusted unless
either a section 754 election is in effect for
the partnership, or the partnership has a
substantial built-in loss with respect to the
transfer of the partnership interest.
Under section 743(b), in the case of a
transfer of a partnership interest by sale or
exchange or on the death of a partner, a
partnership for which a section 754 elec-
tion is in effect or that has a substantial
built-in loss with respect to the transfer of
the partnership interest must increase or
decrease (as applicable) the adjusted basis
of partnership property with respect to the
transferee partner.
Section 743(b)(1) provides that the
adjusted basis of partnership property is
increased by the excess of the transferee
partner’s basis in the transferred partner-
ship interest, over the transferee partner’s
proportionate share of the adjusted basis
of partnership property.
Section 743(b)(2) provides that the
adjusted basis of partnership property
is decreased by the excess of the trans-
feree partner’s proportionate share of the
adjusted basis of partnership property,
over the transferee partner’s basis in the
transferred partnership interest.
A partnership for which no section
754 election is in effect is subject to a
mandatory basis adjustment under sec-
tion 743(b) with respect to a transfer of a
partnership interest if the partnership has
a substantial built-in loss with respect to
the transfer of the partnership interest.
Under section 743(d)(1), a partnership has
a substantial built-in loss with respect to
a transfer of an interest in the partnership
if either the partnership’s adjusted basis in
its property exceeds the fair market value
of such property by more than $250,000,
or the transferee partner would be allo-
cated a loss of more than $250,000 if the
partnership assets were sold for cash equal
to their fair market value immediately
after the transfer.
The flush language at the end of section
743(b) provides that, under regulations
prescribed by the Secretary, a basis adjust-
ment under section 743(b) is an adjust-
ment to the basis of partnership property
with respect to the transferee partner only.
See generally § 1.743-1. The transferee
partner’s proportionate share of the part-
nership’s adjusted basis in its property
generally is determined in accordance
with the transferee partner’s interest in
the partnership’s previously taxed capital
(including the transferee partner’s share of
partnership liabilities) under § 1.743-1(d).
In the case of a transferee partner who
acquired all or part of the partner’s part-
nership interest by a transfer with respect
to which no section 754 election was in
effect for the partnership, and to whom
a distribution of property (other than
money) is made with respect to the trans-
ferred interest within two years, section
732(d) and the regulations thereunder
allow the partner to make an election to
treat as the adjusted basis of the distributed
property the adjusted basis such property
would have if the adjustment under sec-
tion 743(b) were in effect with respect to
the partnership property.
Under § 1.732-1(d)(4), the special
basis adjustment under section 732(d) is
required to apply to a distribution of prop-
erty to a partner who acquired all or part
of the partner’s partnership interest by a
transfer from a partnership for which no
section 754 election is in effect for the tax-
able year of such transfer, whether or not
the distribution is made within two years
of such transfer, if at the time the partner-
ship interest was transferred, (i) the fair
market value of all partnership property
(other than money) exceeded 110 percent
of its adjusted basis to the partnership,
(ii) an allocation of basis under section
732(c) upon a liquidation of the transferee
partner’s interest in the partnership imme-
diately after the transfer of such interest
would have resulted in a shift of basis
from property not subject to an allowance
for depreciation, depletion, or amortiza-
tion to property subject to such an allow-
ance, and (iii) a basis adjustment under
section 743(b) would change the basis to
the transferee partner of the property actu-
ally distributed.
E. Allocation of basis adjustments under
sections 734 and 743
Section 734(c) states that a basis
adjustment under section 734(b) is allo-
cated among partnership properties under
the rules of section 755 of the Code. Sec-
tion 743(c) states that a basis adjustment
under section 743(b) is allocated among
partnership properties under the rules of
section 755.
Section 755(a) generally requires basis
adjustments under section 734(b) or sec-
tion 743(b) to be allocated in a manner
that has the effect of reducing the differ-
ence between the fair market value and
the adjusted basis of partnership proper-
ties or in any other manner permitted by
regulations prescribed by the Secretary.
In addition, section 755(b) requires these
basis adjustments to be allocated to part-
nership property of a like character or to
subsequently acquired partnership prop-
erty of a like character if such property is
not available or has insufficient basis at
the time of the basis adjustment (because a
decrease in the adjusted basis of the prop-
erty would reduce the basis of such prop-
erty below zero). Section 755(c) provides
a special rule that prohibits allocating a
basis decrease under section 734(b) to the
stock of a corporation that is a partner of
the partnership (or that is related to a part-
ner in the partnership within the meaning
of section 267(b) of the Code or section
707(b)(1) of the Code).
F. Common terminology for bases with
respect to a partnership interest
A partner’s adjusted basis in its part-
nership interest commonly is referred to

Bulletin No. 2025–6 663 February 3, 2025
as the partner’s “outside basis” in its part-
nership interest. A partnership’s adjusted
basis in its property commonly is referred
to as the “inside basis” of the partner-
ship’s property. Each partner has a share
of inside basis.
II. Proposed Regulations
On June 18, 2024, the Department of
the Treasury (Treasury Department) and
the IRS published a notice of proposed
rulemaking (REG-124593-23) in the Fed-
eral Register (89 FR 51476) containing
proposed regulations under section 6011
(proposed regulations).
1
The proposed
regulations would have added § 1.6011-
18 identifying certain partnership relat-
ed-party basis adjustment transactions
as “transactions of interest” for purposes
of sections 6011, 6111, and 6112 and §
1.6011-4(b)(6). The provisions of the pro-
posed regulations are explained in greater
detail in the preamble to the proposed reg-
ulations.
The Treasury Department and the IRS
received written comments in response to
the proposed regulations. The comments
are available for public inspection at www.
regulations.gov or upon request. A public
hearing on the proposed regulations was
conducted in person and telephonically
on September 17, 2024, during which two
presenters provided comments. After full
consideration of the comments received,
these final regulations adopt the proposed
regulations with modifications in response
to the comments as described in the Sum-
mary of Comments and Explanation of
Revisions.
Summary of Comments and
Explanation of Revisions
This Summary of Comments and
Explanation of Revisions summarizes
the comments received in response to
the proposed regulations, and describes
and responds to comments concerning:
(1) transactions of interest generally, (2)
the usefulness and burden of reporting
the transactions of interest identified by
the proposed regulations, (3) the specific
transactions of interest identified by the
proposed regulations, (4) the proposed
$5 million threshold amount for reporting
(proposed $5 million threshold amount),
(5) the relatedness standard, (6) substan-
tially similar transactions, and (7) partici-
pation in a transaction of interest identified
by the proposed regulations. In general,
as described herein, the final regulations
adopt several commenters’ suggestions,
which limit the scope of the transactions
identified by the proposed regulations
in an effort to exclude from additional
reporting certain common business trans-
actions that do not meet large economic
thresholds.
Comments merely summarizing the
statute or proposed regulations, recom-
mending revisions to the Code, address-
ing unrelated issues, or recommending
changes to IRS forms or procedures are
generally not addressed in this Summary
of Comments and Explanation of Revi-
sions or adopted in these final regulations.
Additionally, this Treasury decision does
not address comments addressing the
issues and rules specific to Notice 2024-
54, 2024-28 IRB 24, which the Treasury
Department and the IRS continue to con-
sider. Unless otherwise indicated in this
Summary of Comments and Explanation
of Revisions, provisions of the proposed
regulations with respect to which no com-
ments were received are adopted without
substantive change.
I. Transactions of Interest Generally
A. General reporting rules under §
1.6011-4
Section 1.6011-4(e)(2)(i) requires a
taxpayer to report a transaction entered
into prior to the publication of guidance
identifying the transaction as a transaction
of interest after the filing of the taxpayer’s
tax return (including an amended return)
reflecting the taxpayer’s participation in
the transaction of interest (later identified
transaction) if the statute of limitations for
assessment of tax is still open when the
transaction becomes a transaction of inter-
est. Under § 1.6011-4(e)(2)(i), taxpayers
are generally required to report a later
identified transaction by filing a disclosure
statement with the Office of Tax Shelter
Analysis (OTSA) within 90 calendar
days after the date on which a transaction
becomes a transaction of interest.
Some commenters asserted that taxpay-
ers should not be required to report later
identified transactions because taxpayers
were not on notice that certain partnership
related-party basis adjustment transac-
tions would be identified as transactions of
interest. These commenters asserted that
certain of the transactions identified in the
proposed regulations are typical business
transactions for which taxpayers would
not have known to keep records. Two
commenters requested that the required
time for filing a disclosure statement with
the OTSA should be expanded to one year.
Another commenter recommended that
the final regulations apply prospectively
to transactions of interest that occur in tax-
able years beginning on or after the date of
the final regulations.
Although the reporting required by §
1.6011-4(e)(2)(i) may apply to transac-
tions undertaken before the identification
of the transactions as transactions of inter-
est, the disclosure obligation is prospec-
tive rather than retroactive, since it arises
only when the transaction becomes a
transaction of interest after the final regu-
lations are published in the Federal Regis-
ter. Additionally, taxpayers have been on
notice since the issuance of the proposed
regulations that reporting of partnership
related-party basis adjustment transac-
tions may soon be required. Nevertheless,
given the additional time that taxpayers
may need to identify and prepare disclo-
sures for already-completed transactions,
§ 1.6011-18(h)(1) provides an extension
of time of 90 additional calendar days
after the date specified in § 1.6011-4(e)(2)
(i) for taxpayers to meet their obligations
to disclose to the OTSA their participation
in such later identified transactions.
B. Material advisor rules
The proposed regulations provided no
special rules for material advisors. One
commenter requested that the final regula-
tions add an “actual knowledge” qualifier
for material advisors such that advisors
would be required to disclose and list only
those transactions described by the pro-
posed regulations that would be reportable
1
On July 24, 2024, a notice of correction was published in the Federal Register (89 FR 59864) to correct minor typographical errors in the preamble of REG-124593-23.

February 3, 2025 664 Bulletin No. 2025–6
based on their actual knowledge. The rules
for material advisors under sections 6111
and 6112, and the corresponding regula-
tions under §§ 301.6111-3 and 301.6112-1
of the Procedure and Administration Reg-
ulations (26 CFR part 301), which apply
to all transactions of interest, do not have
a knowledge qualifier. After consideration
of this comment, the Treasury Department
and the IRS have determined that adding
a knowledge qualifier for this transaction
of interest is not warranted. Accordingly,
this comment is not adopted in the final
regulations.
One commenter requested that the final
regulations apply reporting requirements
for material advisors only prospectively
for transactions of interest that occur in
taxable years beginning on or after the
date of the final regulations, or, alterna-
tively, that material advisors be permitted
to report transactions of interest to the
OTSA within one year as opposed to by
the last day of the month following the
end of the calendar quarter in which the
final regulations are published. Section
301.6111-3 sets forth the requirements
for disclosures from material advisors. In
particular, § 301.6111-3(e) provides that
a material advisor’s disclosure statement
must be filed with the OTSA by the last
day of the month that follows the end of
the calendar quarter in which the advisor
became a material advisor with respect
to the transaction. Section 301.6111-3(b)
(4)(iii) provides that for a transaction
that was not a reportable transaction but
is identified as a transaction of interest in
published guidance after the occurrence of
the events described in § 301.6111-3(b)(4)
(i), the person will be treated as becom-
ing a material advisor on the date the
transaction is identified as a transaction
of interest. Additionally, material advisors
have been on notice since the issuance of
the proposed regulations that reporting of
partnership related-party basis shifting
transactions may soon be required. How-
ever, given the additional time that may
be needed for material advisors to identify
and prepare disclosures for already-com-
pleted transactions, § 1.6011-18(h)(2)
provides an extension of 90 additional
calendar days after the date specified in
§ 301.6111-3(e) for material advisors to
meet their disclosure obligations.
II. Usefulness and Burden of Reporting
the Transactions of Interest Identified by
the Proposed Regulations
A. Comments suggesting the IRS already
has the information it needs
One commenter stated that the Trea-
sury Department and the IRS already
have sufficient information to determine
that the transactions identified by the pro-
posed regulations are abusive and thus the
proposed regulations are unnecessary.
2

This commenter stated that the Treasury
Department and the IRS have already
concluded that the transactions identified
in the proposed regulations are abusive
through IRS positions taken in litigation
and the issuance of Rev. Rul. 2024-14,
2024-28 IRB 18 (advising taxpayers that
the IRS would challenge certain part-
nership related-party basis adjustment
transactions under the codified economic
substance doctrine in section 7701(o) of
the Code). The commenter also asserted
that transactions of interest are reserved
for transactions that have the potential
for tax avoidance, but that the Treasury
Department and the IRS failed to artic-
ulate a rational connection between “the
facts found and the choice made.” Another
commenter suggested that the proposed
regulations relied on the application of
Rev. Rul. 2024-14, implying that the pro-
posed regulations cannot have effect if the
IRS does not prevail in pending litigation.
The Treasury Department and the IRS
do not agree with these comments. The
final regulations identify certain partner-
ship related-party basis adjustment trans-
actions as transactions of interest under §
1.6011-4(b)(6), rather than as listed trans-
actions under § 1.6011-4(b)(2). This is
because the Treasury Department and the
IRS have determined that these transac-
tions have the potential for tax avoidance
through the IRS’s examination of certain
transactions that are abusive but are not
aware of the entire universe of partnership
related-party basis adjustment transac-
tions and whether every transaction is per
se abusive. As explained in the preamble
to the proposed regulations, the Treasury
Department and the IRS have become
aware of related persons using partner-
ships to engage in transactions that inap-
propriately exploit the basis adjustment
provisions of subchapter K applicable to
distributions of partnership property or
transfers of partnership interests and wish
to gather additional information. This
awareness results from the IRS’s exam-
ination of various partnership transactions
involving related parties in which basis in
distributed property or partnership prop-
erty is shifted in a manner that results in
significant tax benefits attributable to the
basis shift for the related parties but with
little or no tax or economic cost (abusive
partnership related-party basis adjustment
transactions), thus artificially generating
(or regenerating) Federal income tax ben-
efits that results in significant tax savings
without a corresponding economic outlay.
The transactions identified as transactions
of interest in these final regulations have
the potential for tax avoidance because
they share certain indicia with these abu-
sive partnership related-party transactions.
Rev. Rul. 2024-14 contains several exam-
ples of abusive transactions discovered by
the IRS, and the legal analysis it contains
is independent of the requirement to dis-
close the transactions described in these
regulations as transactions of interest. In
other words, the issuance of a revenue rul-
ing does not preclude further scrutiny of
partnership related-party basis adjustment
transactions by identifying those transac-
tions as transactions of interest. Similarly,
pending litigation is irrelevant to the iden-
tification of these transactions as trans-
actions of interest. Accordingly, the final
regulations do not adopt these comments.
A few commenters questioned why the
Treasury Department and the IRS need to
identify certain partnership related-party
basis adjustment transactions as transac-
tions of interest if these transactions are
already disclosed as part of the Form 1120,
U.S. Corporation Income Tax Return, or
Form 1065, U.S. Return of Partnership
Income. These commenters generally
contended that existing reporting require-
ments already accomplish the objectives
2
The commenter also argued that it would be inappropriate to identify the transactions identified in the proposed regulations as listed transactions under §1.6011-4(b)(2). This comment is not
relevant to these final regulations, which solely identify certain transactions as transactions of interest and not as listed transactions.

Bulletin No. 2025–6 665 February 3, 2025
of the proposed regulations and that add-
ing these transactions as transactions of
interest is therefore unnecessary. One
commenter recommended that instead of
identifying the transactions described in
the proposed regulations as transactions of
interest, the Form 1065 should be modi-
fied to ask questions to determine whether
partnership related-party basis adjustment
transactions occurred during the taxable
year.
The Forms 1120 and 1065, including
statements or schedules required to be
attached thereto, are filed as a part of a
taxpayer’s tax return and do not include
all the information contained on Form
8886, Reportable Transaction Disclosure
Statement. The Forms 1120 and 1065 also
do not alert the OTSA to the taxpayer’s
participation in a transaction of interest,
nor does the filing of a tax return result in
disclosure and other obligations of mate-
rial advisors to the transaction. Moreover,
the purpose of the reporting requirements
for a transaction of interest is to allow the
OTSA and the IRS to learn detailed infor-
mation about the identified transaction
using limited resources, and without hav-
ing to distill information obtained through
annual filing requirements or to open tax-
payer examinations. Accordingly, these
comments are not adopted in the final reg-
ulations.
B. Comments addressing compliance
burdens and costs
Several commenters asserted that com-
plying with the reporting requirements for
the transactions identified by the proposed
regulations would be unduly burdensome
and result in excessive costs for small
businesses. One commenter asserted that
the proposed regulations stray from Con-
gressional intent of simplicity by sub-
jecting family business owners and their
advisors to substantial reporting obliga-
tions and penalties. Another commenter
asserted that the proposed regulations
would result in many protective disclo-
sures that the Treasury Department and
the IRS could not handle.
The impact on taxpayers who engage
in legitimate business transactions with
related parties resulting in positive part-
nership basis adjustments that meet the
increased threshold amounts in these final
regulations (applicable threshold amounts)
discussed in Part IV of this Summary of
Comments and Explanation of Revisions,
or who may decide they need to file a
protective disclosure, is far outweighed
by the benefit of requiring disclosure for
the identified transactions, which have
the potential for tax avoidance. Combat-
ting abusive tax avoidance is a priority for
the Federal Government and partnership
transactions that shift basis among related
parties without a corresponding economic
or tax impact have the potential for tax
avoidance. Moreover, the identification
of the transactions described in these final
regulations should not impact small busi-
ness owners. If a taxpayer is engaging in
one or more of the complex transactions
identified by these final regulations with a
related party that results in positive basis
adjustments in a single taxable year that
exceed the applicable threshold amounts
of $10 million or more (or $25 million for
later identified transactions), the taxpayer
is not likely a small business owner and
the reporting obligations outlined in these
final regulations should not be unduly bur-
densome. Accordingly, these comments
are not adopted in the final regulations.
C. Comments requesting that the
proposed regulations be withdrawn or
reissued
A few commenters suggested that the
proposed regulations be withdrawn, stat-
ing that they are overbroad. One com-
menter suggested that due to the number
of their recommendations, the proposed
regulations should be reproposed. Another
commenter suggested that the proposed
regulations be withdrawn and reproposed
after the forthcoming proposed regula-
tions described in Notice 2024-54 are
finalized. The final regulations are nar-
rowly tailored to identify transactions in
which taxpayers may be exploiting the
mechanical basis adjustment provisions
in subchapter K to produce significant tax
benefits with little to no economic cost to
the partners. Taxpayers are able to engage
in these transactions because the parties
are related. In most cases, these transac-
tions would not likely occur between part-
ners negotiating on an arm’s length basis.
The purpose of the final regulations is to
determine the ways in which related tax-
payers are inappropriately shifting basis
using the provisions of subchapter K, how
they are creating opportunities to engage
in transactions that generate inappropriate
basis shifts (for example, how inside-out-
side basis disparities are being created),
and the economic impact of the Federal
income tax consequences created by the
basis shifting transactions (for example,
the extent to which gain is reduced or cost
recovery is increased). It is in the interest
of sound tax administration to gather this
information now. As disclosures pursuant
to this regulation will inform the Treasury
Department and the IRS on transactions
for which further examination or further
guidance may be warranted, it does not
make sense to withdraw the proposed reg-
ulations and wait to repropose them until
the forthcoming regulations described in
Notice 2024-54 are both proposed and
finalized. Moreover, these final regula-
tions are separate from, and do not rely
on, the forthcoming proposed regulations
described in Notice 2024-54. The com-
ments to these proposed regulations have
been helpful and have allowed the Trea-
sury Department and the IRS to make
several modifications in response to com-
ments that limit the scope of the rules, as
described in this Summary of Comments
and Explanation of Revisions.
III. Transactions of Interest Identified in
the Proposed Regulations
The proposed regulations would have
identified four kinds of partnership relat-
ed-party basis adjustment transactions as
transactions of interest. A basis adjustment
transaction under proposed § 1.6011-18(c)
(1)(i) would occur if a partnership distrib-
utes property to a person who is a related
partner in a current or liquidating distri-
bution, the partnership increases the basis
of one or more of its remaining properties
under section 734(b) and (c), and a pro-
posed $5 million threshold amount is met
(section 734(b) TOI). A basis adjustment
transaction under proposed § 1.6011-18(c)
(1)(ii) would occur if a partnership distrib-
utes property to a partner who is related
to one or more partners in liquidation of a
partnership interest (or in complete liqui-
dation of the partnership), the basis of one
or more distributed properties is increased
under section 732(b) and (c), and a pro-

February 3, 2025 666 Bulletin No. 2025–6
posed $5 million threshold amount is met
(section 732(b) TOI). A basis adjustment
transaction under proposed § 1.6011-
18(c)(1)(iii) would occur if a partnership
distributes property to a partner who is
related to one or more partners, the basis
of one or more distributed properties is
increased under section 732(d), the related
partner acquired all or a part of its inter-
est in the partnership in a transaction that
would have been a transaction described
in proposed § 1.6011-18(c)(2) if the part-
nership had a section 754 election in effect
for the year of transfer, and a proposed $5
million threshold amount is met (section
732(d) TOI). A basis adjustment trans-
action under proposed § 1.6011-18(c)(2)
would occur if a partner transfers an inter-
est in the partnership to a related trans-
feree or to a person who is related to one
or more existing partners in a nonrecogni-
tion transaction (as defined in proposed §
1.6011-18(b)(6)), the basis of one or more
partnership properties is increased under
section 743(b)(1) and (c), and a proposed
$5 million threshold amount is met (sec-
tion 743(b) TOI).
A. General reporting exclusions
1. Tax-avoidance indicators
One commenter recommended requir-
ing reporting only for transactions with
defined indicators of potential tax avoid-
ance or evasion, rather than the involve-
ment of a related or tax-indifferent party,
but did not suggest other indicators or
explain how the current indicators are
insufficient. The Treasury Department and
the IRS have made modifications to the
proposed regulations as described herein
to better target the identification of trans-
actions for which reporting is required.
2. Basis shifts between assets of like
character
One commenter recommended exclud-
ing transactions identified as a basis
adjustment transaction of interest in cases
in which (1) basis is shifted between assets
of like character (that is, capital asset to
capital asset or ordinary income asset to
ordinary income asset), (2) basis is shifted
from non-recoverable property to non-re-
coverable property or the basis adjust-
ment does not provide a shorter recovery
period, and (3) the property receiving
the basis increase is not sold within two
years of the basis increase. The Treasury
Department and the IRS agree that a basis
shift to a like-kind asset that has the same
or a longer recovery period than the asset
to which the basis was shifted from pres-
ents less risk of tax avoidance. However,
the Treasury Department and the IRS do
not agree that it would be appropriate in
such circumstances to require reporting
only if the property is disposed of within
two years after the basis increase as there
is still a potential for abuse if the property
is disposed of after two years. A two-year
rule would allow related taxpayers to
increase the basis in property in antici-
pation of a future sale and would exclude
transactions that present significant risks
of tax avoidance. Accordingly, it is in the
interest of sound tax administration to
identify certain partnership related-party
basis adjustment transactions as transac-
tions of interest in the year of the basis
shift and the commenter’s recommenda-
tion is not adopted in the final regulations.
3. Requiring knowledge or intent
A few commenters recommended
including an intent requirement for the
transactions identified by the proposed
regulations as transactions of interest.
One commenter recommended that tax-
payers that are unaware of or have no rea-
son to know that a transaction identified
by the proposed regulations is reportable
be excused from disclosure. Another com-
menter recommended including a sub-
jective test for intent and providing safe
harbors and exceptions for business sep-
arations and succession-planning transac-
tions.
Including an intent requirement for the
transactions identified by the proposed
regulations would introduce a subjective
element, which is inconsistent with the
IRS’s need to gather additional infor-
mation on the identified transactions to
ascertain their potential for tax avoid-
ance. Including an intent requirement in
these regulations would also frustrate the
IRS’s ability to determine which of the
basis adjustment transactions are imper-
missible tax avoidance transactions and
to effectively and efficiently address the
tax avoidance. Moreover, the general
transaction of interest reporting require-
ments under section 6011 do not include
a knowledge component; taxpayers are
required to report the tax consequences of
their transactions identified as transactions
of interest regardless of whether they are
aware of the reporting requirements. As
further described in Parts III.A.4 and III.E
of this Summary of Comments and Expla-
nation of Revisions, it is not appropriate to
incorporate an exception or safe harbor for
business separations or succession-plan-
ning transactions into the final regulations
as these transactions are no less likely to
be structured to avoid tax, and thus may
also have the potential for tax avoidance.
Accordingly, these comments are not
adopted in the final regulations.
4. Excluding certain basis-adjustment
transactions
One commenter recommended exclud-
ing certain basis-adjustment transactions
that cure inside-outside basis disparities
created by section 734(b) adjustments,
section 704(c) methods, contributions,
distributions, and revaluations. Another
commenter recommended that the final
regulations consider common reasons why
an inside-outside basis disparity might
arise, such as transaction costs required
to be capitalized to outside basis, certain
income exclusions related to foreign cor-
porations owned through a partnership, or
the use of various section 704(c) methods.
This commenter recommended that cer-
tain acquisitions of partnership businesses
that may involve or create related-part-
ner relationships, including distributions
of lower-tier partnership interests to an
upper-tier partnership and liquidations
of blocker subsidiaries, be excluded as
transactions of interest. Another com-
menter requested that the final regulations
exclude partnership-incorporation trans-
actions, including transactions described
in Rev. Rul. 84-111, 1984-2 C.B. 88,
Situation 2 (assets-up incorporation) and
Situation 3 (interests-over incorporation).
A few commenters requested that the final
regulations exclude from the transactions
identified as section 732(b) TOIs and sec-
tion 734(b) TOIs any basis adjustments
resulting from an actual or deemed distri-
bution in the case of a partnership merger

Bulletin No. 2025–6 667 February 3, 2025
or division done for commercial reasons,
such as to allow a partial sale and continu-
ation of certain investments held by a pri-
vate equity or other investment fund.
In response to comments received on
the proposed regulations, these final reg-
ulations adopt several suggestions to limit
the scope of the transactions identified by
the proposed regulations to exclude from
reporting common business transactions
that do not meet large, economic thresh-
olds. However, providing a blanket exclu-
sion for certain transactions that may be
common business transactions under spe-
cific circumstances, but may also have the
potential for tax avoidance, would defeat
the purpose of identifying the transactions
as transactions of interest. For example, a
partnership merger or division involving
related parties may be undertaken with the
intent to increase the basis of an asset that
is subsequently disposed of in a recogni-
tion transaction or to increase cost recov-
ery deductions. Moreover, one of the pur-
poses of the final regulations is to gather
additional information on how taxpayers
are creating opportunities to shift basis
between related parties using the provi-
sions of subchapter K (for example, infor-
mation related to how inside-outside basis
disparities are being created). Providing an
exclusion from reporting for transactions
that cure inside-outside disparities created
through certain section 704(c) methods,
contributions, adjustments, distributions
or revaluations would nullify most of
the disclosures required by the final reg-
ulations as these are the techniques used
to create opportunities for partnership
related-party basis shifting. For these
reasons, the commenters’ suggestions for
exclusions of certain transactions are not
adopted in the final regulations.
5. Publicly traded partnerships
One commenter expressed concern
that publicly traded partnerships within
the meaning of section 7704 of the Code
(PTPs) are unable to identify the buyers
and sellers of interests therein, making it
impossible to determine whether a trans-
fer is made between related parties. This
commenter stated that PTPs frequently
engage in transactions that result in sec-
tion 743(b) adjustments as part of normal
public trading and capital-markets transac-
tions and that the final regulations should
add carveouts for transactions of PTPs.
At a minimum, the commenter recom-
mended that the final regulations imple-
ment an ownership threshold for related
partners of five percent or more of the
PTP to allow such persons to be identified
by disclosures required to be made to the
U.S. Securities and Exchange Commis-
sion. Another commenter recommended
that basis adjustments resulting from an
acquisition of a unit in a PTP, including as
part of any redemption of publicly traded
units by the PTP, should be excluded from
the transactions identified as transactions
of interest.
The Treasury Department and the IRS
agree that due to PTPs having a large
number of PTP unitholders that are not
related partners within the meaning of the
final regulations, and the unlikelihood that
unrelated PTP unitholders would engage
in the transactions identified as transac-
tions of interest in the final regulations,
it is appropriate to exclude basis adjust-
ments involving a transfer of or a distribu-
tion with respect to partnership interests in
a PTP, except basis adjustments resulting
from certain material transactions involv-
ing partnership interests held by related
partners in a PTP. Accordingly, the final
regulations provide that in the case of a
PTP, a participating partner means a part-
ner of the PTP but only to the extent that
the partner engages in a private transfer (as
described in § 1.7704-1(e)), redemption
and repurchase agreement (as described
in § 1.7704-1(f)), or private placement (as
described in § 1.7704-1(h)) of a partner-
ship interest with a related partner and the
transaction is not otherwise excluded as
a transaction of interest described in the
final regulations.
B. Cash as property for purposes of
section 734(b) TOIs
One commenter requested that the final
regulations clarify that cash is not included
as “property” for purposes of a section
734(b) TOI and thus positive basis adjust-
ments resulting from a distribution of cash
be excluded from transactions identified
as transactions of interest. Another com-
menter asked for clarification that cash
distributions in excess of basis that result
in positive basis adjustments under sec-
tion 734(b) are identified as transactions
of interest only to the extent that the distri-
butions are made to a tax-indifferent party.
As a general matter, the text of sec-
tion 734 makes no distinction between
cash and other partnership property. A
cash distribution to a related partner could
be treated as a section 734(b) TOI to the
extent that any basis increases generated
under section 734(b)(1) exceed the gain
recognized under section 731(a)(1) (or
otherwise) with respect to which any tax
imposed under subtitle A of the Code
(subtitle A) is required to be paid by the
related partners. However, the Treasury
Department and the IRS note that if gain
is recognized on a distribution of cash that
results in a basis adjustment under section
734(b)(1)(A) and tax imposed under subti-
tle A is required to be paid on such gain by
any of the related partners, that portion of
the basis adjustment would not be counted
towards the overall applicable threshold
amount in determining whether disclosure
of a transaction of interest is required.
C. Acquisition and integration
transactions for purposes of section
743(b) TOIs
A few commenters recommended
excluding from a section 743(b) TOI
transactions in which a party purchases
a partnership interest in an arm’s-length
transaction, receives a basis adjustment
under section 743(b), then transfers the
partnership interest to a related person in a
nonrecognition transaction (for example,
a transfer to a corporation under section
351(a) or to a partnership under section
721(a)) that causes a re-computation and
re-allocation of the section 743(b) adjust-
ment for the benefit of the related-party
transferee. Under the proposed regula-
tions, assuming the proposed $5 million
threshold amount was met, such a trans-
action would be reportable if the nonrec-
ognition transfer to the related transferee
results in a positive basis increase.
The Treasury Department and the IRS
agree that a positive section 743(b) basis
adjustment acquired through an arm’s-
length transaction (for example, a transac-
tion that would not be a reportable transac-
tion under these final regulations, without
regard to the six-year lookback period) to
which a related transferee succeeds should

February 3, 2025 668 Bulletin No. 2025–6
not be a reportable transaction, except to
the extent of any additional positive basis
adjustment resulting from the nonrec-
ognition transfer. This is because if the
original section 743(b) adjustment was
acquired through an arm’s length transac-
tion that would not be reportable under the
final regulations, a corresponding amount
of gain should have been recognized and
tax imposed under subtitle A should have
been paid by the original transferor. Thus,
a subsequent nonrecognition transfer by
the original transferee that results in the
same section 743(b) adjustment has little
potential for tax abuse. Accordingly, the
final regulations provide that if a partner
receives an interest in a partnership from
a person in a recognition transaction (first
transfer) and the basis of one or more part-
nership properties is increased under sec-
tion 743(b)(1) and (c), and subsequently
the partner (transferor) transfers the part-
nership interest to a person related to the
transferor (transferee) in a nonrecognition
transaction (subsequent transfer), the sub-
sequent transfer is a transaction of interest
only if the transferee’s basis adjustment
under section 743(b)(1) and (c) result-
ing from the subsequent transfer exceeds
the amount of the transferor’s remaining
basis adjustment that is attributable to the
transferred partnership interest (excess
amount), and the applicable threshold
amount is met. The final regulations fur-
ther provide that only the excess amount is
counted towards the applicable threshold
amount and that a transferor’s remaining
basis adjustment is equal to the amount
of the transferor’s basis adjustment under
section 743(b)(1) and (c) resulting from
the first transfer as adjusted under section
1016(a)(2) to reflect any recovery of the
basis adjustment or as otherwise adjusted
prior to the subsequent transfer.
D. Transfers between unrelated partners
for purposes of section 743(b) TOIs
Many commenters recommended
excluding transfers between unrelated
parties from a section 743(b) TOI if the
transferee is related to one or more exist-
ing partners. Several of these commenters
recommended that the transaction identi-
fied by proposed § 1.6011-18(c)(2) should
be limited to transfers between related
transferors and transferees. The Treasury
Department and the IRS agree with this
suggestion as transfers between related
parties have a clear potential for tax avoid-
ance whereas transfers between unrelated
parties if the transferee is related to one
or more existing partners may be much
harder to structure to achieve the desired
tax avoidance. Additionally, an unrelated
transferor may not have reason to know
that a transferee is related to one or more
existing partners. Accordingly, the defini-
tion of “related partner” in § 1.6011-18(b)
(9) in the final regulations provides that in
the case of a section 743(b) TOI, a related
partner means a transferor and transferee
of a partnership interest that are related to
each other immediately before or imme-
diately after a section 743(b) TOI. The
definition in the final regulations does not
include a transferee that is unrelated to a
transferor but is related to one or more of
the partners in the partnership.
E. Transfers upon death
For purposes of a section 743(b) TOI,
proposed § 1.6011-18(b)(2) would have
defined a nonrecognition transaction as
defined in section 7701(a)(45) — that is,
any disposition of property in a transac-
tion in which gain or loss is not recog-
nized in whole or in part for purposes of
subtitle A — other than a transfer on the
death of a partner.
One commenter requested clarification
that a step up in basis that results from
the transfer of an interest on the death
of a partner is not a transaction of inter-
est. Another commenter requested clar-
ification that the following transactions
are “transfers on the death of a partner”
excluded from the definition of a non-
recognition transaction under the final
regulations: (1) any deemed transfer to
what had been a grantor trust, including
an intentionally defective grantor trust;
and (2) a transfer on the death of a benefi-
ciary of a trust that is a partner. This same
commenter requested clarification that a
“transfer on the death of a partner” is nei-
ther a “nonrecognition transaction,” nor
a “recognition transaction” as defined in
the proposed regulations. Section 1.6011-
18(c)(4) of the final regulations clarifies
that transfers on the death of a partner are
not identified as transactions of interest or
as substantially similar transactions. Sec-
tion 1.6011-18(b)(13) of the final regula-
tions also provides that the term “transfer
on the death of a partner” means a transfer
of a partnership interest from a partner to
the partner’s estate or a deemed transfer
from a grantor trust owned by the partner
to a trust that becomes a separate entity for
Federal income tax purposes by reason of
the partner’s death.
One commenter recommended exclud-
ing distributions of partnership property to
transferees of an interest in a partnership
owned (or deemed owned) by a decedent
at the time of death that occur during the
administration of the decedent’s estate,
or a trust created by the decedent. This
commenter also recommended excluding
transfers of partnership interests owned (or
deemed owned) by a decedent that occur
during the administration of the dece-
dent’s estate or by a trust that was created
by the decedent. Although not specifically
stated in the commenter’s letter, presum-
ably, both of the commenter’s recommen-
dations would not be relevant in cases in
which a section 754 election was made at
the time of the decedent’s death because
there would be no disparity between the
outside basis in the decedent’s partnership
interest and its share of inside basis in the
partnership’s properties. The Treasury
Department and the IRS agree that trans-
fers of partnership interests resulting from
the death of a partner should be excluded
from the transactions identified as trans-
actions of interest and thus these transfers
are not identified as such by the final reg-
ulations. However, if a section 754 elec-
tion is not made for the taxable year that
includes the death of the partner, subse-
quent transactions that generate positive
basis adjustments, such as distributions
of partnership property to the estate or
transfers of partnership interests to benefi-
ciaries that may resolve an inside-outside
basis disparity created by a step-up to the
basis of the decedent’s partnership interest
upon death, will be included as transac-
tions of interest, provided that the applica-
ble threshold amount is met. The Treasury
Department and the IRS appreciate that a
section 754 election, once made, is irre-
vocable without seeking permission from
the IRS, and that a section 754 election at
the time of a partner’s death may require
the partnership to maintain a separate set
of calculations of the transferee benefi-

Bulletin No. 2025–6 669 February 3, 2025
ciaries’ distributive shares of partnership
items that reflect the section 743(b) adjust-
ment. But making a section 754 election at
the time of death would be the mechanism
by which to avoid the reporting require-
ments imposed by the regulations (assum-
ing the applicable threshold amount is
met). Providing an exception to reporting
for transactions that result in basis adjust-
ments because a section 754 election was
not made on the death of a partner due to
potential administrative burdens would
result in additional requests for reporting
exceptions in other fact patterns in which
a section 754 election was not made on
an original transaction due to potential
administrative burdens, and a subsequent
nonrecognition transaction results in a
basis adjustment that would otherwise
be reportable. Including such exceptions
in the final regulations would defeat the
purpose of identifying the transactions of
interest, as there may be circumstances in
which the lack of a section 754 election
was part of a strategy to generate more
beneficial results using a transaction iden-
tified as a transaction of interest by the
regulations. Thus, these final regulations
do not exclude transactions in which a
basis increase arises because a section 754
election was not made for a transaction
that would have provided a basis adjust-
ment to offset an inside-outside basis dis-
parity. The Treasury Department and the
IRS note that relief under §§ 301.9100-1
through 301.9100-3 may be available for
section 754 elections should a partnership
fail to make the election in the time pre-
scribed by the Code and regulations.
IV. Threshold Amount For Reporting
A. Amount generally
Under proposed § 1.6011-18(c)(3),
a partnership related-party basis adjust-
ment transaction would have included
those transactions in which the total basis
increases from all transactions described
in proposed § 1.6011-18(c)(1) or (2), (d)
(1) or (2) engaged in by the same part-
ner or partnership during the taxable year
(without netting for any basis adjustment
that results in a basis decrease in the
same transaction or another transaction),
reduced by the gain recognized, if any,
on which tax imposed under subtitle A is
required to be paid by any of the related
parties to the transaction, equal or exceed
$5 million. Accordingly, a transaction
of a partner or partnership described in
proposed § 1.6011-18(c)(1) or (2) that
resulted in a basis increase of less than
$5 million during the taxable year would
have been a transaction of interest under
proposed § 1.6011-18(a) if, in the same
taxable year, the partner or partnership
participated in another transaction or
transactions described in proposed §
1.6011-18(c)(1) or (2) and, in the aggre-
gate, the transactions resulted in a basis
increase that equals or exceeds $5 mil-
lion, without regard to any basis decrease
resulting from the transactions and after
reducing the resulting aggregate amount
by the gain recognized, if any, on which
tax imposed under subtitle A is required to
be paid by any of the related parties to the
transactions.
Many commenters recommended
increasing the proposed $5 million thresh-
old amount, asserting that the $5 million
threshold was too low, particularly con-
sidering the aggregation requirement, and
would catch common business transac-
tions. Several commenters recommended
increasing the proposed $5 million
threshold amount to an amount between
$10 million and $100 million. One com-
menter recommended making the thresh-
old amount $10 million for transactions
of interest occurring after the applicability
date of these final regulations and $50 mil-
lion for transactions of interest occurring
before that date.
The Treasury Department and the IRS
have determined that increasing the pro-
posed $5 million threshold amount is
appropriate to reduce the administrative
burden imposed on taxpayers. The pur-
pose of these final regulations is to learn
more about partnership related-party basis
adjustment transactions and the Treasury
Department and the IRS are conscious
of overburdening taxpayers in that pur-
suit. Accordingly, the final regulations
provide that, in the case of related-party
basis adjustment transactions occur-
ring within the six-year lookback period
described in §1.6011-18(c)(3)(ii), the
applicable threshold amount is $25 mil-
lion. For related-party basis adjustment
transactions occurring after the six-year
lookback period, the final regulations
provide an applicable threshold amount
of $10 million. In each case, the appli-
cable threshold amount is met for a tax-
able year if the sum of all related-party
basis increases (as determined under Part
IV.B. of this Summary of Comments and
Explanation of Revisions) resulting from
all transactions described in the final reg-
ulations of a participant during the taxable
year (without netting for any downward
basis adjustment in the same transaction
or another transaction) exceeds by at least
the applicable threshold amount the gain
recognized from such transactions, if any,
on which tax imposed under subtitle A is
required to be paid by any of the related
partners (or tax-indifferent party) who are
a party to such transactions. If the applica-
ble threshold amount is met for a taxable
year, all transactions of the participant
described in the final regulations for the
taxable year are reportable as transactions
of interest regardless of whether an indi-
vidual transaction meets the applicable
threshold amount.
B. Calculation of threshold amount
Commenters also recommended
changing how the threshold amount is cal-
culated. A few commenters recommended
allowing basis increases to be offset by
basis decreases for purposes of deter-
mining whether the threshold amount has
been reached. Another commenter recom-
mended taking basis increases into account
only to the extent that corresponding basis
decreases are borne by related parties. The
same commenter recommended exempt-
ing transactions from the proposed regu-
lations for which only a small portion (for
example, 10 percent) of an overall basis
decrease impacts parties related to those
with corresponding basis increases, or vice
versa. One commenter recommended that
if its recommendation to limit reporting to
the year of the transaction of interest is not
adopted, that the threshold amount look to
net taxable income — that is, reporting
should be required only if the tax benefit
reduced taxable income by the threshold
amount. This commenter also suggested
eliminating aggregation of basis increases.
Another commenter recommended using
a threshold amount that is not related to
basis (for example, the book value of dis-
tributed property).

February 3, 2025 670 Bulletin No. 2025–6
The Treasury Department and the IRS
agree that the calculation of the applicable
threshold amount for purposes of section
734(b) TOIs should include only related
partners’ shares of basis increases and
not the shares of unrelated parties, who
can negotiate transactions at arm’s length
to protect their interests. The Treasury
Department and the IRS also agree that
the calculation of the applicable threshold
amount for purposes of section 732(b)
TOIs should exclude basis increases that
correspond to basis decreases borne by
unrelated partners (other than tax-indif-
ferent parties) as basis decreases borne
by unrelated partners should be negoti-
ated at arm’s length unless the unrelated
partner is a tax-indifferent party. Accord-
ingly, § 1.6011-18(c)(3)(iii) of the final
regulations provide that in the case of
a section 734(b) TOI, other than a sub-
stantially similar transaction described
in § 1.6011-18(d)(1), for determining
whether the applicable threshold amount
is met for a taxable year, a basis increase
is an increase to the adjusted basis of
the partnership’s property under section
734(b)(1) and (c) only to the extent of
each related partner’s share of the basis
increase. Section 1.6011-18(c)(3)(iv) of
the final regulations provides that in the
case of a section 732(b) TOI, other than a
substantially similar transaction described
in § 1.6011-18(d)(1), for determining
whether the applicable threshold amount
is met for a taxable year, a basis increase
is an increase to the basis of property
distributed to one of the related partners
under section 732(b) or (c), but exclud-
ing the amount of any basis increase that
corresponds to a decrease to the basis of
property distributed to unrelated partners
(other than tax-indifferent parties) under
section 732(b) and (c) or to unrelated
partners’ (other than tax-indifferent par-
ties’) shares of a corresponding decrease
to the basis of the partnership’s remain-
ing property under section 734(b)(2) and
(c). In the case of a substantially similar
transaction described in § 1.6011-18 (d)
(1), for purposes of determining whether
the applicable threshold amount is met
for a taxable year, a basis increase is an
increase to the basis of property distrib-
uted to one of the partners under section
732(b) or (c) only to the extent of a corre-
sponding decrease to the basis of property
distributed to a tax-indifferent party under
section 732(b) and (c) or to one or more
tax-indifferent party’s shares of a corre-
sponding decrease to the basis of the part-
nership’s remaining property under sec-
tion 734(b)(2) and (c). For purposes of all
of these rules, a partner’s share of a basis
decrease is determined immediately after
the distribution under rules similar to the
rules of § 1.197-2(h)(12)(iv)(D).
The Treasury Department and the IRS
do not agree, however, that additional
changes to the calculation of the applica-
ble threshold amount, such as eliminating
aggregation, calculating the applicable
threshold amount based on increases to
taxable income, or using an economic
threshold that is based on book amounts,
are appropriate in light of the modifica-
tions made. If aggregation were elimi-
nated from the calculation of the appli-
cable threshold amount, taxpayers would
be incentivized to separate transactions
described in the final regulations into mul-
tiple transactions that result in positive
basis adjustments in an amount below
the applicable threshold amount to avoid
reporting obligations. Incentivizing such
behavior would defeat the purpose of the
final regulations, which is to gather infor-
mation on partnership related-party basis
adjustment transactions. Additionally, cal-
culating the applicable threshold amount
based on taxable income or book amounts
would introduce unnecessary complexity
for both taxpayers and the IRS in identify-
ing the transactions described in the final
regulations. The calculation of the appli-
cable threshold amount in the final regu-
lations represents an appropriate method-
ology for quantifying the magnitude of
partnership related-party basis adjustment
transactions a taxpayer engages in for a
taxable year. As described in Part IV.A of
this Summary of Comments and Expla-
nation of Revisions, the increases to the
threshold amount made by these final reg-
ulations should also address concerns that
the applicable threshold amount is overly
inclusive.
Finally, one commenter requested
clarification that substantially similar
transactions are subject to the threshold
amount. The Treasury Department and
the IRS clarify that a transaction cannot
be a substantially similar transaction if
the applicable threshold amount is not
met. As described in part VI of this Sum-
mary of Comments and Explanation of
Revisions, transactions would be “sub-
stantially similar” transactions if they are
(1) expected to obtain the same or similar
types of tax consequences as the transac-
tions described in the final regulations, (2)
factually similar or based on the same or
similar tax strategy, and (3) the applicable
threshold amount is met.
V. Relatedness Standard
Proposed § 1.6011-18(b)(8) would
have defined “related” as having a rela-
tionship described in section 267(b) (with-
out regard to section 267(c)(3)) or section
707(b)(1). Proposed § 1.6011-18(b)(9)
would have defined “related partners” as
partners of a partnership that are related in
the following manner — (i) in a transac-
tion described in proposed § 1.6011-18(c)
(1), the partnership has two or more direct
or indirect partners that are related to each
other within the meaning of proposed §
1.6011-18(b)(8), or (ii) in a transaction
described in proposed § 1.6011-18(c)(2),
the transferor of a partnership interest is
related to the transferee, or the transferee
is related to one or more of the partners
in the partnership, within the meaning
of proposed § 1.6011-18(b)(8). Under
the proposed regulations, this related-
ness requirement would have been met
if the requisite relatedness exists either
immediately before or immediately after
a partnership related-party basis adjust-
ment transaction described in proposed §
1.6011-18(c)(1) or (2).
Several commenters recommended
changes to the relatedness requirement,
stating that it was overbroad and diffi-
cult to comply with as partnerships and
partners may not be able to identify their
related parties. One commenter recom-
mended importing concepts found in
section 1563(a)(2) of the Code (related
to brother-sister controlled groups of
corporations) that would limit the defini-
tion of related partnerships by taking into
account common ownership of capital or
profits interests in the partnerships only to
the extent that such ownership is identical
with respect to each partnership.
In the case of transactions of interest
involving section 734(b) or section 732(b)
or (d), one commenter recommended

Bulletin No. 2025–6 671 February 3, 2025
requiring related partners to own 80 per-
cent or more of the capital or profits inter-
ests of the partnership. Similarly, another
commenter recommended that for all pur-
poses of the final regulations, reporting
should be required only if related parties
own 80 percent or more of the capital or
profits of a participating partnership. This
commenter also recommended that the
standard for relatedness be modified by
substituting “80 percent” for “50 percent”
in the relevant relationships defined within
sections 267(b) or section 707(b)(1).
The Treasury Department and the IRS
appreciate that the standard of relatedness
used in the proposed regulations, com-
bined with the scope of the transactions
identified as transactions of interest, the
proposed $5 million threshold amount,
and the proposed definition of participa-
tion could result in administrative burdens
on partnerships and their partners. The
final regulations address these burdens by
limiting the scope of the transactions iden-
tified, increasing the applicable threshold
amounts, and limiting the application of
the subsequent realization of tax benefit
rule as described in Part VII.A. of this
Summary of Comments and Explanation
of Revisions. For example, in response to
comments requesting that the standard of
relatedness be narrowed, in the case of a
section 734(b), 732(b) or 732(d) TOI, the
final regulations provide that only directly
related partners (and not also indirectly
related partners) are considered in deter-
mining whether partners are related within
the meaning of § 1.6011-18(b)(8) of the
final regulation.
The final regulations do not adopt
the additional changes to the standard of
relatedness recommended by commenters
because the Treasury Department and the
IRS are concerned that counting only iden-
tical ownership as between related partner-
ships, or requiring related partners to own
80 percent or more of the capital or profits
interests in a partnership, would more eas-
ily permit partnership structures with only
marginally different ownership, including
through the use of accommodation parties,
to avoid such higher ownership thresholds
without substantially affecting the part-
ners’ economics. Likewise, the Treasury
Department and the IRS are concerned
that increasing the relatedness standard
from 50 percent to 80 percent could allow
taxpayers to structure their affairs to stay
below an 80-percent-relatedness standard,
while simultaneously engaging in abusive
partnership related-party basis adjustment
transactions. Adding an ownership thresh-
old or increasing the relatedness standard
would frustrate the purpose of identifying
the transactions described in the proposed
regulations as transactions of interest.
Accordingly, the commenters’ recommen-
dations are not adopted in the final regu-
lations.
A commenter recommended exclud-
ing transactions between family mem-
bers from those defined as transactions
of interest and focusing instead on trans-
actions involving controlled corpora-
tions described in section 267(f). The
commenter noted that if relatedness is
determined immediately before or after
a transaction, parties undergoing divorce
may be subject to these rules even though
they have competing interests and will not
be related after the divorce. Another com-
menter recommended excluding brothers
and sisters from a person’s family for
purposes of determining relatedness, stat-
ing that, in the commenter’s experience,
siblings often have a contentious busi-
ness relationship and are less likely to
engage in transactions that confer large,
gratuitous economic or tax benefits to one
another. The Treasury Department and
the IRS do not agree that familial rela-
tionships, including sibling relationships,
should be excluded from the definition of
relatedness. Family members, including
siblings, often work in concert in ways
that arm’s-length parties do not. For those
reasons, Congress included these familial
relationships as part of the limitation rules
in sections 267 and 707(b). Additionally,
section 1041 of the Code is intended to
address transfers of property between
spouses incident to divorce. For these rea-
sons, the final regulations retain familial
relationships, including sibling relation-
ships, in the definition of relatedness.
VI. Substantially Similar Transactions
Section 1.6011-4(b)(6) defines a
“transaction of interest” as a transaction
that is the same as or substantially similar
to one of the types of transactions that the
IRS has identified by notice, regulation,
or other form of published guidance as
a transaction of interest. For purposes of
proposed § 1.6011-18, transactions would
be “substantially similar” transactions if
the transactions are substantially similar
within the meaning of § 1.6011-4(c)(4) —
that is, if they are expected to obtain the
same or similar types of tax consequences
and are either factually similar or based on
the same or similar tax strategy. Proposed
§ 1.6011-18(a) would have provided that
substantially similar transactions include,
but are not limited to, the transactions
described in proposed § 1.6011-18(d).
Some commenters recommended clar-
ifying or narrowing the definition of “sub-
stantially similar” transactions generally.
Several commenters noted that the broad
definition of “substantially similar trans-
actions” in § 1.6011-4 increases uncer-
tainty and compliance costs. Suggestions
to amend § 1.6011-4, including that pro-
vision’s definition of a “substantially sim-
ilar” transaction, are outside the scope of
these final regulations. As a result, the
commenters’ suggestions are not adopted
in the final regulations.
A. Tax-indifferent parties
Under proposed § 1.6011-18(d)(1), a
transaction would have been substantially
similar to a transaction described in pro-
posed § 1.6011-18(c) if the transaction is a
basis adjustment transaction described in
proposed § 1.6011-18(c)(1) or (2), except
that it does not involve related partners and
one or more partners of the partnership is
a tax-indifferent party. Under proposed §
1.6011-18(b)(11), a tax-indifferent party
would have meant a person that is either
not liable for Federal income tax because
of its tax-exempt or, in certain cases, for-
eign status, or to which gain from a trans-
action described in proposed § 1.6011-
18(c) would not result in Federal income
tax liability for the person’s taxable year
within which such gain is recognized (for
example, because the taxpayer has a net
operating loss carryforward or capital loss
carryforward).
Two commenters recommended elimi-
nating transactions involving tax-indiffer-
ent parties from those identified as trans-
actions of interest. Many commenters
noted that partners and partnerships may
be unaware that a person engaging in a
transaction identified by the proposed reg-

February 3, 2025 672 Bulletin No. 2025–6
ulations is a tax-indifferent party. Some
commenters requested clarification to the
definition of tax-indifferent party, such as
whether it includes direct or indirect part-
ners that are exempt from Federal income
tax under section 115 of the Code (relating
to the income of State, territorial, or local
governments), entities treated as partner-
ships or S corporations for Federal tax
purposes, or a person that, due to tax attri-
butes or for other reasons, is subject to tax
on only part of its income. One commenter
requested confirmation that the definition
of a tax-indifferent party does not include
a party with a capital loss carryover. The
commenter raised that a capital loss car-
ryover may be unrelated to a partner’s
partnership interest and unknown by other
partners, particularly if the partner is unre-
lated.
One commenter recommended lim-
iting the rule to situations in which the
tax-indifferent party knows or has rea-
son to know of the tax benefits arising
in connection with its participation in a
basis-adjustment transaction and that the
other partners that are party to the transac-
tion know of the partner’s tax-indifferent
status. One commenter recommended an
exception for taxpayers who do not have
knowledge or reason to know that its trans-
action is reportable because a person that
is a party to the transaction is tax-indif-
ferent. Another commenter recommended
modifying the tax-indifferent party rule to
apply only to situations in which the tax-
payer knowingly participates in the trans-
action to which the tax-indifferent party
facilitates a basis step-up.
Eliminating the tax-indifferent party
rule would frustrate the purpose of iden-
tifying substantially similar transactions
to the identified transactions of interest
that use tax-indifferent parties instead of
related parties to achieve the same eco-
nomic or tax results. Accordingly, the
Treasury Department and the IRS decline
to eliminate the tax-indifferent party rule
entirely in the final regulations. However,
in response to these comments, the Trea-
sury Department and the IRS have deter-
mined that certain changes to the scope of
transactions of interest involving tax-in-
different parties are appropriate.
Accordingly, the final regulations
include a knowledge element in the defi-
nition of a tax-indifferent party. Section
1.6011-18(b)(12) of the final regulations
provides that a tax-indifferent party means
a person that is either not liable for Fed-
eral income tax by reason of its tax-ex-
empt or, in certain cases, foreign status,
or to which any gain, or portion of any
gain, that would have resulted from a sec-
tion 732(b) TOI or a section 734(b) TOI
if the property subject to a basis decrease
in such transaction were sold immediately
after such transaction, would not result in
Federal income tax liability for the per-
son’s taxable year within which such gain
would have been recognized, and whose
status as a tax-indifferent party is known
or should be known to any other person
that participates in the transaction or to a
partner in a partnership that participates
in such a transaction. Thus, a tax-indiffer-
ent party would include a person that is
partially taxable, for example, due to tax
attributes, to the extent that the person’s
status as a tax-indifferent party is known
or should be known by any other person
participating in the transaction or to a
partner in a partnership that participates
in such a transaction. Because partner-
ships or S corporations are generally not
liable for tax, and because the tax status
of their partners or shareholders could be
diverse, the final regulations also provide
that partnerships or S corporations are not
tax-indifferent parties except in cases in
which a principal purpose of the use of the
partnership or S corporation is to avoid
tax-indifferent party status.
Additionally, the final regulations limit
the scope of a substantially similar trans-
action with a tax-indifferent party under §
1.6011-18(d)(1) by limiting the calcula-
tion of the applicable threshold amount to
basis increases that correspond to a basis
decrease to the tax-indifferent party for
sections 732 and 734 TOIs. See Part IV.B.
of this Summary of Comments and Expla-
nation of Revisions. These modifications
are intended to address concerns that the
tax-indifferent party rules in the proposed
regulations were overbroad.
The final regulations also clarify that
a transaction with a tax-indifferent party
includes a transaction in which the tax-in-
different party facilities the increase in the
basis of partnership property in a section
732 TOI by having a share of a corre-
sponding decrease to the basis of partner-
ship property.
B. Recognition transactions
Proposed § 1.6011-18(d)(2) would
have defined as a substantially similar
transaction a transaction in which a part-
ner transfers the partner’s partnership
interest in a recognition transaction to a
related transferee or to a person related to
one or more existing partners, and the pro-
posed $5 million threshold amount was
met. Proposed § 1.6011-18(b)(6) would
have defined a “recognition transaction”
as a transaction other than a nonrecogni-
tion transaction.
One commenter requested clarification
that proposed § 1.6011-18(d)(2) applies
only to transfers between related parties,
meaning the transferor and transferee
must be related. The Treasury Department
and the IRS agree with this comment and
have made clarifying changes to confirm
that the rule in § 1.6011-18(d)(2) does not
apply to transfers of partnership interests
between persons that are not related.
VII. Participation in a Transaction
of Interest Identified by the Proposed
Regulations
A. Subsequent realization of tax benefit
rule
Under proposed § 1.6011-18(e)(2)-(4),
a participating partnership, participating
partner, or related subsequent transferee
would have participated in a transaction
of interest in any taxable year in which
it participates in a transaction described
in proposed § 1.6011-18(c). Addition-
ally, under proposed § 1.6011-18(e)(5),
a participating partnership, participating
partner, or related subsequent transferee
would have participated in a transaction of
interest in any taxable year in which its tax
return reflected the tax consequences of a
basis increase resulting from a transac-
tion described in proposed § 1.6011-18(c)
(subsequent realization of tax benefit rule).
Therefore, under the proposed regulations,
as a result of the subsequent realization of
tax benefit rule, a transaction described
in proposed § 1.6011-18(c) that occurred
many years ago could require reporting
if a taxpayer’s tax return in an open tax
year reflected the tax consequences (such
as cost-recovery deductions) arising from
the transaction of interest.

Bulletin No. 2025–6 673 February 3, 2025
Several commenters recommended
eliminating the retroactive effect of the
subsequent realization of tax benefit rule.
These commenters stated that comply-
ing with the rule would be burdensome
given that it could require taxpayers and
their advisors to reconstruct transactions
and their resulting tax consequences from
many years ago. Commenters asserted
that, in many cases, taxpayers and their
advisors will not have sufficient informa-
tion to comply with the rule.
Several commenters recommended that
the proposed regulations apply prospec-
tively to transactions that occur in taxable
years beginning on or after the date the
final regulations are adopted, whereas one
commenter recommended applying the
proposed regulations solely to transac-
tions effected on or after January 1, 2023.
One commenter recommended applying
the subsequent realization of tax bene-
fit rule only to partnership related-party
basis adjustment transactions that occur
within partnership tax years that remain
open under the period of limitations set
forth in section 6235 of the Code. Sec-
tion 6235 provides rules on the period of
limitations for making adjustments with
respect to partnerships subject to the Cen-
tralized Partnership Audit Regime under
the Bipartisan Budget Act of 2015 (BBA
partnerships). Under section 6235(a)(1),
the time for the IRS to make an adjust-
ment for a taxable year of a BBA part-
nership generally is the later of the date
which is three years after the latest of (1)
the date on which the partnership return
for the taxable year was filed, (2) the
return due date for the taxable year, or (3)
the date on which the partnership filed an
administrative adjustment request under
section 6227 of the Code with respect to
the taxable year. In the case of a BBA
partnership that makes a substantial omis-
sion of gross income within the meaning
of section 6501(e)(1), section 6235(c)(2)
provides that the period of limitations on
making adjustments is six years instead of
three years.
The Treasury Department and the IRS
do not agree with eliminating all report-
ing that would occur under the subsequent
realization of tax benefit rule as this would
defeat the purpose of providing the IRS
with information regarding transactions
with tax consequences occurring over
more than one taxable year. However, the
Treasury Department and the IRS agree
that it is appropriate to limit the retroac-
tive information effect of the subsequent
realization of tax benefit rule because of
administrative concerns with compliance
for transactions that would meet the ele-
ments of § 1.6011-18(c) and (d) except
that they occurred many years ago.
In determining the appropriate limita-
tion for the subsequent realization of tax
benefit rule, limiting the look back period
to the prior six years as recommended by
one commenter allows the IRS to preserve
its ability to assess tax in cases in which
the statute of limitations for assessment
of tax is six years pursuant to section
6501(e) or section 6235(c)(2). In addition,
a six-year lookback period aligns with
the requirement under § 301.6112-1(b)
(2) that material advisors of transactions
of interests maintain lists of advisees, but
not if the person entered into the transac-
tion more than six years from the date the
transaction was identified as a transac-
tion of interest under published guidance.
Accordingly, the final regulations adopt
a six-year lookback period for required
disclosures. Under the final regulations
at § 1.6011-18(f)(2), for a taxable year
described in § 1.6011-4(e)(2)(i), a par-
ticipant must provide the information
described in the final regulations only if
the transaction of interest occurred within
the six-year lookback period. Section
1.6011-18(b)(11) of the final regulations
provides that the six-year lookback period
means the seventy-two months imme-
diately preceding the first month of the
taxpayer’s most recent taxable year that
began before January 14, 2025. The final
regulations include examples demonstrat-
ing the six-year lookback period rule.
B. Limiting the definition of participation
Several commenters recommended
requiring reporting only in the taxable
year the transaction of interest occurs
and eliminating the subsequent realiza-
tion of tax benefit rule. These comment-
ers asserted that reporting only in the
year in which the transaction of interest
first arises would reduce compliance bur-
dens and costs for taxpayers and limit the
potential for missed reporting. One com-
menter suggested adopting a one-time
disclosure mechanism like that adopted in
Form 1065, Schedule B, questions 11 and
12 for the “drop and swap” or “swap and
drop” transactions to which section 1031
of the Code applies. Another commenter
recommended requiring reporting only at
the partnership level to avoid duplicative
reporting. Reporting by all participants in
any taxable year in which the participant’s
tax return reflects the tax consequences
of a basis increase resulting from a trans-
action of interest is the most appropriate
for tax compliance and administration.
Accordingly, the commenters’ recommen-
dations are not adopted in the final regu-
lations.
Special Analyses
I. Paperwork Reduction Act
The collection of information contained
in these final regulations is reflected in the
collection of information for Form 8886
and Form 8918, Material Advisor Disclo-
sure Statement, that have been reviewed
and approved by the Office of Manage-
ment and Budget (OMB) in accordance
with the Paperwork Reduction Act (44
U.S.C. 3507(c)) under control numbers
1545-1800 and 1545-0865.
To the extent there is a change in bur-
den as a result of these final regulations,
the change in burden will be reflected
in the updated burden estimates for the
Forms 8886 and 8918. The requirement to
maintain records to substantiate informa-
tion on Forms 8886 and 8918 is already
contained in the burden associated with
the control number for the forms and
remains unchanged.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
II. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
(5 U.S.C. chapter 6) requires agencies to
“prepare and make available for public
comment an initial regulatory flexibil-
ity analysis,” which will “describe the
impact of the rule on small entities.” Sec-
tion 605(b) of the RFA allows an agency
to certify a rule if the rulemaking is not

February 3, 2025 674 Bulletin No. 2025–6
expected to have a significant economic
impact on a substantial number of small
entities.
The Secretary of the Treasury hereby
certifies that these final regulations will
not have a significant economic impact
on a substantial number of small entities
pursuant to the RFA. This certification is
based on IRS data that estimates the per-
centage of partnerships that would have
been required to file a disclosure state-
ment under the proposed regulations and
those that may be required to file a disclo-
sure statement under the final regulations.
The IRS’s Research, Applied Analyt-
ics, and Statistics division (RAAS) pro-
vided data that indicated the percentage of
partnerships with gross receipts or sales of
$25 million or less that might have been
subject to the disclosure obligations under
the proposed regulations because of a
basis adjustment under section 743(b) of
more than $5 million during the taxable
year. In addition, RAAS provided data
that indicated the percentage of partner-
ships with gross receipts or sales of $25
million or more that might have been sub-
ject to the disclosure obligations under
the proposed regulations because of a
basis adjustment under section 743(b) of
more than $5 million during the taxable
year. The data suggested that of all part-
nerships with related parties and a basis
adjustment under section 743(b) of more
than $5 million during the taxable year,
approximately two-thirds of the partner-
ships would have gross receipts or sales
of $25 million or less and approximately
one-third would have gross receipts or
sales of $25 million or more. The Treasury
Department and the IRS determined that
the data did not indicate that the proposed
regulations would have a significant eco-
nomic impact on a substantial number of
small entities because not all partnerships
with gross receipts or sales of $25 million
or less are considered small businesses,
3

and the data did not provide information
on whether the partnerships with gross
receipts or sale of $25 million or less were
part of larger enterprises.
As discussed in Part II of the Summary
of Comments and Explanation of Revi-
sions, several commenters stated that the
scope of the proposed regulations would
be overbroad and the number of entities
that would be subject to disclosure was
underestimated. In addition, commenters
asserted that taxpayers would be subject
to substantial costs for complying with
the proposed regulations because compli-
ance required reviewing transactions from
prior taxable years to determine whether
a continuing tax benefit was attributable
to a transaction identified as a transaction
of interest under the proposed regulations.
These comments are addressed in Parts II
and VII of the Summary of Comments and
Explanation of Revisions.
One commenter asserted that the Trea-
sury Department and the IRS underesti-
mated the likely cost of complying with
the proposed regulations. Specifically, the
commenter asserted that the likely wage
of tax preparers and costs of due diligence,
as well as the number of parties affected
by each transaction of interest were under-
estimated.
As indicated in the Summary of Com-
ments and Explanation of Revisions, the
final regulations include changes that
should significantly limit the total num-
ber of entities and more specifically, small
businesses, subject to the disclosure obli-
gations. Most significantly, the applica-
ble threshold amount is increased from
$5 million to $10 million; the period for
reporting under § 1.6011-4(e)(2)(i) is lim-
ited to a six-year lookback period and the
applicable threshold amount for the six-
year lookback period is $25 million; in the
case of a section 734(b) TOI, the appli-
cable threshold amount is determined by
generally only taking into account only
the amount of the basis increase shared
by related partners; in the case of a sec-
tion 732(b) TOI, the applicable threshold
amount is determined by generally only
taking into account only the amount of the
basis increase that corresponds to a basis
decrease shared by the related partners.
In addition, more recent data from the
IRS indicates that, in the case of partner-
ships with gross assets of less than $25
million that reported basis adjustments
under section 734(b) or section 743(b) for
the taxable year, the average basis adjust-
ment was less than the applicable threshold
amount of $10 million or more in the final
regulations. Thus, the Treasury Department
and the IRS anticipate that many partner-
ships with gross assets of less than $25
million should not be subject to the disclo-
sure obligations under the final regulations.
Further, the data indicates that partnerships
with gross assets of more than $25 million
that reported basis adjustments under sec-
tion 734(b) or section 743(b) for the tax-
able year that met the applicable threshold
amount of $10 million or more in the final
regulations represent less than one percent
of all partnerships that filed tax returns for
the taxable year. Accordingly, as a result of
the changes made to the final regulations in
response to comments received on the pro-
posed regulations, the disclosure obliga-
tions in the final regulations should affect a
low percentage of partnerships and most of
those partnerships will be partnerships with
less than $25 million of gross assets.
The final regulations should not have a
significant economic impact on small enti-
ties subject to the reporting requirements
of the final regulations because the final
regulations merely implement sections
6011, 6111 and 6112 and § 1.6011-4 by
specifying the manner in which and the
time at which a transaction identified as
a transaction of interest in the final reg-
ulations must be reported. Accordingly,
because the final regulations will be lim-
ited in scope to time and manner of infor-
mation reporting, their economic impact
is expected to be minimal. The Treasury
Department and the IRS expect that the
reporting burden is low because the infor-
mation sought is necessary for regular
annual return preparation and ordinary
recordkeeping. The estimated burden for
any taxpayer required to file Form 8886
is approximately 10 hours, 16 minutes for
recordkeeping, 4 hours, 50 minutes for
learning about the law or the form, and 6
hours, 25 minutes for preparing, copying,
assembling, and sending the form to the
IRS.
RAAS estimated that the appropriate
wage rate for complying with the proposed
regulations is $102.00 (2022 dollars) per
hour. Thus, it was estimated that persons
required to comply with the proposed reg-
ulations would have incurred costs totaling
3
See, 13 CFR § 121.201.

Bulletin No. 2025–6 675 February 3, 2025
approximately $2,194.70 per filing. One
commenter indicated that this per hour
dollar amount is too small and that a better
estimate is approximately $177.29 per hour
or approximately $3,814.69 per filing (sub-
ject to the taxpayer potentially seeking spe-
cialists with a higher hourly fee to comply
with the proposed regulations). Either of
these amounts is small in comparison to an
aggregate basis increase of $10 million or
more as the result of a transaction identified
as a transaction of interest under the final
regulations. Thus, the relatively small cost
to comply with the final regulations will
not pose any significant economic impact
to any small entities that would be subject
to the final regulations.
For the reasons stated, a regulatory
flexibility analysis under the RFA is not
required. Pursuant to section 7805(f) of
the Code, the proposed rule preceding this
rulemaking was submitted to the Chief
Counsel for the Office of Advocacy of the
Small Business Administration for com-
ment on its impact on small business, and
no comments were received.
III. Unfunded Mandates Reform Act
Section 202 of the Unfunded Man-
dates Reform Act of 1995 requires that
agencies assess anticipated costs and
benefits and take certain other actions
before issuing a final rule that includes
any Federal mandate that may result in
expenditures in any one year by a State,
local, or Tribal government, in the aggre-
gate, or by the private sector, of $100
million in 1995 dollars, updated annually
for inflation. This rule does not include
any Federal mandate that may result in
expenditures by State, local, or Tribal
governments, or by the private sector in
excess of that threshold.
IV. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts state law, unless the agency
meets the consultation and funding
requirements of section 6 of the Executive
order. These final regulations do not have
federalism implications and do not impose
substantial direct compliance costs on
State and local governments or preempt
state law within the meaning of the Exec-
utive order.
V. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
VI. Congressional Review Act
Pursuant to the Congressional Review
Act (5 U.S.C. 801 et seq.), the Office of
Information and Regulatory Affairs has
designated this rule as not a “major rule,”
as defined by 5 U.S.C. 804(2).
Statement of Availability of IRS
Documents
Guidance cited in this preamble is pub-
lished in the Internal Revenue Bulletin
and is available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Drafting Information
The authors of these regulations are
Elizabeth Zanet and Cameron William-
son, Office of the Associate Chief Coun-
sel (Passthroughs and Special Industries).
However, other personnel from the Trea-
sury Department and the IRS participated
in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding an entry
for § 1.6011-18 in numerical order to read
in part as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 1.6011-18 also issued under 26
U.S.C. 6001 and 26 U.S.C. 6011.
* * * * *
Par. 2. Section 1.6011-18 is added to
read as follows:
§1.6011-18 Certain partnership
related-party basis adjustment
transactions as transactions of interest.
(a) Identification as transaction of
interest. Transactions that are the same as
or substantially similar (within the mean-
ing of § 1.6011-4(c)(4)) to the transactions
described in paragraph (c) of this section
are identified as transactions of interest
for purposes of § 1.6011-4(b)(6). Transac-
tions that are substantially similar (within
the meaning of § 1.6011-4(c)(4)) to the
transactions described in paragraph (c) of
this section include, but are not limited to,
transactions described in paragraph (d) of
this section.
(b) Definitions. The following defini-
tions apply for purposes of this section:
(1) Code means the Internal Revenue
Code.
(2) Nonrecognition transaction means
a nonrecognition transaction within the
meaning of section 7701(a)(45) of the
Code.
(3) Participating partner means—
(i) Except as provided in paragraph
(b)(3)(ii), (iii), or (iv) of this section, any
partner that directly receives a distribution
of property from, or an interest in, a par-
ticipating partnership, or directly transfers
an interest in a participating partnership,
in a transaction described in paragraph (c)
or (d) of this section, including a person
that becomes or ceases to be a partner as a
result of such transaction.
(ii) In the case of a participating part-
nership interest held by an entity that is
disregarded as separate from its owner
within the meaning of § 301.7701-2(c)(2)
(i) of this chapter, participating partner
means the owner of the disregarded entity
for Federal income tax purposes.

February 3, 2025 676 Bulletin No. 2025–6
(iii) In the case of a participating part-
nership interest held by a trust for which
the grantor or another person is treated as
the owner of the trust that holds the par-
ticipating partnership interest as provided
in section 671 of the Code, participating
partner means the grantor or other person
designated under sections 671 through 679
of the Code as the owner of the trust that
holds the participating partnership interest.
(iv) In the case of a publicly traded
partnership within the meaning of sec-
tion 7704 of the Code, participating part-
ner means a partner of the publicly traded
partnership but only to the extent that the
partner engages in a private transfer (as
described in § 1.7704-1(e)), redemption
or repurchase agreement (as described in
§ 1.7704-1(f)), or private placement (as
described in § 1.7704-1(h)) of a partner-
ship interest with a related partner and the
transaction is not otherwise excluded as a
transaction described in paragraph (c) or
(d) of this section.
(4) Participating partnership means
any partnership—
(i) That makes a distribution of prop-
erty to a participating partner in a trans-
action described in paragraph (c)(1) or (d)
(1) of this section, or
(ii) A partnership interest in which is
transferred by a participating partner in a
transaction described in paragraph (c)(2)
or (d)(2) of this section.
(5) Participating partnership interest
means any partnership interest in a partic-
ipating partnership.
(6) Recognition transaction means a
transaction other than a nonrecognition
transaction within the meaning of para-
graph (b)(2) of this section.
(7) Recoverable property means prop-
erty of a character subject to an allowance
for depreciation, amortization, or deple-
tion under subtitle A of the Code (subtitle
A).
(8) Related means having a relation-
ship described in section 267(b) of the
Code (without regard to section 267(c)(3))
or section 707(b)(1) of the Code.
(9) Related partners means:
(i) In the case of a transaction described
in paragraph (c)(1) of this section, two or
more direct partners of a partnership that
are related immediately before or immedi-
ately after a transaction described in para-
graph (c)(1) of this section.
(ii) In the case of a transaction
described in paragraph (c)(2) or (d)(2) of
this section, a transferor and transferee of
a partnership interest that are related to
each other immediately before or immedi-
ately after a transaction described in para-
graph (c)(2) of this section.
(10) Related subsequent transferee
means any person that is related to a par-
ticipating partner and directly received
in a nonrecognition transaction a transfer
(including a distribution) of property that
was subject to an increase in basis from a
transaction described in paragraph (c) or
(d) of this section.
(11) Six-year lookback period means
the seventy-two months immediately pre-
ceding the first month of the taxpayer’s
most recent taxable year that began before
January 14, 2025.
(12) Tax-indifferent party means a
person that is either not liable for Fed-
eral income tax by reason of the person’s
tax-exempt or, in certain cases, foreign
status, or to which any gain, or portion of
any gain, that would have resulted from a
transaction described in paragraph (d)(1)
of this section if the property subject to
a basis decrease in such transaction were
sold immediately after such transaction
would not result in Federal income tax lia-
bility for the person’s taxable year within
which such gain would have been recog-
nized, and whose status as a tax-indiffer-
ent party is known or should be known
to any other person that participates in a
transaction described in paragraph (d)(1)
of this section or to a partner in a partner-
ship that participates in such a transaction.
A tax-indifferent party does not include a
partnership or S corporation except in a
case in which a principal purpose of the
use of the partnership or S corporation is
to avoid tax-indifferent party status.
(13) Transfer on the death of a part-
ner means a transfer of a partnership
interest from a partner to the partner’s
estate or a deemed transfer from a grantor
trust owned by the partner to a trust that
becomes a separate entity for Federal
income tax purposes by reason of the part-
ner’s death.
(c) Transaction description. A trans-
action is described in this paragraph (c)
if the factual elements of the transaction
described in paragraph (c)(1)(i) through
(iii) or (c)(2) of this section are met.
(1) Distributions by a partnership. A
partnership with two or more related part-
ners engages in any of the transactions
described in paragraphs (c)(1)(i) through
(iii) of this section as follows:
(i) The partnership distributes property
to one of the related partners in a current
or liquidating distribution, the partnership
increases the basis of one or more of its
remaining properties under section 734(b)
and (c) of the Code, and the applicable
threshold described in paragraph (c)(3) of
this section is met.
(ii) The partnership distributes property
to one of the related partners in liquidation
of that person’s partnership interest (or in
complete liquidation of the partnership),
the basis of one or more of those distrib-
uted properties is increased under section
732(b) and (c) of the Code, and the appli-
cable threshold described in paragraph (c)
(3) of this section is met.
(iii) The partnership distributes prop-
erty to one of the related partners, the basis
of one or more of those distributed prop-
erties is increased under section 732(d) of
the Code, the distributee acquired all or a
part of its interest in the partnership in a
transaction that would have been a trans-
action described in paragraph (c)(2) of this
section if the partnership had a section 754
election in effect for the year of transfer,
and the applicable threshold described in
paragraph (c)(3) of this section is met.
(2) Transfers of a partnership inter-
est—(i) In general. Except as otherwise
provided in paragraph (c)(2)(ii) or (c)(4)
of this section, a partner transfers all or a
portion of a partnership interest to a related
partner in a nonrecognition transaction,
the basis of one or more partnership prop-
erties is increased under section 743(b)
(1) and (c) of the Code, and the applicable
threshold described in paragraph (c)(3) of
this section is met.
(ii) Subsequent nonrecognition trans-
fers—(A) In general. If a partner receives
an interest in a partnership from a person
in a recognition transaction (first trans-
fer) and the basis of one or more partner-
ship properties is increased under section
743(b)(1) and (c) of the Code, and sub-
sequently the partner (transferor) trans-
fers the partnership interest to a person
related to the transferor (transferee) in a
transaction described in paragraph (c)(2)
(i) of this section (subsequent transfer),

Bulletin No. 2025–6 677 February 3, 2025
the subsequent transfer is a transaction
described in paragraph (c)(2)(i) of this
section only to the extent, if any, that the
transferee’s basis adjustment under sec-
tion 743(b)(1) and (c) resulting from the
subsequent transfer exceeds the amount
of the transferor’s remaining basis adjust-
ment described in paragraph (c)(2)(ii)(B)
of this section that is attributable to the
transferred partnership interest (excess
amount), and the applicable threshold
described in paragraph (c)(3) of this sec-
tion is met. Only the excess amount is
counted towards the applicable threshold
described in paragraph (c)(3) of this sec-
tion.
(B) Transferor’s remaining basis
adjustment. A transferor’s remaining
basis adjustment is equal to the amount
of the transferor’s basis adjustment under
section 743(b)(1) and (c) resulting from
the first transfer as adjusted under sec-
tion 1016(a)(2) of the Code to reflect the
recovery of the basis adjustment or as oth-
erwise adjusted prior to the subsequent
transfer.
(3) Applicable threshold—(i) In gen-
eral. Except as otherwise provided in
paragraph (c)(3)(ii) of this section, for
determining whether a transaction is
described in paragraph (c)(1) or (2), (d)(1)
or (2) of this section, the applicable thresh-
old is met for a taxable year if the sum of
all basis increases resulting from all such
transactions of a partnership or partner
during the taxable year (without netting
for any basis adjustment that results in a
basis decrease in the same transaction or
another transaction) exceeds by at least
$10 million the gain recognized from such
transactions during the same taxable year,
if any, on which tax imposed under subti-
tle A is required to be paid by any of the
related partners (or tax-indifferent party,
in the case of a transaction described in
paragraph (d)(1) of this section) who are
a party to such transactions.
(ii) Six-year lookback period threshold.
In the case of a transaction described in (c)
or (d) of this section that occurred within
the six-year lookback period, paragraph
(c)(3)(i) applies by substituting “$25 mil-
lion” for “$10 million” for determining
whether the applicable threshold is met
for a taxable year.
(iii) Basis increase under section
734(b) and (c) only for shares of basis
increase to related partners. In the case of
a transaction described in paragraph (c)(1)
(i) of this section for determining whether
the applicable threshold is met for a tax-
able year, a basis increase is an increase
to the adjusted basis of the partnership’s
property under section 734(b)(1) and (c)
only to the extent of a related partner’s
share of the basis increase. For purposes
of this paragraph (c)(3)(iii), a partner’s
share of a basis increase is determined
immediately after the distribution under
rules similar to the rules of § 1.197-2(h)
(12)(iv)(D).
(iv) Basis increase under sections
732(b) or (c) only for shares of corre-
sponding basis decreases under section
734(b) to related partners or tax-indif-
ferent parties. In the case of a transac-
tion described in paragraph (c)(1)(ii) of
this section for determining whether the
applicable threshold is met for a taxable
year, a basis increase is an increase to the
basis of property distributed to one of the
related partners under section 732(b) or
(c), but excluding the amount of any basis
increase that corresponds to a decrease to
the basis of property distributed to unre-
lated partners (other than tax-indifferent
parties) under section 732(b) and (c) or to
unrelated partners’ (other than tax-indif-
ferent parties’) shares of a corresponding
decrease to the basis of the partnership’s
remaining property under section 734(b)
(2) and (c). For purposes of this para-
graph (c)(3)(iv), a partner’s share of a
basis decrease is determined immediately
after the distribution under rules similar
to the rules of § 1.197-2(h)(12)(iv)(D).
In the case of a transaction described in
paragraph (d)(1) of this section, for pur-
poses of determining whether the applica-
ble threshold is met for a taxable year, a
basis increase is an increase to the basis
of property distributed to one of the part-
ners under section 732(b) or (c) only to the
extent of a corresponding decrease to the
basis of property distributed to a tax-indif-
ferent party under section 732(b) and (c)
or to one or more tax-indifferent party’s
shares of a corresponding decrease to the
basis of the partnership’s remaining prop-
erty under section 734(b)(2) and (c).
(4) Exclusion of a transfer on the death
of a partner. A transaction described in
paragraph (c)(2) or (d)(2) of this section
does not include a transfer of a partnership
interest that is a transfer on the death of a
partner within the meaning of paragraph
(b)(13) of this section.
(d) Substantially similar transaction.
A transaction that is substantially similar
(within the meaning of § 1.6011-4(c)(4))
to a transaction described in paragraph (c)
of this section includes, but is not limited
to:
(1) A transaction that is described in
paragraph (c)(1)(i) or (ii) of this section
except that the partners of the partnership
are not related and one or more partners
of the partnership is a tax-indifferent party
that facilitates an increase in the basis of
partnership property or an increase in the
basis of property held by another partner in
the partnership by receiving a distribution
of property from the partnership or hav-
ing a share of a corresponding decrease to
the basis of partnership property, and the
applicable threshold described in para-
graph (c)(3) of this section is met; and
(2) A transaction in which a transferor
transfers an interest in a partnership to a
transferee that is related to the transferor
in a recognition transaction, and the appli-
cable threshold described in paragraph (c)
(3) of this section is met.
(e) Participation—(1) In general.
Whether a taxpayer has participated in a
transaction of interest described in para-
graph (c) of this section or a substantially
similar transaction described in paragraph
(d) of this section during a taxable year is
determined under this paragraph (e).
(2) Participating partners. A partici-
pating partner participates in a transaction
of interest described in paragraph (c)(1)
of this section or a substantially similar
transaction described in paragraph (d)
(1) of this section in any taxable year in
which the partner directly receives a dis-
tribution of property, or directly transfers
or receives an interest in a participating
partnership, in a transaction described in
paragraph (c)(2) of this section or a sub-
stantially similar transaction described in
paragraph (d)(2) of this section.
(3) Participating partnerships. A par-
ticipating partnership participates in a
transaction of interest described in para-
graph (c) or a substantially similar trans-
action described in paragraph (d) of this
section in any taxable year in which the
partnership makes a distribution of prop-
erty to a participating partner in a trans-

February 3, 2025 678 Bulletin No. 2025–6
action described in paragraph (c)(1) or (d)
(1) of this section, or a participating part-
nership interest is transferred in a transac-
tion described in paragraph (c)(2) or (d)
(2) of this section.
(4) Related subsequent transferees. A
related subsequent transferee participates
in a transaction of interest described in
paragraph (c) of this section or a sub-
stantially similar transaction described in
paragraph (d) of this section in any tax-
able year in which the related subsequent
transferee directly receives, in a nonrec-
ognition transaction, a transfer (including
a distribution) of property that was sub-
ject to an increase in basis as a result of a
transaction described in paragraph (c) or
(d) of this section that was required to be
disclosed under paragraph (f) of this sec-
tion.
(5) Subsequent realization of tax bene-
fit. A participating partnership, participat-
ing partner, or related subsequent trans-
feree also participates in a transaction of
interest described in paragraph (c) or a
substantially similar transaction described
in paragraph (d) of this section in any tax-
able year in which its tax return reflects
the tax consequences of a basis increase
resulting from a transaction of interest
described in paragraph (c) or (d) of this
section, taking into account the limitations
provided in paragraphs (c)(3)(iii) and (iv)
of this section. For example, if a partici-
pating partner sells property the basis of
which has been increased as a result of a
transaction of interest described in para-
graph (c) of this section during a taxable
year after the taxable year in which the
transaction of interest occurred, the par-
ticipating partner participates in a transac-
tion of interest described in paragraph (c)
of this section in the taxable year of the
basis increase and in the taxable year of
the sale.
(f) Disclosure requirements—(1) In
general. Except as otherwise provided in
this paragraph (f)(1), participants must
provide the information required under §
1.6011-4(d) and the Instructions to Form
8886, Reportable Transaction Disclosure
Statement (or successor form), and in the
manner described in § 1.6011-4(e), for
each taxable year in which the participant
participated in a transaction described
in paragraph (c) or (d) of this section as
determined under paragraph (e) of this
section. For all participants, describing
the transaction in sufficient detail includes
describing the information described in
paragraphs (f)(1)(i) through (iii) of this
section, as applicable, on Form 8886 (or
successor form) for the taxable year of a
transaction described in paragraph (c) or
(d) of this section. In the case of a par-
ticipant that is a tax-indifferent party, the
disclosure requirements of this paragraph
(f) apply only if the tax-indifferent party is
otherwise required to file a tax return (or
an information return) for the taxable year
of the transaction described in paragraph
(d)(1) of this section.
(i) The names and identifying numbers
of all participants, including the partici-
pating partnership, participating partners
and any related subsequent transferees.
(ii) All basis adjustments resulting
from a transaction described in paragraph
(c) or (d) of this section, including—
(A) Basis information, including the
participating partnership’s adjusted basis
in the distributed property immediately
before the distribution,
(B) Any adjustments to basis under sec-
tion 732(a)(2), (b), (d) or section 734(b),
(C) Any adjustments to basis under
section 743(b) with respect to a participat-
ing partner that is transferred an interest in
a participating partnership, and
(D) With respect to a participating
partner that transfers an interest in a par-
ticipating partnership, that participating
partner’s adjusted basis in the participat-
ing partnership interest and share of the
participating partnership’s adjusted basis
in its property immediately before the
transfer.
(iii) Any Federal income tax conse-
quences realized during the taxable year
as a result of a transaction described in
paragraph (c) or (d) of this section, includ-
ing any cost recovery allowances attribut-
able to any increase in basis as a result of
a transaction described in paragraph (c) of
this section, and any gain or loss attribut-
able to the disposition of property that was
subject to an increase in basis as a result
of a transaction described in paragraph
(c) or (d) of this section. The Federal
income tax consequences attributable to
an increase in basis resulting from a trans-
action described in paragraph (c) or (d) of
this section are limited to those attribut-
able to the increase in basis, taking into
account the limitations of paragraph (c)(3)
(iii) or (iv) of this section. For example,
in the case of a distribution of depreciable
property that was subject to an increase in
basis because of a transaction described
in paragraph (c) or (d) of this section, the
Federal income tax consequences realized
during the taxable year include the basis
increase and cost recovery allowances
attributable to the basis increase during
the taxable year.
(2) Six-year lookback period for tax-
able years described in special rule
of §1.6011-4(e)(2)(i). For purposes of
the special rule of § 1.6011-4(e)(2)(i)
(describing the disclosure requirement
with respect to a transaction that is iden-
tified as a transaction of interest after the
filing of the taxpayer’s tax return (includ-
ing an amended return) reflecting the tax-
payer’s participation in the transaction of
interest but before the end of the period of
limitations for assessment of tax for such
taxable year), a participant must provide
the information described in paragraph (f)
(1) of this section for such open years only
if the transaction described in paragraph
(c) or (d) of this section occurred within
the six-year lookback period described in
paragraph (b)(11) of this section.
(g) Examples. The following examples
illustrate the provisions of this section.
(1) Example 1: Reporting by a participating
partner and participating partnership in the tax-
able year of the transaction, including cost recovery
allowances—(i) Facts. ABC Partnership is owned
by partners A, B, and C. Partners A, B, and C are
related within the meaning of paragraphs (b)(8)
and (9) of this section. At the beginning of taxable
year 2025, ABC Partnership distributes a deprecia-
ble asset, Property X, to Partner A in liquidation of
Partner A’s interest in ABC Partnership. The distri-
bution is a transaction described in paragraph (c)(1)
(ii) of this section. As a result of the distribution, the
basis of Property X is increased by $10 million in
Partner A’s hands. On its tax return for taxable year
2025, Partner A reports deductions for depreciation
expense attributable to the $10 million increase in
the basis of Property X resulting from the transaction
under paragraph (c)(1)(ii) of this section. In addition,
ABC Partnership must reduce the basis of its remain-
ing property under section 734(b)(2) as a result of the
distribution of Property X to Partner A by $10 mil-
lion. ABC Partnership and Partner A use the calendar
year as their taxable year.
(ii) Analysis. Partner A is a participant during
taxable year 2025 within the meaning of paragraph
(e) of this section because it is a participating partner
within the meaning of paragraph (b)(3) of this section
since it directly received a distribution of property
during taxable year 2025 in a transaction described
in paragraph (c) of this section. ABC Partnership

Bulletin No. 2025–6 679 February 3, 2025
is a participant during taxable year 2025 within the
meaning of paragraph (e) of this section because it
is a participating partnership within the meaning
of paragraph (b)(4) of this section since it made a
distribution of property to a participating partner
during taxable year 2025 in a transaction described
in paragraph (c) of this section. As part of its disclo-
sure requirements under paragraph (f) of this section
and § 1.6011-4(d) and (e), Partner A must disclose
the distribution as a transaction of interest under this
section on Form 8886 (or successor form) and file
the form with its tax return for taxable year 2025.
Partner A must include the information described in
paragraph (f) of this section, including the amount
of the deductions attributable to the $10 million
increase in the basis of Property X resulting from the
transaction described in paragraph (c)(1)(ii) of this
section. As part of its disclosure requirements under
paragraph (f) of this section and § 1.6011-4(d) and
(e), ABC Partnership must disclose the distribution
as a transaction of interest under this section on Form
8886 (or successor form) and file the form with its
tax return for taxable year 2025, including the infor-
mation described in paragraph (f) of this section. In
addition, Partner A and ABC Partnership must send
a copy of their respective Form 8886 (or successor
form) to the Office of Tax Shelter Analysis (OTSA).
(2) Example 2: Reporting of the Federal income
tax consequences (cost recovery allowances) of the
transaction in all taxable years—(i) Facts. Under
the same facts as in paragraph (g)(1)(i) of this sec-
tion (Example 1), on its tax returns for taxable years
2026 through 2030, Partner A reports deductions for
depreciation expense attributable to the $10 million
increase in the basis of Property X related to the
transaction described in paragraph (c)(1)(ii) of this
section, which occurred in taxable year 2025.
(ii) Analysis. As part of its disclosure require-
ments under paragraph (f) of this section and §
1.6011-4(d) and (e), Partner A must disclose the
deductions on Form 8886 (or successor form)
for taxable years 2026 through 2030 as the Fed-
eral income tax consequences of the transaction
described in paragraph (c)(1)(ii) of this section. As a
result, for each of taxable years 2026 through 2030,
Partner A must file the form with its tax return for
the taxable year with the information described in
paragraph (f) of this section, including the amount
of the deductions for the taxable year attributable to
the $10 million increase in the basis of Property X
resulting from the transaction described in paragraph
(c)(1)(ii) of this section.
(3) Example 3: Reporting by a participating
partner, participating partnership, and related sub-
sequent transferee in the taxable year of the trans-
action—(i) Facts. The facts are the same as in para-
graph (g)(1)(i) of this section (Example 1), except
that at the beginning of taxable year 2025, instead
of distributing a depreciable asset, ABC Partnership
distributes a nondepreciable asset, Land with an
adjusted basis of $5 million, to Partner A in liqui-
dation of Partner A’s interest in ABC Partnership.
The distribution is a transaction described in para-
graph (c)(1)(ii) of this section. As a result of the
distribution, the basis of Land is increased to $15
million in Partner A’s hands. Subsequently in the
same taxable year 2025, Partner A contributes Land
to another partnership, AX Partnership, in a transfer
that is treated as a contribution of property under sec-
tion 721(a). Partner A and AX Partnership are related
within the meaning of paragraph (b)(8) of this sec-
tion. ABC Partnership, Partner A and AX Partnership
use the calendar year as their taxable year.
(ii) Analysis. Partner A is a participant during
taxable year 2025 within the meaning of paragraph
(e) of this section because it is a participating partner
within the meaning of paragraph (b)(3) of this sec-
tion since Partner A directly received a distribution
of property during taxable year 2025 in a transac-
tion described in paragraph (c) of this section. ABC
Partnership is a participant during taxable year 2025
within the meaning of paragraph (e) of this section
because it is a participating partnership within the
meaning of paragraph (b)(4) of this section since
it made a distribution of property to a participating
partner during taxable year 2025 in a transaction
described in paragraph (c) of this section. AX Part-
nership is a participant during taxable year 2025
within the meaning of paragraph (e) of this section
because it is a related subsequent transferee within
the meaning of paragraph (b)(10) of this section
since it directly received in a nonrecognition transac-
tion a transfer of property during taxable year 2025
that was subject to an increase in basis because of a
transaction described in paragraph (c) of this section.
As part of its disclosure requirements under para-
graph (f) of this section and § 1.6011-4(d) and (e),
Partner A must disclose the distribution as a trans-
action of interest under this section on Form 8886
(or successor form) and file the form with its tax
return for taxable year 2025. Partner A must include
the information described in paragraph (f) of this
section. As part of its disclosure requirements under
paragraph (f) of this section and § 1.6011-4(d) and
(e), ABC Partnership must disclose the distribution
as a transaction of interest under this section on Form
8886 (or successor form) and file the form with its
tax return for taxable year 2025, including the infor-
mation described in paragraph (f) of this section.
Further, AX Partnership is subject to the disclosure
requirements under paragraph (f) of this section and
§ 1.6011-4(d) and (e). AX Partnership must disclose
that it is a related subsequent transferee within the
meaning of paragraph (b)(10) of this section that
received, in a nonrecognition transaction, a transfer
of property that was distributed in a transaction of
interest under this section on Form 8886 (or suc-
cessor form) and file the form with its tax return
for taxable year 2025. In addition, Partner A, ABC
Partnership and AX Partnership must send a copy of
their respective Form 8886 (or successor form) to the
OTSA.
(4) Example 4: Reporting of the Federal income
tax consequences (reduced taxable gain) of the
transaction in the taxable year of disposition of the
property—(i) Facts. Under the same facts as in para-
graph (g)(3)(i) of this section (Example 3), in taxable
year 2026, AX Partnership disposes of Land in a tax-
able sale for its fair market value of $15 million and
recognizes no gain or loss.
(ii) Analysis. As part of its disclosure require-
ments under paragraph (f) of this section and §
1.6011-4(d) and (e), AX Partnership must disclose
the taxable gain (zero) on the disposition of Land on
Form 8886 (or successor form) for taxable year 2026
as the Federal income tax consequences of the trans-
action described in paragraph (c)(1)(ii) of this sec-
tion. AX Partnership must file the form with its tax
return for taxable year 2026. Partner A does not have
a disclosure requirement with respect to AX Partner-
ship’s disposition of Land because the disposition is
a subsequent realization of a tax benefit within the
meaning of paragraph (e)(5) of this section with
respect to AX Partnership.
(5) Example 5. Reporting of a transaction of
interest that occurred within the six-year lookback
period—(i) Facts. The facts are the same as in para-
graph (g)(1)(i) of this section (Example 1), except
that instead of ABC Partnership distributing Prop-
erty X in taxable year 2025, the distribution is made
in May of taxable year 2022, which is within the
six-year lookback period described in paragraph (b)
(11) of this section. That is, the distribution occurred
within the seventy-two months immediately preced-
ing January 2025, the first month of the taxpayer’s
most recent taxable year that began before January
2025. Further, taxable year 2022 is an open taxable
year subject to the special rule of § 1.6011-4(e)(2)(i).
Additionally, neither Partner A nor ABC Partnership
engages in any other transaction described in para-
graph (c) or (d) of this section for taxable year 2022.
(ii) Analysis. Because the transaction occurred
within the six-year lookback period described in
paragraph (b)(11) of this section, the applicable
threshold described in paragraph (c)(3)(i) of this
section is $25 million as provided in paragraph (c)
(3)(ii) of this section. The distribution of Property X
to Partner A is not a transaction described in para-
graph (c)(1)(ii) of this section with respect to either
Partner A or ABC Partnership because the applicable
threshold is not met for taxable year 2022. Had the
applicable threshold for taxable year 2022 been met,
all the information required by paragraph (f)(1) of
this section must be reported in its disclosure for tax-
able year 2022 and for any subsequent taxable year
for which the taxpayer’s return reflected the tax con-
sequences of the transaction.
(6) Example 6. No reporting of a transaction of
interest for transaction that occurred prior to the
six-year lookback period—(i) Facts. The facts are
the same as in paragraph (g)(1)(i) of this section
(Example 1), except that as a result of the distribu-
tion of Property X to Partner A, the basis of Property
X is increased by $30 million, and the distribution
occurred in December of taxable year 2018, which
is prior to the six-year lookback period described in
paragraph (b)(11) of this section. That is, the trans-
action occurred prior to January 2019, which is the
beginning of the seventy-two-month period that ends
in December 2024. In addition, taxable year 2018 is
an open taxable year subject to the special rule of
§ 1.6011-4(e)(2)(i). Further, Partner A realized Fed-
eral income tax consequences (depreciation expense)
in taxable year 2019 attributable to the $30 million
increase to the basis of Property X and taxable year
2019 is an open taxable year subject to the special
rule of § 1.6011-4(e)(2)(i).
(ii) Analysis. Because taxable year 2018 is not
within the six-year lookback period, under paragraph
(f)(2) of this section, neither the distribution of Prop-
erty X to Partner A, nor any of the Federal income
tax consequences arising in that taxable year or later
taxable years (such as depreciation expense in tax-
able year 2019 or any later taxable year) from such

February 3, 2025 680 Bulletin No. 2025–6
distribution, is required to be disclosed under para-
graph (f) of this section and §§1.6011-4(d) and (e).
(7) Example 7. Corresponding basis decrease
under section 734(b)(2)(B) shared by an unrelated
partner—(i) Facts. The facts are the same as in para-
graph (g)(1)(i) of this section (Example 1), except
Partner C is unrelated to Partners A and B and is not a
tax-indifferent party. As a result of the distribution of
Property X to Partner A, and the increase to the basis
of Property X by $10 million in Partner A’s hands,
ABC Partnership is required to reduce the adjusted
basis of its remaining properties under section
734(b)(2)(B) by $10 million. Partner B’s and Part-
ner C’s share of ABC Partnership’s basis decrease to
its remaining properties is $5 million each. Neither
Partner A nor ABC Partnership engages in any other
transaction described in paragraph (c) of this section
for taxable year 2025.
(ii) Analysis. For purposes of paragraphs (c)(1)
(ii) and (c)(3)(i) of this section, under paragraph (c)
(3)(iv) of this section, only $5 million of the $10 mil-
lion basis increase to Property X counts toward the
applicable threshold because $5 million of the basis
increase corresponds to unrelated Partner C’s share
of the decrease to the basis of ABC Partnership’s
remaining properties under section 734(b)(2)(B) and
thus, is excluded from the calculation of the appli-
cable threshold. Thus, the distribution of Property X
to Partner A is not a transaction described in para-
graph (c)(1)(ii) of this section with respect to either
Partner A or ABC Partnership because the applicable
threshold is not met for taxable year 2025.
(h) Extension of time—(1) Taxpayer
disclosures. Taxpayers will be treated as
having met their requirements to disclose
timely under §1.6011-4(e)(2)(i) if they file
their disclosure with the OTSA by January
14, 2025.
(2) Material advisor disclosures. Mate-
rial advisors who have made a tax state-
ment before January 14, 2025 will be
treated as having met their requirements
to disclose timely under § 301.6111-3(e)
of this chapter if they file their disclo-
sure with the OTSA by the date that is an
additional 90 days beyond the last day for
filing specified in § 301.6111-3(e) of this
chapter.
(i) Applicability date—(1) In general.
This section’s identification of transac-
tions that are the same as or substantially
similar (within the meaning of § 1.6011-
4(c)(4)) to the transactions described in
paragraph (c) of this section as transac-
tions of interest for purposes of §1.6011-
4(b)(6) and sections 6111 and 6112 of the
Code is effective January 14, 2025.
(2) Material advisors. Notwithstand-
ing § 301.6111-3(b)(4)(i) and (iii) of this
chapter, material advisors are required
to disclose only if they have made a tax
statement on or after January 9, 2031.
Douglas W. O’Donnell,
Deputy Commissioner.
Approved: January 3, 2025.
Aviva R. Aron-Dine,
Deputy Assistant Secretary of the
Treasury (Tax Policy).
(Filed by the Office of the Federal Register January
10, 2025, 8:45 a.m., and published in the issue of the
Federal Register for January 14, 2025, 90 FR 2958)

Bulletin No. 2025–6 681 February 3, 2025
Part III
Section 45W Credit for
Qualified Commercial
Clean Vehicles and
Incremental Cost for
2025
Notice 2025-9
SECTION 1. PURPOSE
This notice provides safe harbors
regarding the incremental cost and retail
price equivalent (RPE) of certain qualified
commercial clean vehicles for purposes of
the credit for qualified commercial clean
vehicles under section 45W of the Internal
Revenue Code (Code).
1
SECTION 2. BACKGROUND
.01 Section 13403(a) of Public Law
117-169, 136 Stat. 1818 (August 16,
2022), commonly known as the Inflation
Reduction Act of 2022, added section
45W to the Code to allow a credit for
qualified commercial clean vehicles (sec-
tion 45W credit). The section 45W credit
is effective for vehicles acquired after
December 31, 2022, and before January
1, 2033.
.02 For purposes of the General Busi-
ness Credit under section 38 of the Code,
section 45W(a) allows a taxpayer to claim
a credit for the acquisition of each quali-
fied commercial clean vehicle, as defined
in section 45W(c), placed in service by
the taxpayer during the taxable year. The
amount of the section 45W credit allowed
for each qualified commercial clean vehi-
cle is the lesser of (1) 15 percent of the
taxpayer’s basis in the vehicle (30 per-
cent in the case of a vehicle not powered
by a gasoline or diesel internal combus-
tion engine), or (2) the incremental cost
of the vehicle. See section 45W(b)(1).
Under section 45W(b)(4), the maximum
credit allowed is $7,500 for a qualified
commercial clean vehicle that has a gross
vehicle weight rating (GVWR) of less
than 14,000 pounds, and $40,000 for all
other vehicles.
.03 Section 45W(b)(2) provides that
the incremental cost of any qualified com-
mercial clean vehicle is the excess of the
purchase price of such vehicle over the
purchase price of a comparable vehicle.
A comparable vehicle with respect to any
qualified commercial clean vehicle is any
vehicle that is powered solely by a gaso-
line or diesel internal combustion engine
and is comparable in size and use to such
qualified commercial clean vehicle. See
§ 45W(b)(3).
.04 On January 17, 2023, the Depart-
ment of the Treasury (Treasury Depart-
ment) and the Internal Revenue Service
(IRS) published Notice 2023-9, 2023-3
I.R.B. 402, which provides a safe har-
bor for purposes of the section 45W
credit regarding the incremental cost
of certain qualified commercial clean
vehicles placed in service in calendar
year 2023, based on a December 2022
incremental cost analysis by the U.S.
Department of Energy (DOE) across
classes of clean vehicles (DOE Anal-
ysis).
2
The DOE Analysis modeled
the costs of representative clean vehi-
cles and comparable internal combus-
tion engine vehicles. For this purpose,
clean vehicles included battery electric,
plug-in hybrid electric, and fuel cell
electric vehicles.
.05 On January 8, 2024, the Trea-
sury Department and the IRS pub-
lished Notice 2024-5, 2024-2 I.R.B.
347, which provides a safe harbor for
purposes of the section 45W credit
regarding the incremental cost of cer-
tain qualified commercial clean vehicles
placed in service in calendar year 2024,
based on the DOE Analysis updated
to incorporate minor modifications in
December 2023.
3
The minor modifica-
tions did not change the results of the
analysis conducted in December 2022.
Notice 2024-5 also requested comments
regarding additional types or classes of
vehicles that should be included in the
safe harbor in the future. The Treasury
Department and the IRS received com-
ments in response to Notice 2024-5 and
carefully considered them.
.06 The DOE updated the DOE Anal-
ysis in a report published in January
2025 to incorporate further modifications
(DOE’s January 2025 Report).
4
First, the
DOE’s January 2025 Report updates the
analysis of component and vehicle man-
ufacturing costs, including refinements
to the approach previously employed
for determining an incremental purchase
cost for battery electric, plug-in hybrid
electric, and fuel cell electric vehicles.
Second, the DOE’s January 2025 Report
expands medium- and heavy-duty vehi-
cle classes previously analyzed and
updates results based on current costs of
technology. These modifications changed
the results of the analysis conducted in
December 2022 and updated in Decem-
ber 2023.
.07 In addition to modeled incremen-
tal costs, the DOE’s January 2025 Report
explicitly identifies the RPEs used in the
DOE Analysis, that is, the factors applied
to the component and vehicle manufac-
turing costs to account for additional
indirect costs and profits when modeling
the incremental cost of a class of vehicle.
In cases where taxpayers do not rely on
modeled incremental cost safe harbors
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code.
2
U.S. Department of Energy, “2022 Incremental Purchase Cost Methodology and Results for Clean Vehicles,” December 2022, available at https://www.energy.gov/sites/default/files/2022-
12/2022.12.23%202022%20Incremental%20Purchase%20Cost%20Methodology%20and%20Results%20for%20Clean%20Vehicles.pdf.
3
U.S. Department of Energy, “Incremental Purchase Cost Methodology and Results for Clean Vehicles,” originally published December 2022 and amended December 2023, available
at https://www.energy.gov/sites/default/files/2023-12/2023.12.18%20Incremental%20Purchase%20Cost%20Methodology%20and%20Results%20for%20Clean%20Vehicles%20pub%20
12-2022%20amd%2012-2023%20Final_2.pdf.
4
U.S. Department of Energy, “2025 Incremental Purchase Cost Methodology and Results for Clean Vehicles,” January 2025, available at https://www.energy.gov/sites/default/files/2025-
01/2025.01.13_DOE_Incremental_Cost_Report_for_publication.pdf..

February 3, 2025 682 Bulletin No. 2025–6
(which in every case already incorporate
the appropriate RPE), taxpayers may use
the RPEs provided in the DOE’s January
2025 Report to determine incremental
cost.
.08 On January 14, 2025, the Trea-
sury Department and the IRS published a
notice of proposed rulemaking that con-
tains proposed regulations issued under
section 45W (REG-123525-23) in the
Federal Register (proposed regulations),
90 FR 3506.
SECTION 3. SAFE HARBORS
.01 Incremental cost of a qualified
commercial clean vehicle.
(1) The DOE’s January 2025 Report
provides a modeled incremental cost
analysis based on current costs across
several classes of clean vehicles. For
any qualified commercial clean vehi-
cle not previously placed in service by
another person or entity, the IRS will
accept a taxpayer’s use of the modeled
incremental cost published in table ES-2
in the DOE’s January 2025 Report for
the appropriate class of clean vehicle to
establish the incremental cost of a qual-
ified commercial clean vehicle placed in
service by the taxpayer on or after Janu-
ary 1, 2025. An incremental cost estab-
lished under this section 3.01(1) is used
to identify the lesser of (1) 15 percent
of the taxpayer’s basis in the vehicle
(30 percent in the case of a vehicle not
powered by a gasoline or diesel internal
combustion engine), or (2) the incre-
mental cost of the vehicle for purposes
of section 45W(b)(1).
(2) For any qualified commercial
clean vehicle previously placed in ser-
vice by another person or entity, the
IRS will accept a taxpayer’s applica-
tion of the modeled incremental cost of
the qualified commercial clean vehicle
when new, as determined by reference
to the IRS safe harbor guidance that
corresponds to the model year of such
vehicle,
5
to the rules found in proposed
§1.45W-2(f) of the proposed regulations
to establish the incremental cost of such
qualified commercial clean vehicle. Pro-
posed §1.45W-2(f)(1) provides that the
incremental cost of a qualified commer-
cial clean vehicle previously placed in
service by another person or entity is the
product of the incremental cost of the
qualified commercial clean vehicle (that
is, the incremental cost of such vehicle
when new) and the residual value fac-
tor that corresponds to the age of the
qualified commercial clean vehicle as
described in that section. An incremen-
tal cost established under this section
3.01(2) is used to identify the lesser of
(1) 15 percent of the taxpayer’s basis in
the vehicle (30 percent in the case of a
vehicle not powered by a gasoline or
diesel internal combustion engine), or
(2) the incremental cost of the vehicle
for purposes of section 45W(b)(1). A
taxpayer may use the safe harbor in this
section 3.01(2) with respect to any qual-
ified commercial clean vehicle placed in
service by the taxpayer after December
31, 2022.
.02 Retail price equivalent. The DOE’s
January 2025 Report provides the RPEs
used by the DOE for purposes of model-
ing incremental cost across several classes
of clean vehicles. In cases where taxpay-
ers do not use a modeled incremental cost
safe harbor, such as those provided in
section 3.01 of this notice, the IRS will
accept taxpayers’ use of the RPEs pub-
lished in table 4 of the DOE’s January
2025 Report for the appropriate class of
clean vehicle to calculate the incremental
cost of qualified commercial clean vehi-
cles. A taxpayer may use the safe harbor
in this section 3.02 with respect to any
qualified commercial clean vehicle placed
in service by the taxpayer after December
31, 2022.
SECTION 4. EFFECT ON OTHER
DOCUMENTS
Section 3.01(2) of this notice clarifies
the application of the guidance provided
in Notice 2023-9 and Notice 2024-5 to
qualified commercial clean vehicles previ-
ously placed in service by another person
or entity. Section 3.02 of this notice ampli-
fies Notice 2023-9 and Notice 2024-5 by
providing that the RPEs published in the
DOE’s January 2025 Report may be used
to calculate the incremental cost of quali-
fied commercial clean vehicles placed in
service by taxpayers after December 31,
2022.
SECTION 5. EFFECTIVE DATE
This notice is effective on January 15,
2025, and will remain in effect through the
day before the effective date of supersed-
ing guidance published in the IRB or the
Federal Register.
SECTION 6. DRAFTING
INFORMATION
The principal author of this notice is
the Office of Associate Chief Counsel
(Energy, Credits, and Excise Tax). How-
ever, other personnel from the Treasury
Department and the IRS participated in
its development. For further informa-
tion regarding this notice contact Chief
Counsel at (202) 317-5254 (not a toll-
free call).
Section 45Z Clean Fuel
Production Credit; Request
for Public Comments
Notice 2025-10
SECTION 1. PURPOSE
This notice announces that the Depart-
ment of the Treasury (Treasury Depart-
ment) and the Internal Revenue Service
(IRS) intend to propose regulations (forth-
coming proposed regulations) addressing
the clean fuel production credit deter-
mined under § 45Z of the Internal Reve-
5
For example, the safe harbor incremental cost of a model year 2023 vehicle is determined by reference to Notice 2023-9, and the safe harbor incremental cost of a model year 2024 vehicle
is determined by reference to Notice 2024-5.

Bulletin No. 2025–6 683 February 3, 2025
nue Code (§ 45Z credit),
1
which applies
to eligible transportation fuel produced
domestically after December 31, 2024,
that is sold by December 31, 2027. In
addition to providing background on the
§ 45Z credit, this notice explains the rules
that the Treasury Department and the
IRS intend to propose in the forthcoming
proposed regulations and requests public
comments on the draft text of the forth-
coming proposed regulations contained in
the appendix to this notice. Notice 2025-
11, this Bulletin, provides additional guid-
ance on fuel emissions rates for purposes
of the § 45Z credit and contains the initial
emissions rate table described in § 45Z(b)
(1)(B)(i).
The Treasury Department and the IRS
developed this notice and Notice 2025-11
in consultation with the Department of
Energy (DOE), the Environmental Pro-
tection Agency (EPA), the United States
Department of Agriculture, and other Fed-
eral agencies.
SECTION 2. BACKGROUND
.01
Overview of § 45Z. Section 45Z,
added to the Code by § 13704 of Pub-
lic Law 117-169, 136 Stat. 1818, 1997
(August 16, 2022), commonly known as
the Inflation Reduction Act of 2022 (IRA),
provides an income tax credit for clean
transportation fuel produced domestically
after December 31, 2024, and sold by
December 31, 2027. The § 45Z credit is a
general business credit under § 38.
To qualify for the § 45Z credit, a tax-
payer must: (1) produce a transportation
fuel that has a lifecycle greenhouse gas
emissions rate (emissions rate) of not
greater than 50 kilograms (kg) of CO
2
e
per mmBTU
2
and that satisfies certain
suitability and coprocessing requirements;
(2) produce the fuel in the United States at
a qualified facility; (3) be registered as a
producer of clean fuel under § 4101 at the
time of production; and (4) sell the fuel to
an unrelated person in a qualifying manner
during the taxable year. See § 45Z(a)(1) &
(4), (d)(4)-(5)(A), and (f)(1). A taxpayer
producing a transportation fuel that is sus-
tainable aviation fuel (SAF transportation
fuel) must also provide unrelated party
certification demonstrating compliance
with certain requirements. See
§ 45Z(f)(1)
(A)(i)(II). A taxpayer is eligible to claim a
§ 45Z credit for the taxable year in which
the taxpayer sells a transportation fuel.
See § 45Z(a)(1)(A).
Under § 45Z(a)(1), a taxpayer calcu-
lates the § 45Z credit by multiplying the
applicable amount per gallon or gallon
equivalent with respect to a transportation
fuel by the emissions factor for such fuel.
The applicable amount varies depending
on whether the transportation fuel is a SAF
transportation fuel or a transportation fuel
that is not a sustainable aviation fuel (non-
SAF transportation fuel) and is higher for
SAF transportation fuel than for non-SAF
transportation fuel. Under § 45Z(a)(2)
and (3), the applicable amount increases
if the taxpayer produces transportation
fuel at a qualified facility that satisfies
the prevailing wage and apprenticeship
(PWA) requirements. See § 1.45Z-3 of the
Income Tax Regulations for applicable
PWA requirements.
A transportation fuel’s emissions factor
is a calculation of the fuel’s emission rate
against the baseline emissions rate of 50
kg of CO
2
e per mmBTU. See § 45Z(b)(1)
(A). A taxpayer determines a fuel’s emis-
sions rate by using either the annual emis-
sions rate table published by the Secretary
of the Treasury or her delegate (Secretary)
or a provisional emissions rate (PER)
determined by the Secretary. See § 45Z(b)
(1)(B) and (D).
.02 Section 45Z published guidance
and FAQs.
(1) Notice 2022-58 (Request for
Comments). Notice 2022-58, 2022-47
I.R.B. 483 (released November 3, 2022),
requested comments on § 45Z.
3
The com-
ments received in response to Notice
2022-58 were considered in the drafting
of this notice.
(2) Notice 2024-49 (Registration
Requirements). Notice 2024-49, 2024-26
I.R.B. 1781 (released May 31, 2024), pro-
vides guidance on the § 45Z registration
requirements, including the time, form,
and manner of registration. Notice 2024-
49 also provides initial definitions of SAF
and non-SAF transportation fuels and
an initial, non-exclusive list of primary
feedstocks, to help taxpayers applying
for registration identify fuels and primary
feedstocks that may qualify for the § 45Z
credit. Section 7 of this notice addresses
the effect of this notice on Notice 2024-
49.
(3) Treasury Decision 9998 (PWA
Requirements). Treasury Decision 9998,
published in the Federal Register at 89 FR
53184 (June 25, 2024), adopted final reg-
ulations on the PWA requirements under
several sections of the Code (PWA Reg-
ulations). The PWA Regulations include
§ 1.45Z-3, which provides rules on the
application of the PWA requirements to
§ 45Z.
(4) Fact Sheet FAQs. A § 45Z Fact
Sheet, FS-2024-25 (released July 10,
2024), provides answers to certain fre-
quently asked questions (FAQs) on the
§ 45Z registration requirements. This Fact
Sheet is available at https://www.irs.gov/
newsroom/frequently-asked-questions-
about-applying-for-registration-for-the-
clean-fuel-production-credit-under-ss-
45z.
(5) Notice 2025-11. Notice 2025-11
provides guidance regarding methodolo-
gies

for determining emissions rates under
§ 45Z and provides the initial emissions
rate table required by § 45Z(b)(1)(B)(i).
Notice 2025-11 is being released concur-
rently with this notice.
SECTION 3. EXPLANATION OF
FORTHCOMING PROPOSED
REGULATIONS
.01 Forthcoming proposed regulations.
The draft text of the forthcoming § 45Z
proposed regulations is contained in the
appendix of this notice. This section 3
explains the draft regulatory text.
.02 Authority. The forthcoming pro-
posed regulations would be issued under
1
Unless otherwise specified, all “section” or “§” references are to sections of the Internal Revenue Code (Code), or the regulations issued thereunder.
2
The term “mmBTU” means 1,000,000 British thermal units, and the term “Btu” means British thermal units. The term “CO
2
e” means, with respect to any greenhouse gas, the equivalent
carbon dioxide (as determined based on relative global warming potential). See
§ 45Z(d)(1)-(2).
3
Notice 2022-58 also requested comments on § 45V.

February 3, 2025 684 Bulletin No. 2025–6
the authority granted by §§ 45Z, 4101(a)
(1), 6001, and 7805(a).
Section 45Z contains several delega-
tions of authority to the Secretary. Sec-
tion 45Z(e) directs the Secretary to issue
guidance no later than January 1, 2025,
regarding implementation of § 45Z,
including calculation of emissions factors
for transportation fuel, the emissions rate
table described in § 45Z(b)(1)(B)(i), and
the determination of clean fuel production
credits under § 45Z. Section 45Z(f)(2)
further authorizes the Secretary to issue
regulations regarding the fuel production
attributable to the taxpayer, and § 45Z(f)
(1)(A)(i)(II) authorizes the Secretary to
issue guidance on certification and other
information with respect to certain trans-
portation fuels. Section 45Z(b)(1)(B)
(ii) authorizes the Secretary to determine
whether a model is a successor model in
the case of non-SAF transportation fuel.
Additionally, § 45Z(b)(1)(B)(i) directs
the Secretary, subject to § 45Z(b)(1)(B)
(ii) and (iii), to annually publish a table
setting forth the emissions rate for simi-
lar types and categories of transportation
fuels based on the amount of lifecycle
greenhouse gas emissions as described
in section 211(o)(1)(H) of the Clean Air
Act (42 U.S.C. 7545(o)(1)(H)), as in
effect on August 16, 2022 (CAA) for such
fuels, expressed as kilograms of CO
2
e per
mmBTU, which a taxpayer must use for
purposes of § 45Z. See Notice 2025-11
(providing initial emissions rate table).
Section 4101(a)(1) authorizes the Sec-
retary to prescribe regulations related to
any registration required under § 4101,
including the time, form, manner, and
terms and conditions of such registration.
Section 6001 authorizes the Secretary
to prescribe regulations related to record-
keeping, statements, and special returns.
The Secretary implemented such regula-
tions under § 1.6001-1.
Section 7805(a) authorizes the Secre-
tary to prescribe all needful rules and reg-
ulations for the enforcement of the Code,
including all rules and regulations as may
be necessary by reason of any alteration of
law in relation to internal revenue.
.03 Definitions
. Section 1.45Z-1 of the
forthcoming proposed regulations would
provide definitions that would apply for
purposes of § 45Z. The forthcoming pro-
posed regulations would incorporate stat-
utory definitions and provide additional
or clarifying definitions with respect to
§ 45Z. Sections 3.03(1) through (10) of
this notice address some of the key terms
that would be defined in the forthcoming
proposed regulations.
(1) 45ZCF-GREET model. The forth-
coming proposed regulations would pro-
vide that the 45ZCF-GREET model means
the model by that name developed by the
Argonne National Laboratory (ANL) and
published by the DOE for use in determin-
ing the amount of lifecycle greenhouse
gas emissions for purposes of § 45Z. For
additional information about the 45ZCF-
GREET model, see section 3.04(3)(a) of
this notice.
(2) Fuel. The forthcoming proposed
regulations would define a “fuel” as any
liquid or gaseous substance that can be
consumed to supply heat or power. There-
fore, for purposes of § 45Z, the term “fuel”
would not include electricity. For an addi-
tional explanation, see section 3.03(8)(b)
of this notice.
(3) Gallon equivalent.
(a) In general. The forthcoming pro-
posed regulations would define “gallon
equivalent” for purposes of § 45Z(a)(1)
(A) to mean, with respect to any non-liq-
uid fuel, the amount of such fuel that
has the energy equivalent of a gallon of
gasoline, which refers to the amount of
such fuel having a Btu content of 116,090
(lower heating value).
(b) Non-liquid fuel. The forthcoming
proposed regulations would clarify that a
fuel is considered non-liquid if it is in a
gaseous state at ambient pressure and tem-
perature of 1 atmosphere and 60 degrees
Fahrenheit, respectively. The forthcom-
ing proposed regulations would also clar-
ify that the gallon equivalent for a given
non-liquid fuel is calculated by dividing
the lower heating value of that fuel (mea-
sured in Btu) by the lower heating value of
a gallon of gasoline (that is, 116,090 Btu),
rounded to 5 decimal places.
(4) Producer and taxpayer.
(a) In general. The forthcoming pro-
posed regulations would define “pro-
ducer” for purposes of § 45Z as the person
that engages in the production of a trans-
portation fuel. The forthcoming proposed
regulations would define the “taxpayer”
for purposes of § 45Z as the person that
is registered as a producer of clean fuel
under § 4101 (or treated as the registrant
for purposes of filing a claim for the § 45Z
credit).
Section 45Z refers to the “taxpayer”
producing and selling a transportation fuel
as the person eligible to claim the credit
but does not specify who that person is if
the production process involves multiple
persons and multiple steps. The forthcom-
ing proposed regulations would provide
clarity on this point.
(b) Producer of alternative natural gas.
The forthcoming proposed regulations
would provide that the “producer” of alter-
native natural gas, including renewable
natural gas (RNG), for purposes of § 45Z
is the person that processes the alternative
natural gas (processor) to remove water,
carbon dioxide, and other impurities such
that it is interchangeable with fossil natu-
ral gas. This definition would be consis-
tent with the purpose of § 45Z because
the processor is the most active partici-
pant in the production process, and § 45Z
incentivizes production. The definition of
“producer” would, therefore, exclude any
person that removes conventional or alter-
native natural gas (CANG) from a pipe-
line, compresses it further after removal,
and then sells such further-compressed
CANG (compressor). Under the pro-
posed definition, CANG compression also
would not meet the definition of “produc-
tion” because compression is not a chem-
ical transformation, and the compression
process is minimal processing.
Several commenters and industry
stakeholders specifically raised questions
about who should be considered the pro-
ducer of RNG for purposes of § 45Z. The
Treasury Department and the IRS under-
stand that the processor and the compres-
sor are typically different persons, and
that the processor typically performs most
of the active production and owns (or
uses) a facility. The Treasury Department
and the IRS further understand that the
compressor typically performs the final
compression step before a fuel is used in a
vehicle and typically owns (or uses) only
compression equipment rather than an
actual facility. As a result, the compressor
would be unable to meet the requirement
that transportation fuel be produced in a
qualified facility as provided in § 45Z(d)
(4) and § 1.45Z-1(b)(24) of the forthcom-
ing proposed regulations and is not engag-

Bulletin No. 2025–6 685 February 3, 2025
ing in production of a transportation fuel
under § 45Z(a)(1) and § 1.45Z-1(b)(23) of
the forthcoming proposed regulations.
(5) Production. The forthcoming pro-
posed regulations would define “pro-
duction” as all steps and processes used
to make a transportation fuel. Under the
forthcoming proposed regulations, pro-
duction would begin with the processing
of primary feedstock(s) and end with a
transportation fuel ready to be sold in a
qualifying sale. Production would not
include instances where a person uses a
primary feedstock to produce a fuel that
meets the same ASTM standard as the pri-
mary feedstock.
The definition of “production” would
also clarify that minimal processing
would not qualify as production for pur-
poses of the § 45Z credit. Minimal pro-
cessing would include blending a fuel
mixture or otherwise engaging in activi-
ties that do not result in a chemical trans-
formation. Therefore, under the forthcom-
ing proposed regulations, a person that
merely blends a fuel mixture, regardless
of whether the fuel mixture itself satis-
fies the requirements of § 45Z(d)(5)(A),
is not a producer of a transportation fuel
because the blending process would con-
stitute minimal processing. For example, a
person that blends different types of fuel,
such as ethanol and gasoline, directly at
a fuel pump (sometimes known as splash
blending) would not be the producer of
a transportation fuel. Further, the impor-
tation of fuel that is largely finished fuel
and undergoes only minimal processing
in the United States would not constitute
production.
Section 45Z is a production credit that
is meant to replace fuel credits and pay-
ments that specifically incentivize blend-
ing (including credits under §§ 40B and
6426(k), which incentivize SAF blend-
ing). Thus, to equate blending with pro-
duction would be contrary to Congress’s
purpose in enacting § 45Z.
The forthcoming proposed regula-
tions would also incorporate the rules in
§ 45Z(f)(1)(A)(ii) and (f)(1)(B) requiring
production to occur in the United States.
(6) Qualified facility.
(a) Facility. The forthcoming proposed
regulations would clarify that a “facility,”
as used in § 45Z(d)(4), means a single
production line that is used to produce
a transportation fuel and would include
all components that function interde-
pendently to produce a transportation
fuel. The definition would also clarify the
treatment of indirect, post-production, and
multipurpose equipment. The definition
of “facility” would also exclude CANG
compression equipment as post-produc-
tion equipment.
(b) Qualified facility. The forthcoming
proposed regulations would clarify that a
“qualified facility,” as defined in § 45Z(d)
(4), means a facility that satisfies the
anti-stacking rules in § 45Z(d)(4)(B) and
§ 1.45Z-4 of the forthcoming proposed
regulations.
(7) Qualifying sale. The forthcom-
ing proposed regulations would define
a “qualifying sale” in accordance with
§ 45Z(a)(4). The forthcoming proposed
regulations would also (1) clarify that a
sale “for use . . . in a trade or business”
refers to use as a fuel in a trade or busi-
ness within the meaning of § 162; and (2)
incorporate the sale attribution rules in
§ 45Z(f)(3) when fuel is sold by another
member (as defined in § 1.1502-1(b)) of
the taxpayer’s consolidated group (as
defined in § 1.1502-1(h)).
(8) Transportation fuel.
(a) In general. The forthcoming pro-
posed regulations would define terms
associated with the § 45Z(d)(5)(A) defini-
tion of “transportation fuel.”
The term “suitable for use as a fuel in a
highway vehicle or aircraft” (suitable for
use) would be defined to mean that the fuel
either has practical and commercial fitness
for use as a fuel in a highway vehicle or
aircraft, or may be blended into a fuel
mixture that has practical and commer-
cial fitness for use as a fuel in a highway
vehicle or aircraft. The forthcoming pro-
posed regulations would also clarify that
actual use as a fuel in a highway vehicle
or aircraft is not required. For example, a
fuel that is otherwise suitable for use, but
is used as marine diesel fuel or marine
methanol, may satisfy the definition of
transportation fuel. The forthcoming pro-
posed regulations would further provide
that CANG is suitable for use once it is
produced such that if further compressed
it would meet the specifications of ASTM
International D8080, and that a fuel that
does not require further processing and
may be blended with or used as a compo-
nent of taxable fuel (within the meaning of
§ 4083) is suitable for use.
(b) Electricity. The forthcoming pro-
posed regulations would not include elec-
tricity in the definition of “transportation
fuel,” and electricity production would
therefore be ineligible for the § 45Z credit,
for several reasons.
First, at the time § 45Z was enacted, the
Code contained an assortment of income
tax credit, excise tax credit, and excise tax
payment provisions for various biofuels
and other alternative fuels sold or used
as a fuel. These include incentives for
biodiesel, renewable diesel, and several
different alternative fuels (including com-
pressed natural gas and second generation
biofuel). Joint Committee on Taxation,
General Explanation of Tax Legislation
Enacted in the 117th Congress, JCS 1-23,
at 278 (Dec. 31, 2023). Congress designed
the § 45Z credit to replace these incen-
tives, which were only available for liquid
or gaseous fuels. See
§§ 40(b)(6); 40A(b)
(1) and (b)(2); 40B; 6426(c)-(e) and (k);
6427(e). Therefore, for purposes of § 45Z,
a “fuel” refers to a liquid or gaseous sub-
stance that can be consumed to supply heat
or power and does not include electricity.
Second, the anti-stacking rules within
the definition of “qualified facility” in
§ 45Z(d)(4)(B) prevent the allowance of
both a § 45Z credit and a credit for clean
hydrogen production (§ 45V or 48(a)(15))
or carbon oxide sequestration (§ 45Q)
with respect to a facility in a taxable year.
The inclusion of the anti-stacking rules
indicates that Congress was concerned
about the potential for activity at a partic-
ular facility to generate multiple credits
in a taxable year and wished to foreclose
that possibility. This, combined with the
omission of the § 45Y credit from the
anti-stacking rules, suggests that the pro-
duction of electricity is not eligible for
the § 45Z credit. See § 45Z(d)(4)(B). Had
Congress intended to include electricity
as a transportation fuel for purposes of
§ 45Z, Congress would have included the
§ 45Y credit in the anti-stacking rules.
Third, the Code already provides a sep-
arate credit for clean electricity produc-
tion under § 45Y. When Congress created
the § 45Z clean fuel production credit, it
also created the clean electricity produc-
tion credit under § 45Y. Generally, the
credit allowed under § 45Y is not limited

February 3, 2025 686 Bulletin No. 2025–6
based on how the electricity is ultimately
used. If the definition of “transportation
fuel” in § 45Z were read to include elec-
tricity, there would be significant overlap
between the electricity eligible for a credit
under § 45Z and the electricity eligible for
a credit under § 45Y. A reading of § 45Z to
include electricity would not be consistent
with Congress’ intent in designing § 45Y
specifically to incentivize clean electricity
production and § 45Z to incentivize pro-
duction of clean transportation fuel.
(9) Non-SAF transportation fuel. The
forthcoming proposed regulations would
define “non-SAF transportation fuel” for
purposes of § 45Z. The forthcoming pro-
posed regulations would also provide a
list of non-SAF fuels that may qualify as a
transportation fuel, as well as descriptions
of such fuels. A listed non-SAF fuel that
meets the applicable description must also
meet all the other applicable requirements
under § 45Z to qualify as a transportation
fuel. The list of non-SAF fuels would
generally track those in Notice 2024-49,
with a few modifications to the definitions
within Notice 2024-49 to address con-
cerns raised by commenters and industry
stakeholders.
(10) SAF transportation fuel. The
forthcoming proposed regulations would
define “SAF transportation fuel” in accor-
dance with the § 45Z(a)(3)(B) definition of
sustainable aviation fuel and would clarify
that a taxpayer may meet the requirement
that the fuel be “sold for use in an aircraft”
if such taxpayer sells a synthetic blending
component to a person that blends the fuel
into a fuel mixture described in ASTM
D7566.
.04 General rules.
(1) Overview. Section 1.45Z-2 of
the forthcoming proposed regulations
would provide general rules regarding the
amount and timing of the § 45Z credit.
The rules would describe and clarify the
credit calculation rules in § 45Z(a) to
(c), including the applicable amount, the
emissions factor, the emissions rate, the
applicable emissions rate table, rounding,
and inflation adjustment. The rules would
also clarify that a taxpayer is eligible to
claim the § 45Z credit only for the tax-
able year in which a qualifying sale of a
transportation fuel occurs. See § 45Z(a)
(1)(A)(ii). The rules would provide that
a taxpayer may produce a transportation
fuel in an earlier taxable year than the tax-
able year in which the qualifying sale of
such fuel occurs, and that a qualifying sale
may take place no earlier than the date
the fuel is produced. The forthcoming
proposed regulations would also describe
when a taxpayer may file a petition with
the Secretary for determination of a PER
and generally describe the PER process.
The Treasury Department and the IRS will
publish guidance establishing procedures
for taxpayers to request a PER and provid-
ing the § 45Z inflation adjustment factor at
a later time.
(2) Fuel measurement. The forthcom-
ing proposed regulations would require
the § 45Z credit to be calculated using
the applicable amount per gallon for liq-
uid transportation fuels and the applicable
amount per gasoline gallon equivalent for
non-liquid transportation fuels. The vol-
ume of a liquid fuel would be measured
on the basis of gallons adjusted to ambient
pressure and temperature of 1 atmosphere
and 60 degrees Fahrenheit. Section 45Z
directs taxpayers to use a gallon equiva-
lent for non-liquid fuels but does not pro-
vide a baseline standard. Gasoline is the
most appropriate baseline fuel for a gallon
equivalency for non-liquid fuels because
gasoline is the most common transporta-
tion fuel, and § 45Z is designed to incen-
tivize cleaner transportation fuels as alter-
natives to existing fossil fuels. The use
of a gasoline gallon equivalency is also
consistent with the gasoline gallon equiv-
alent requirement in § 6426(d)(3), which
applies to many of the types of fuel that
would be considered transportation fuel
under § 45Z in the context of a credit that
§ 45Z is intended to replace. To facilitate
implementation of a gallon equivalency
standard for non-liquid fuels, it is neces-
sary to specify whether the equivalency is
based on a lower heating value or a higher
heating value of the baseline fuel, as the
two types of heating values have different
energy contents. The forthcoming pro-
posed regulations would use a lower heat-
ing value of gasoline, rather than a higher
heating value, because it is a better repre-
sentation of the useful energy provided by
a transportation fuel.
(3) Emissions rates.
(a) 45ZCF-GREET model. (i) In gen-
eral
. Section 45Z(b)(1)(B)(ii) provides
that in the case of non-SAF transporta-
tion fuel, the lifecycle greenhouse gas
emissions of such fuel must be based on
the most recent determinations under the
Greenhouse gases, Regulated Emissions,
and Energy use in Transportation model
developed by the ANL or a successor
model (as determined by the Secretary).
The name of the “Greenhouse gases,
Regulated Emissions, and Energy use in
Transportation” model was changed to
“Greenhouse gases, Regulated Emissions,
and Energy use in Technologies” and it is
now generally referred to as the “GREET”
model.
The GREET model refers to a suite
of models, the first version of which was
released in 1995 and is now called the
R&D GREET model. Since 1995, DOE
maintained the GREET model to enable
research regarding lifecycle analyses of
hundreds of different methods of pro-
ducing, delivering, and using energy. The
R&D GREET model, was not designed to
be used for determining emissions rates
for tax credits, including the § 45Z credit,
but the current suite of GREET models
includes different versions, some of which
are designed to facilitate particular regula-
tory regimes.
As of January 10, 2025, the DOE’s
GREET website lists the following dif-
ferent versions of the GREET model:
R&D GREET, 40BSAF-GREET, 45VH2-
GREET, 45ZCF-GREET, CA-GREET4.0,
and ICAO-GREET. See http://energy.
gov/eere/greet. For the reasons discussed
below, for purposes of the § 45Z credit,
the phrase “most recent determinations
under the Greenhouse gases, Regulated
Emissions, and Energy use in Transporta-
tion model” in § 45Z(b)(1)(B)(ii) is best
understood as referring to determinations
under the 45ZCF-GREET model. In addi-
tion, the forthcoming proposed regula-
tions would designate the 45ZCF-GREET
model as a successor model to the GREET
model.
Some commenters have suggested that
the R&D GREET model should be used
for the § 45Z credit. However, the 45ZCF-
GREET model is the only appropriate
GREET model to use for purposes of the
45Z credit, because the R&D GREET
model is not limited to transportation fuels
and includes information that is based on
preliminary analyses (that is, analyses
that are not yet complete, have significant

Bulletin No. 2025–6 687 February 3, 2025
technical uncertainties, or are still being
reviewed by laboratory staff, the DOE
staff, or independent experts). See gener-
ally GREET, Office of Energy Efficiency
& Renewable Energy, U.S. Department of
Energy available at https://www.energy.
gov/eere/greet.
While the R&D GREET model is a
valuable tool for characterizing the ben-
efits and impacts of energy technologies
in a directional manner and testing new
and updated data and parameters, it is
not appropriate for use in analyses where
a high degree of precision and certainty
is required. Because the R&D GREET
model offers users many choices regard-
ing analysis methodology (for example,
co-product accounting method and global
warming potential values), different users
can calculate different emissions rates
with respect to the same fuel. Many of
these choices would not be appropriate
for the specific context of the § 45Z credit
given the potentially preliminary nature
of much of the information represented
in R&D GREET and given that specific
representations of activities, and their
emissions, are needed in a specific fashion
(for example, to comply with the require-
ments of § 45Z). Given the limitations of
some of the data underlying aspects of
the R&D GREET model and the fact that
the model does not predetermine for the
user which methodologies and accounting
parameters are appropriate for compliance
with the requirements of § 45Z, R&D
GREET does not provide the analytical
and methodological specificity necessary
to meet the specific objectives or statutory
requirements of the § 45Z credit.
ANL developed, and the DOE pub-
lished, the 45ZCF-GREET model as a
specific version of the GREET model to
determine emissions rates that also meets
three key parameters: (1) user-friendliness
and consistency, (2) technical robustness
of the pathways represented, and (3) con-
sistency with the requirements of § 45Z.
The first version of the 45ZCF-GREET
model, anticipated to be released on Jan-
uary 10, 2025, will be available at https://
www.energy.gov/eere/greet. This first ver-
sion of the 45ZCF-GREET model includes
the most commonly used types and cate-
gories of fuel that are anticipated to meet
the eligibility requirements to claim the
§ 45Z credit. Additional types and catego-
ries of fuel may be added in future ver-
sions of the 45ZCF-GREET model.
Implementation of the § 45Z credit
requires that data used to calculate emis-
sions rates reflect a given taxpayer’s
specific operations and that such data
be independently verifiable to the extent
possible. Use of facility-specific, veri-
fiable data ensures that the § 45Z credit
is available only to those fuels that meet
statutory requirements. For certain param-
eters, bespoke inputs are unlikely to be
easily measured by taxpayers and/or inde-
pendently verifiable with high fidelity,
given the current status of verification
mechanisms. Thus, certain parameters
in the 45ZCF-GREET model are fixed
assumptions, referred to as “background
data,” that are based on the best available
data and may not be changed by users.
Alternatively, the “foreground data” in the
45ZCF-GREET model are parameters that
must be input by the user. See the 45ZCF-
GREET User Manual
4
for details on back-
ground and foreground data.
(ii) 45ZCF-GREET as a “successor
model”
The Treasury Department and the IRS
recognize that the continued existence
of the R&D GREET model and periodic
updates to both the 45ZCF-GREET model
and the R&D GREET model may create
potential uncertainty about the meaning of
“most recent determinations” with regard
to the GREET model, which would be det-
rimental to the administration and imple-
mentation of the § 45Z credit. To avoid
any potential uncertainty, the forthcoming
proposed regulations would invoke the
Secretary’s express delegation of author-
ity in § 45Z(b)(1)(B)(ii) to require use of
the 45ZCF-GREET model as a successor
model.
This rule would be consistent with the
Secretary’s determination that, for pur-
poses of the § 45V credit, the 45VH2-
GREET model is a “successor” model to
GREET and that taxpayers are required to
use the most recent version of the 45VH2-
GREET model.
5
See T.D. 10023 (January
10, 2025) for the Secretary’s determina-
tion with regard to the 45VH2-GREET
model and a more detailed discussion of
the GREET model.
In drafting the forthcoming proposed
regulations, the Treasury Department and
the IRS considered the statutory definition
of “lifecycle greenhouse gas emissions” in
§ 21 1(o)(1)(H) of the Clean Air Act (as in
effect on August 16, 2022) and the specific
objectives of § 45Z and consulted with
the DOE. The 45ZCF-GREET model is a
model specifically developed by ANL as
a derivative of and successor to the R&D
GREET model to meet the requirements
and objectives of § 45Z.
(iii) Most recent determinations under
GREET
. Regardless of any determination
by the Secretary of a successor model,
the phrase “most recent determinations
under the Greenhouse gases, Regulated
Emissions, and Energy use in Transporta-
tion model” in § 45Z(b)(1)(B)(ii) is best
understood as referring to determinations
under the latest version of the 45ZCF-
GREET model.
After consultation with the DOE, the
Treasury Department and the IRS have
concluded that use of the latest version of
the 45ZCF-GREET model would be appro-
priate because it is tailored to the adminis-
tration of the § 45Z tax credit and includes
features that make it easy for taxpayers to
use. Use of the latest version of the 45ZCF-
GREET model would also ensure that the
pathways and approaches provided for
determining “well-to-wheel” emissions for
various fuel production processes are of
sufficient methodological certainty to be
appropriate for determining eligibility for
a tax credit. The most recent determina-
tions under the latest version of the 45ZCF-
GREET model are the only determinations
under a variant of a GREET model that are
suitable for use and may be used for pur-
poses of the § 45Z credit.
4
The 45ZCF-GREET User Manual, along with the 45ZCF-GREET model, is available at: https://www.energy.gov/eere/greet.
5
Similar to § 45Z(b)(1)(B)(ii), § 45V(c)(1)(B) requires the Secretary to determine lifecycle greenhouse gas emissions using “the most recent Greenhouse gases, Regulated Emissions, and
Energy use in Transportation model (commonly referred to as the ‘GREET model’) developed by Argonne National Laboratory, or a successor model (as determined by the Secretary)” for
purposes of the clean hydrogen production credit under § 45V.

February 3, 2025 688 Bulletin No. 2025–6
(iv) SAF portion of 45ZCF-GREET
model. The forthcoming proposed regu-
lations would provide that the 45ZCF-
GREET model can be used to determine
emissions rates for SAF transportation
fuel (SAF portion of 45ZCF-GREET
model). The SAF portion of the 45ZCF-
GREET model is a “similar methodol-
ogy” to CORSIA under § 45Z(b)(1)(B)
(iii)(II) because, like the CORSIA pro-
gram, it evaluates the full fuel lifecycle,
including all stages of fuel and feed-
stock production through to the end use
of the finished fuel. The DOE worked
with the Treasury Department and other
federal agencies to develop the 45ZCF-
GREET model, including specifications
for and limitations on background and
foreground data, to satisfy the statutory
requirements of § 45Z. Additionally, in
the context of whether the R&D GREET
model could be used to determine life-
cycle greenhouse gas emissions for pur-
poses of § 40B(e)(2),
6
the EPA identified
certain necessary components of a life-
cycle greenhouse gas analysis consistent
with § 211(o)(1)(H) of the CAA that the
R&D GREET model lacked and deter-
mined that the newly created 40BSAF-
GREET 2024 model included the absent
categories of emissions.
7
Similarly, the
EPA has concluded that the newly-cre-
ated 45ZCF-GREET model includes the
categories of emissions it previously
identified as missing from the R&D
GREET model, the lack of which made
R&D GREET insufficient for calculat-
ing lifecycle greenhouse gas emissions
for purposes of § 211(o)(1)(H) of the
CAA.
8

Additionally, the 45ZCF-GREET
model contains certain necessary compo-
nents of a lifecycle greenhouse gas analy-
sis consistent with § 211(o)(1)(H) of the
CAA.
9
Therefore, emissions rates for SAF
transportation fuels calculated using the
45ZCF-GREET model would be based
on the amount of lifecycle greenhouse gas
emissions as described in § 211(o)(1)(H)
of the CAA. See
§ 45Z(b)(1)(B)(i).
(b) Methodologies. The forthcoming
proposed regulations would designate
the allowed methodologies for determin-
ing emissions rates for purposes of the
emissions rate table described in § 45Z(b)
(1)(B)(i). If a type and category of non-
SAF transportation fuel is established
in the applicable emissions rate table, a
taxpayer producing such type and cate-
gory of fuel would determine the fuel’s
emissions rate using the 45ZCF-GREET
model, as directed by the applicable emis-
sions rate table. If a type and category of
SAF transportation fuel is established in
the applicable emissions rate table, a tax-
payer producing such type and category
of fuel would determine the fuel’s emis-
sions rate using the most recent version
of the CORSIA Default Life Cycle Emis-
sions Values for CORSIA Eligible Fuels
lifecycle approach (CORSIA Default) or
the CORSIA Methodology for Calculat-
ing Actual Life Cycle Emissions Values
lifecycle approach (CORSIA Actual), or
the 45ZCF-GREET model, as directed by
the applicable emissions rate table. Under
the forthcoming proposed regulations, for
each type and category of SAF transpor-
tation fuel, a taxpayer would be required
to use the same methodology to calculate
lifecycle greenhouse gas emissions asso-
ciated with all stages of fuel feedstock
production and distribution.
Section 45Z(b)(1)(B)(i) requires the
emissions rate table to be based on the
amount of lifecycle greenhouse gas emis-
sions (as described in § 211(o)(1)(H) of
the CAA) for such fuels. This CAA pro-
vision defines lifecycle greenhouse gas
emissions as the aggregate emissions from
all stages of the fuel’s production and use,
including feedstock production and trans-
portation, fuel production and distribu-
tion, and use of the finished fuel. This type
of lifecycle analysis is sometimes referred
to as “well-to-wheel” emissions analysis.
As a result, for each type and category of
transportation fuel, the 45ZCF-GREET
model also uses “well-to-wheel” emis-
sions to calculate lifecycle greenhouse gas
emissions for all stages of fuel production,
as well as emissions resulting from use of
the fuel in transportation.
Consistent with § 45Z(b)(1)(B)(ii), the
forthcoming proposed regulations would
require taxpayers to use the most recent
version of an allowed methodology that is
publicly available on the first day of the
taxable year during which the taxpayer
produced the transportation fuel for which
the § 45Z credit is claimed. If a version
of an allowed methodology adds a type or
category of fuel after the first day of a tax-
able year, taxpayers must use such version
for such new type or category of fuel for
the entire taxable year. If an updated ver-
sion of an allowed methodology becomes
publicly available after the first day of the
taxable year of production (but still within
such taxable year), then the taxpayer could
choose to treat such updated version as the
most recent version of such methodology.
In the 45ZCF-GREET model, for pur-
poses of accounting for emissions asso-
ciated with hydrogen (as a production
input), natural gas alternatives (as a pro-
duction input or as the transportation fuel
produced), electricity, and carbon capture
and sequestration, rules similar to the
rules under section 45V would apply.
The portions of the forthcoming pro-
posed regulations regarding the emissions
rate table and allowed methodologies
(including the designation of the 45ZCF-
GREET model as a successor model)
would apply to taxable periods ending on
or after January 10, 2025.
The Treasury Department and the IRS
intend to propose rules at a future date
providing that taxpayers will be able to
access additional reductions in calculating
the lifecycle greenhouse gas emissions
rates of SAF and non-SAF transportation
fuels (as described in 42 U.S.C. 7545(o)
6
Section 40B(e)(2) has a requirement that a methodology similar to CORSIA must also satisfy the criteria under § 211(o)(1)(H) of the CAA, just as in § 45Z(b)(1)(B)(iii)(II). See also Notice
2024-37, 2024-21 I.R.B. 1191.
7
See Letter from Joseph Goffman, Principal Deputy Assistant Administrator for the Office of Air and Radiation, U.S. Environmental Protection Agency, to Lily Batchelder, Assistant Secretary
for Tax Policy, U.S. Department of Treasury (December 13, 2023), (EPA December 2023 Letter) available at https://home.treasury.gov/system/files/136/Final-EPA-letter-to-UST-on-SAF-
signed.pdf.
8
See Letter from Joseph Goffman, Assistant Administrator for the Office of Air and Radiation, U.S. Environmental Protection Agency, to Aviva Aron-Dine, Deputy Assistant Secretary for
Tax Policy, U.S. Department of Treasury (January 8, 2025), (EPA January 2025 Letter) available at https://home.treasury.gov/system/files/136/January-2025-EPA-letter-to-UST-on-45zcf-
GREET-signed.pdf.
9
EPA January 2025 Letter.

Bulletin No. 2025–6 689 February 3, 2025
(1)(H)) by utilizing certain climate smart
agriculture (CSA) practices for cultivating
domestic corn (CSA corn), domestic soy-
beans (CSA soybeans), and domestic sor-
ghum (CSA sorghum) (collectively, CSA
crops) for use as SAF and non-SAF trans-
portation fuel primary feedstocks. These
additional reductions would be available
to taxpayers once the Treasury Depart-
ment and the IRS propose regulations,
including rules for CSA, for the § 45Z
credit, and an accounting of one or more
CSA practices is developed for the life-
cycle greenhouse gas emissions rates of
CSA crops calculated under the 45ZCF-
GREET model.
.05 Special rules. Section 1.45Z-4 of
the forthcoming proposed regulations
would provide certain special rules with
respect to the § 45Z credit. The rules
would (1) incorporate the requirements in
§ 45Z(f)(1)(A)(i)(I) and (ii) that taxpayers
must be registered as a producer of clean
fuel under § 4101 at the time of produc-
tion and produce their fuel in the United
States; (2) describe the anti-stacking
rules under § 45Z(d)(4)(B) for purposes
of determining if a facility is a qualified
facility, including examples; (3) incor-
porate the production attribution rules in
§ 45Z(f)(2) for facilities with multiple
owners; (4) clarify that § 45Z does not
require the taxpayer to own a facility and
provide related production attribution
rules; and (5) describe the recordkeeping
and substantiation requirements for tax-
payers claiming the § 45Z credit.
The forthcoming proposed regulations
would provide an emission rate substanti-
ation safe harbor providing that a taxpayer
may substantiate the emissions rate for
a non-SAF transportation fuel that was
determined using the 45ZCF-GREET
model by obtaining certification with
respect to such fuel substantially in the
form and manner described in § 1.45Z-5
of the forthcoming proposed regula-
tions for certifying a SAF transportation
fuel emissions rate determined using the
45ZCF-GREET model.
The Treasury Department and the IRS
are concerned about the potential abuse of
the section 45Z credit where transporta-
tion fuel is produced and sold in a manner
that is inconsistent with the statutory pur-
poses. The Treasury Department and the
IRS are considering the need for an anti-
abuse rule in the forthcoming proposed
regulations.
With respect to used cooking oil
(UCO) feedstocks, the Treasury Depart-
ment and the IRS are concerned about
(1) the improper identification of a sub-
stance that is not UCO as UCO (for exam-
ple, virgin palm oil mislabeled as UCO),
which could have substantially greater
emissions impacts than genuine UCO,
and (2) the uncertainty of market impacts
caused by incentivizing UCO (for exam-
ple, the degree to which increased UCO
demand would be backfilled by virgin oils
such as palm oil). Both of these concerns
are particularly acute for imported UCO
given the lack of transparency regarding
the local sources. Due to these significant
concerns about the ability to reliably dis-
tinguish between imported UCO and palm
oil, and the resulting risk of crediting
ineligible fuels, the Treasury Department
and the IRS are considering appropriate
substantiation and recordkeeping require-
ments for imported UCO. As a result,
pathways that use imported UCO will not
be available in the 45ZCF-GREET model
until the Treasury Department and the IRS
publish further guidance. UCO is consid-
ered to be imported if it originates from
a source (for example, restaurant or food
processor) outside the United States and/
or is purchased from an aggregator located
outside the United States.
.06 Certification of emissions rates.
Section 1.45Z-5 of the forthcoming pro-
posed regulations would provide rules for
unrelated party certification of emissions
rates for SAF transportation fuel (certi-
fication). The rules would describe the
content, form, and manner for a taxpayer
to provide certification under § 45Z(f)(1)
(A)(i)(II). The Treasury Department and
the IRS are developing a model certifi-
cate that will be provided at a later date.
Until the model certificate is available,
taxpayers may use the model certificates
included in Notice 2024-6, 2024-2 I.R.B.
348, and Notice 2024-37, 2024-21 I.R.B.
1191, as examples of how to format their
certification. Taxpayers should reference
§ 1.45Z-5 of the forthcoming proposed
regulations for the substance and content
of the certification.
The forthcoming proposed regulations
would treat the following as qualified
certifiers for the associated methodol-
ogies: (1) for taxpayers using CORSIA
Default or CORSIA Actual, any individ-
ual or organization with active accredi-
tation from International Sustainability
and Carbon Certification, Roundtable on
Sustainable Biomaterials, or other sus-
tainability certification scheme approved
by the International Civil Aviation Orga-
nization; and (2) for taxpayers using the
45ZCF-GREET model, any individual or
organization with active accreditation (i)
as a validation and certification body from
the American National Standards Institute
National Accreditation Board or (ii) as a
verifier, lead verifier, or verification body
under the California Air Resources Board
Low Carbon Fuel Standard program
(CARB LCFS). Qualified certifiers would
be required to have the relevant active
accreditation as of the date they provide
the certification for a taxpayer’s fuel.
The forthcoming proposed regulations
would include CARB LCFS verifiers as
qualified certifiers for taxpayers using the
45ZCF-GREET model as a methodol-
ogy for SAF transportation fuel because
CARB LCFS verifiers are experienced
with evaluating information similar to
the information included in the 45ZCF-
GREET model.
The Treasury Department and the IRS
anticipate requiring unrelated party certi-
fication of CSA crops, including informa-
tion related to chain of custody of CSA
crops throughout the biofuel supply chain.
.07 Claim filing
. Section 1.45Z-6 of the
forthcoming proposed regulations would
(1) describe the time and manner of filing
a claim for the § 45Z credit and (2) pro-
vide special rules for cases in which the
producer of a clean fuel is not the credit
claimant. If an entity that is disregarded
as an entity separate from its owner within
the meaning of § 301.7701-2(c)(2)(i) of
the Procedure and Administration Regu-
lations (disregarded entity) or a qualified
subchapter S subsidiary within the mean-
ing of § 1361(b)(3)(B) (QSub) produces
transportation fuel that is eligible for the
§ 45Z credit, the forthcoming proposed
regulations would treat the owner of such
disregarded entity or QSub as registered
as a producer of clean fuel under § 4101
for purposes of claiming the § 45Z credit.
In addition, the forthcoming proposed
regulations would clarify that the agent of
a consolidated group, when filing a Form

February 3, 2025 690 Bulletin No. 2025–6
7218, Clean Fuel Production Credit,
to claim the § 45Z credit, must use the
producer’s registration number (within
the meaning of § 45Z(f)(1)(A)(i)(I) and
§ 1.4101-1) of the member that produced
the transportation fuel. The forthcoming
proposed regulations would be consistent
with the § 45Z Fact Sheet FAQs and pro-
vide additional specificity and clarity.
.08 Registration.
(1) Registration rules generally. Sec-
tion 1.4101-1 of the forthcoming proposed
regulations would provide rules regarding
the approval, denial, revocation, or sus-
pension of registration that are similar to
the rules of § 4222(c) and § 48.4222(c)-1
of the Manufacturers and Retailers Excise
Tax Regulations. Additionally, many of
the requirements of § 1.4101-1 of the
forthcoming proposed regulations would
be similar or identical to the requirements
of § 48.4101-1. The Treasury Department
and the IRS are aware that many appli-
cants for registration as clean fuel produc-
ers (which is required in order to claim
the § 45Z credit) must also be registered
under § 4101 for excise tax purposes; such
applicants are therefore familiar with the
registration process and must maintain
other § 4101 registrations.
(2) Separate entity treatment. The
forthcoming proposed regulations would
generally provide that each business unit
that has, or is required to have, a separate
employer identification number (EIN)
is treated as a separate person. The rules
would provide that each disregarded
entity that has an EIN and is a producer of
transportation fuel for purposes of § 45Z
must register as a producer of clean fuel
in order to be eligible to claim the § 45Z
credit. The rules would also provide that
each QSub that has an EIN and is a pro-
ducer of transportation fuel for purposes
of § 45Z must register as a producer of
clean fuel in order to be eligible to claim
the § 45Z credit.
The Treasury Department and the
IRS understand that, for many pro-
ducers, each facility is owned by a
disregarded entity. The forthcoming
proposed regulations would provide
registration rules that would reflect this
practice while also satisfying the statu-
tory requirements. The separate entity
treatment rules also would provide for
registration in a manner that would be
similar to registering on a facility basis
and would thus align more closely with
other related tax provisions, including
§§ 45V and 45Q (for which anti-stack-
ing provisions apply) and the elective
payment election and transfer election
provisions of §§ 6417 and 6418, which
are generally determined on a per-fa-
cility basis. The rules would also be
consistent with (1) § 48.4101-1(a)(4),
which requires separate entity treatment
by providing that every business that has
or is required to have a separate EIN is
treated as a separate person for purposes
of excise tax registrations under § 4101,
(2) § 301.7701-2(c)(2)(v)(A)(3), which
provides that § 301.7701-2(c)(2)(i)
(concerning certain wholly-owned enti-
ties) does not apply for purposes of reg-
istration under §§ 4101, 4222, and 4412,
and (3) § 1.1361-4(a)(8)(i)(C), which
provides that a QSub is treated as a sep-
arate corporation for purposes of regis-
tration under §§ 4101, 4222, and 4412.
(3) Reregistration safe harbor. The
forthcoming proposed regulations would
provide a safe harbor for a person that
has been registered by the IRS and must
reregister due to a change in ownership. A
person that is approved for reregistration
would be eligible to claim a § 45Z credit
as of the date the IRS received the applica-
tion for reregistration, even if, at the time
of such person’s fuel production, the IRS
had not yet approved the reregistration.
(4) Section 4101(a)(1) registration
requirement. Section 13704(b)(5) of the
IRA provides that for transportation fuel
produced after December 31, 2024, “[s]
ection 4101(a)(1), as amended by the pre-
ceding provisions of this Act, is amended
by inserting the phrase ‘every person
producing a fuel eligible for the clean
fuel production credit (pursuant to sec-
tion 45Z)’ after ‘section 6426(k)(3)).’”
However, § 4101(a)(1) does not reference
§ 6426(k)(3). A prior version of such
amendment contained text that read “(as
defined in section 40B or section 6426(k)
(3)),”
10
but the reference to § 6426(k)(3)
did not appear in the enacted version of
§ 13704(b)(5) of the IRA. The Office of
Law Revision Counsel of the U.S. House
of Representatives, whose functions
include preparing and publishing period-
ically a new edition of the United States
Code, executed the provision by mak-
ing the insertion after “section 40B),” to
reflect the probable intent of Congress.
11

Such intent is also reflected in § 45Z(f)(1)
(A)(i)(I). For these reasons, the forthcom-
ing proposed regulations would require
every person intending to claim a § 45Z
credit with respect to the production of a
fuel eligible for the § 45Z credit to register
with the IRS under § 4101.
SECTION 4. REQUEST FOR
COMMENTS
.01 General request for comments. The
Treasury Department and the IRS request
comments on the forthcoming proposed
regulations described in section 3 of this
notice, the topics identified in section 4.02
of this notice, and the draft text in the
appendix of this notice.
.02 Specific request for comments. The
Treasury Department and the IRS specifi-
cally request comments on:
(1) How the fuel pathways approved
under the EPA’s Renewable Fuel Stan-
dard (RFS) program could be adapted for
purposes of the emissions rate table if the
Treasury Department and the EPA were
to determine that the RFS program is a
methodology “similar” to CORSIA that
also satisfies the criteria under § 211(o)(1)
(H) of the CAA (as required by § 45Z(b)
(1)(B)(iii)(II)).
(2) Any clean fuel production processes
that are currently in commerce that might
meet the eligibility requirements of § 45Z
but are not included in the 45ZCF-GREET
model that is released simultaneously with
this notice.
SECTION 5. SUBMISSION OF
COMMENTS
Written comments should be submitted
by April 10, 2025. The subject line for the
comments should include a reference to
Notice 2025-10. Comments may be sub-
mitted in one of two ways:
10
See H.R. 5376, 121st Cong., 2d. Sess. § 136203(d)(2)(E) (Nov. 19, 2021).
11
Available at https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4101&num=0&edition=prelim.

Bulletin No. 2025–6 691 February 3, 2025
(1) electronically via the Federal eRule-
making Portal at http://www.regulations.
gov (type IRS-2025-0002 in the search
field on the regulations.gov homepage to
find this notice and submit comments); or
(2) by mail to: Internal Revenue Ser-
vice, CC:PA:01:PR (Notice 2025-10),
Room 5203, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
All commenters are strongly encour-
aged to submit comments electroni-
cally. The Treasury Department and the
IRS will publish for public availabil-
ity any comment submitted electroni-
cally, or on paper, to its public docket on
www.regulations.gov.
SECTION 6. EFFECTIVE DATE OF
THIS NOTICE
This notice is effective January 10,
2025.
SECTION 7. EFFECT ON OTHER
DOCUMENTS
Section 3 of Notice 2024-49 is modi-
fied and superseded. Until further notice,
the definitions in section 3 of Notice 2024-
49 are replaced with the definitions in the
appendix of this notice.
SECTION 8. PAPERWORK
REDUCTION ACT
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (PRA) generally
requires that a federal agency obtain the
approval of the Office of Management
and Budget (OMB) before collecting
information from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit. An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control number
assigned by the OMB.
This notice sets forth intended collec-
tions of information to be provided to the
IRS with Form 637, Application for Reg-
istration (For Certain Excise Tax Activi-
ties), to determine whether an applicant
meets the requirements to be registered
under § 4101, a requirement to qualify
for the § 45Z credit. Any collections of
information associated with this notice
will be reflected in the submission to the
OMB for review in accordance with the
PRA that is associated with Form 637
(OMB control number 1545-1835). This
submission will be updated in the ordi-
nary course.
Any collections of information associ-
ated with this notice may include report-
ing and third-party disclosure require-
ments that would be necessary to ensure
that taxpayers qualify for the § 45Z
credit. The collections would be used by
the IRS for tax compliance purposes and
by taxpayers to ensure that the fuel being
produced qualifies for the § 45Z credit.
The burden for these requirements would
be included with the Form and Instruc-
tions for Form 7218, Clean Fuel Pro-
duction Credit. For PRA purposes, the
Form and Instructions for Form 7218 are
already approved by OMB under 1545-
0123 for business filers, 1545-0092 for
individuals, 1545-0047 for non-profit
organizations, and 1545-0092 for trust
and estate filers.
Any collections of information associ-
ated with this notice may include report-
ing and recordkeeping requirements. The
collections would be used by the IRS
for tax compliance purposes. A taxpayer
would use these collections to establish
its eligibility for the § 45Z credit and the
amount of the credit claimed. The record-
keeping requirements would include that
taxpayers keep records about emissions
rates, production, and sale. These record-
keeping requirements are considered
general tax records under § 1.6001-1(e).
For PRA purposes, general tax records
are already approved by OMB under
1545-0123 for business filers, 1545-0092
for individuals, 1545-0047 for non-profit
organizations, and 1545-0092 for trust
and estate filers.
SECTION 9. DRAFTING
INFORMATION
The principal authors of this notice
are Jennifer Golden, Danielle Mayfield,
Camille Edwards Bennehoff, and Andrew
Clark of the Office of Associate Chief
Counsel (Passthroughs & Special Indus-
tries). For questions regarding this notice,
contact Ms. Golden, Ms. Mayfield, Ms.
Edwards Bennehoff, or Mr. Clark at (202)
317-6855 (not a toll-free number).

February 3, 2025 692 Bulletin No. 2025–6
Appendix – Draft Text of
Forthcoming Proposed
Regulations
§1.45Z-1 Clean fuel
production credit;
definitions.
(a) Overview. For purposes of section
38 of the Code, the section 45Z clean fuel
production credit is determined under sec-
tion 45Z of the Code and the section 45Z
regulations. This section provides an over-
view and definitions that apply for pur-
poses of section 45Z and the section 45Z
regulations. Section 1.45Z-2 provides gen-
eral rules for determining the amount and
timing of the section 45Z credit, including
rules on the emissions factor and the emis-
sions rate for transportation fuels. Section
1.45Z-3 provides rules relating to the
increased credit amount for satisfying pre-
vailing wage and apprenticeship require-
ments. Section 1.45Z-4 provides rules on
required registration (under section 4101
of the Code and §1.4101-1 of this chap-
ter), anti-stacking, production attribution,
facility ownership, and recordkeeping and
substantiation. Section 1.45Z-5 provides
procedures for the certification of emis-
sions rates. Section 1.45Z-6 provides pro-
cedures for filing a claim for the section
45Z credit. Section 1.4101-1 provides the
rules for registration under section 4101.
(b) Definitions. The definitions in this
section apply for purposes of section 45Z
and the section 45Z regulations.
(1) 45ZCF-GREET model. The term
45ZCF-GREET model means the model
by that name developed by the Argonne
National Laboratory and published by the
DOE for use in determining the amount
of lifecycle greenhouse gas emissions for
purposes of section 45Z.
(2) Applicable amount. The term
applicable amount means the applicable
amount as described in section 45Z(a)(2)
and (a)(3)(A) and §1.45Z-2(a)(4).
(3) Applicable material. As provided
in section 45Z(d)(5)(B)(i), the term appli-
cable material means—
(i) monoglycerides, diglycerides, and
triglycerides,
(ii) free fatty acids, and
(iii) fatty acid esters.
(4) ASTM. The term ASTM means the
standards published by ASTM Interna-
tional, formerly known as the American
Society for Testing and Materials. Addi-
tional information about ASTM Interna-
tional is available at https://www.astm.
org/.
(5) Biomass. As provided in section
45Z(d)(5)(B)(ii) (citing section 45K(c)
(3) of the Code), the term biomass means
any organic material other than (i) oil and
natural gas (or any product thereof), and
(ii) coal (including lignite) or any product
thereof.
(6) Claim; Form 7218. The term claim
means a completed Form 7218, Clean Fuel
Production Credit (including any other
required documentation that the relevant
form instructions and the section 45Z reg-
ulations require), filed with the taxpayer’s
Federal income tax return or Federal infor-
mation return for the taxable year in which
the section 45Z credit is determined. The
term Form 7218 means Form 7218, Clean
Fuel Production Credit, and any successor
form(s). See §601.602 Statement of Pro-
cedural Rules of this chapter.
(7) CO
2
e. As provided in section
45Z(d)(2), the term CO
2
e means, with
respect to any greenhouse gas, the equiv-
alent carbon dioxide (as determined based
on relative global warming potential).
(8) Code. The term Code means the
Internal Revenue Code.
(9) CORSIA program—(i) In general.
As provided in section 45Z(b)(1)(B)(iii)
(I), the term CORSIA program means the
Carbon Offsetting and Reduction Scheme
for International Aviation (CORSIA) pro-
gram which has been adopted by the Inter-
national Civil Aviation Organization with
the agreement of the United States. Addi-
tional information about the CORSIA
program is available at https://www.icao.
int/environmental-protection/CORSIA/
Pages/default.aspx.
(ii) CORSIA Default or CORSIA
Actual. The term CORSIA Default or
CORSIA Actual means determinations
from fuel pathways approved under the
CORSIA Default Life Cycle Emissions
Values for CORSIA Eligible Fuels life-
cycle approach (CORSIA Default) or the
CORSIA Methodology for Calculating
Actual Life Cycle Emissions Values life-
cycle approach (CORSIA Actual). Addi-
tional information about CORSIA Default
and CORSIA Actual is available at https://
www.icao.int/environmental-protection/
CORSIA/Pages/CORSIA-Eligible-Fuels.
aspx.
(10) DOE. The term DOE means the
United States Department of Energy.
(11) Emissions factor. The term emis-
sions factor means the emissions factor
as described in section 45Z(b)(1)(A) and
§1.45Z-2(c)(1).
(12) Emissions rate. The term emis-
sions rate means the emissions rate for a
transportation fuel as described in §1.45Z-
2(d).
(13) E PA. The term E PA means the
United States Environmental Protection
Agency.
(14) Facility—(i) In general. For
purposes of the definition of qualified
facility provided in section 45Z(d)(4)
and paragraph (b)(24) of this section,
the term facility means a single produc-
tion line that is used to produce a trans-
portation fuel. For this purpose, a single
production line includes all components
that function interdependently to produce
a transportation fuel through a process
that results in the lifecycle greenhouse
gas emissions rate used to determine
the credit. Components function inter-
dependently to produce a transportation
fuel if the use of each component is
dependent upon the use of each of the
other components to produce a transpor-
tation fuel. A component that functions
interdependently with other components
to produce a transportation fuel need not
be located within the same building as, or
within a certain geographic proximity to,
the other components. A facility includes
carbon capture equipment if such car-
bon capture equipment contributes to the
lifecycle greenhouse gas emissions rate
of the process by which the transporta-
tion fuel for which the credit is deter-
mined is produced. A single production
line includes all steps of the production
process from the processing of feedstock
through to the transportation fuel that is
sold by the taxpayer in a qualifying sale.
(ii) Certain indirect production and
post-production equipment. The term
facility does not include—
(A) Equipment that is used to con-
dition, such as equipment used to blend
transportation fuel into a fuel mixture,
pressurize a fuel for use in transportation,

Bulletin No. 2025–6 693 February 3, 2025
or transport a transportation fuel beyond
the point of production; or
(B) Notwithstanding paragraph (b)
(14)(iii) of this section, feedstock-re-
lated equipment (including production,
purification, recovery, transportation, or
transmission equipment) or electricity
production equipment used to power the
transportation fuel production process,
including any carbon capture equipment
associated with the electricity production
process.
(iii) Multipurpose components. Com-
ponents that have a purpose in addition
to the production of a transportation fuel
may be part of a facility if such compo-
nents function interdependently with other
components to produce a transportation
fuel.
(iv) Examples. The following examples
illustrate the definition of facility.
(A) Example 1. Effect of geographic proximity;
carbon capture equipment. Z produces a transporta-
tion fuel at a facility that is equipped with carbon
capture equipment (as defined in §1.45Q-2(c)), as
distinguished from the carbon capture equipment
described in paragraph (b)(14)(ii)(B) of this section.
One purpose of the equipment is to capture carbon
oxides. Without the carbon capture equipment, the
facility could not produce a fuel that has an emis-
sions rate that is not greater than 50 kilograms of
CO
2
e per mmBTU. Because the carbon capture
equipment functions interdependently with other
components to produce the transportation fuel, the
carbon capture equipment is part of the facility under
paragraph (b)(14)(i) of this section. The analysis in
this example is the same regardless of the geographic
distance between the carbon capture equipment and
the rest of the components comprising the facility.
A component that functions interdependently with
other components to produce a transportation fuel
need not be located within the same building as, or
within a certain geographic proximity to, the other
components.
(B) Example 2. Single production line with com-
ponents functioning interdependently; SAF trans-
portation fuel. X produces SAF transportation fuel
that is a synthetic blending component that meets
the requirements of ASTM D7566, Annex A2, at
its facility. X sells the SAF transportation fuel to an
unrelated person, Y, a blender, that blends it with
kerosene to create a fuel mixture that qualifies as
jet fuel under ASTM 7566. X uses equipment and
components that function interdependently to pro-
duce the SAF transportation fuel that is sold to Y. X’s
equipment and components constitute a facility for
section 45Z purposes. As described in paragraph (b)
(14)(ii)(A) of this section, Y’s equipment and com-
ponents used to make a transportation fuel mixture
are blending equipment and not a facility for section
45Z purposes.
(15) Fuel. The term fuel means any liq-
uid or gaseous substance that can be con-
sumed to supply heat or power. Therefore,
for purposes of section 45Z, the term fuel
does not include electricity.
(16) Gallon equivalent—(i) In general.
The term gallon equivalent means, with
respect to any non-liquid fuel, the amount
of such fuel that has the energy equivalent
of a gallon of gasoline, which refers to the
amount of such fuel having a Btu content
of 116,090 (lower heating value).
(ii) Non-liquid fuel. A fuel is consid-
ered non-liquid if it is in a gaseous state
at ambient pressure and temperature of
1 atmosphere and 60 degrees Fahrenheit,
respectively.
(iii) Calculation. For a given non-liq-
uid fuel, the gallon equivalent of such fuel
is equal to that fuel’s lower heating value
divided by the lower heating value of a
gallon of gasoline. Expressed mathemat-
ically: Gallon equivalent = lower heating
value of given fuel (measured in Btu) ÷
lower heating value of a gallon of gaso-
line (116,090 Btu). Such gallon equivalent
must be rounded to 5 decimal places. The
lower heating value of some non-liquid
fuels are provided below:
FuelLower Heating Value
Low-GHG compressed CANG20,267 Btu per pound
Low-GHG dimethyl ether12,417 Btu per pound
Low-GHG hydrogen51,585 Btu per pound
Low-GHG liquified CANG
1
20,908 Btu per pound
Low-GHG LPG (other than propane from HEFA)
2
19,873 Btu per pound
Low-GHG LPG (propane from HEFA)
3
18,568 Btu per pound
(iv) Example. A produced 100,000
pounds of low-GHG compressed CANG
at a qualified facility and sold it in a qual-
ifying sale. To determine the number of
gallon equivalents for which A is eligible
to claim the section 45Z credit, A must
divide the lower heating value of low-
GHG compressed CANG, 20,267 Btu per
pound, by the lower heating value of a
gallon of gasoline, 116,090 Btu. Rounded
to 5 decimal places, on an energy equiva-
lence basis, each pound of low-GHG com-
pressed CANG is equal to 0.17458 gallon
equivalents. As such, A is eligible to claim
the section 45Z credit for 17,458 gallon
equivalents of low-GHG compressed
CANG.
(17) Greenhouse gas (GHG). As
provided in section 45Z(d)(3), the term
greenhouse gas, or GHG, has the same
meaning given that term under section
211(o)(1)(G) of the Clean Air Act (42
U.S.C. 7545(o)(1)(G)), as in effect on
August 16, 2022.
(18) Lifecycle greenhouse gas emis-
sions. The term lifecycle greenhouse gas
emissions means the lifecycle greenhouse
gas emissions as described in section
211(o)(1)(H) of the Clean Air Act (42
U.S.C. 7545(o)(1)(H)), as in effect on
August 16, 2022.
(19) mmBTU. As provided in sec-
tion 45Z(d)(1), the term mmBTU means
1,000,000 British thermal units.
(20) Non-SAF transportation fuel—(i)
In general. The term non-SAF transpor-
1
Low-GHG liquified CANG is a non-liquid fuel at ambient pressure and temperature of 1 atmosphere and 60 degrees Fahrenheit.
2
Low-GHG LPG (other than propane from HEFA) is a non-liquid fuel at ambient pressure and temperature of 1 atmosphere and 60 degrees Fahrenheit.
3
Low-GHG LPG (propane from HEFA) is a non-liquid fuel at ambient pressure and temperature of 1 atmosphere and 60 degrees Fahrenheit.

February 3, 2025 694 Bulletin No. 2025–6
tation fuel means any transportation fuel
that is not a SAF transportation fuel.
(ii) Low-GHG non-SAF fuels. This
paragraph provides a list of non-SAF fuels
that may qualify as a transportation fuel,
as well as descriptions for such fuels. A
listed non-SAF fuel that meets the appli-
cable description in this paragraph (b)(20)
(ii) must also meet all the other applica-
ble requirements under section 45Z and
the section 45Z regulations to qualify as a
transportation fuel.
(A) Low-GHG biodiesel. The term
low-GHG biodiesel means the monoal-
kyl esters of long chain fatty acids that
meet the specifications of ASTM D6751
and that have an emissions rate that is not
greater than 50 kilograms of CO
2
e per
mmBTU.
(B) Low-GHG butanol. The term low-
GHG butanol means any mixture of n-bu-
tyl, sec-butyl, and iso-butyl alcohols that
meets the specifications of ASTM D7862
and that has an emissions rate that is not
greater than 50 kilograms of CO
2
e per
mmBTU.
(C) Low-GHG diesel fuel. The term
low-GHG diesel fuel means liquid fuel,
including renewable diesel, that meets the
specifications of ASTM D975 and that has
an emissions rate that is not greater than
50 kilograms of CO
2
e per mmBTU.
(D) Low-GHG dimethyl ether. The term
low-GHG dimethyl ether, which includes
renewable dimethyl ether, means a gas-
eous fuel that meets the specifications of
ASTM D7901 and that has an emissions
rate that is not greater than 50 kilograms
of CO
2
e per mmBTU.
(E) Low-GHG ethanol. The term low-
GHG ethanol means ethyl alcohol that is a
liquid fuel that meets the specifications of
ASTM D4806 for denatured fuel ethanol
for blending with gasoline and that has an
emissions rate that is not greater than 50
kilograms of CO
2
e per mmBTU.
(F) Low-GHG gasoline. The term low-
GHG gasoline, which includes renewable
gasoline, means liquid fuel that meets the
specifications of ASTM D4814 and that
has an emissions rate that is not greater
than 50 kilograms of CO
2
e per mmBTU.
(G) Low-GHG hydrogen. The term
low-GHG hydrogen means any gaseous
or liquid fuel that meets the requirements
of the Society of Automotive Engineers
(SAE) J2719 standard and that has an
emissions rate that is not greater than 50
kilograms of CO
2
e per mmBTU. Informa-
tion about SAE standards is available at
https://www.sae.org/standards.
(H) Low-GHG liquefied petroleum gas
(LPG). The term low-GHG LPG, which
includes low-GHG propane, means lique-
fied gases that meet the specifications of
ASTM D1835 and that have an emissions
rate that is not greater than 50 kilograms
of CO
2
e per mmBTU.
(I) Low-GHG methanol. The term low-
GHG methanol means a methyl alcohol
that is a liquid fuel that meets the specifi-
cations of ASTM D1152 or ASTM D5797
and that has an emissions rate that is not
greater than 50 kilograms of CO
2
e per
mmBTU.
(J) Low-GHG conventional or alterna-
tive natural gas (CANG). The term low-
GHG conventional or alternative natural
gas (CANG), which includes renewable
natural gas (RNG), means a pipeline-qual-
ity compressed or liquefied gas that meets
the specifications of ASTM D8080,
except for the compression requirements,
and that has an emissions rate that is not
greater than 50 kilograms of CO
2
e per
mmBTU.
(21) Prevailing wage and apprentice-
ship requirements. The term prevailing
wage and apprenticeship requirements
or PWA requirements means the require-
ments described in section 45Z(f)(6) and
(7) and §1.45Z-3.
(22) Producer—(i) In general. Except
as provided in paragraph (b)(22)(ii), the
term producer means the person that
engages in the production of a transpor-
tation fuel.
(ii) Alternative natural gas. With
respect to alternative natural gas, includ-
ing RNG, the term producer means the
person that processes the alternative nat-
ural gas (processor) to remove water, car-
bon dioxide, and other impurities such
that it is interchangeable with fossil nat-
ural gas.
(iii) Examples. The following exam-
ples illustrate the definition of producer.
(A) Example 1. SAF producer. X uses vegetable
oil to make 10,000 gallons of a synthetic blending
component via a hydroprocessed esters and fatty
acids (HEFA) production pathway described in
ASTM D7566, Annex A2, that qualifies as a SAF
transportation fuel. X sells the synthetic blending
component to Y, a blender that makes a 20,000-gal-
lon SAF blend consisting of 50 percent synthetic
blending component and 50 percent petroleum-based
kerosene that meets the requirements of ASTM
D7566. X and Y are unrelated. X is the producer for
the 10,000 gallons of synthetic blending component
that it sold to Y. Y is not the producer for any of the
20,000 gallons of fuel that it blended, because blend-
ing is not production.
(B) Example 2. RNG producer. R collects bio-
gas from an anaerobic digester and processes it into
RNG that qualifies as a transportation fuel. R sells
10,000-gallon equivalents of RNG to W, a RNG
wholesaler and distributer. R injects the 10,000-gal-
lon equivalents of RNG into a pipeline. W removes
10,000-gallon equivalents of CANG from the pipe-
line, further compresses it and sells it to a munic-
ipality that uses it to fuel compressed natural gas
buses. R and W are unrelated. R is the producer of
the 10,000-gallon equivalents of RNG. W is not the
producer because W merely took a post-production
transportation fuel and further compressed it. Fur-
ther, W’s compression equipment does not constitute
a facility (as defined in paragraph (b)(14) of this sec-
tion), as the equipment was used solely to condition,
pressurize, or transport a transportation fuel beyond
the point of production.
(23) Production—(i) In general. The
term production means all steps and pro-
cesses used to make a transportation fuel.
Production begins with the processing
of primary feedstock(s) and ends with a
transportation fuel ready to be sold in a
qualifying sale. Production must involve
substantial processing by the producer to
create a transportation fuel. Production
does not include instances in which a per-
son engages in minimal processing, such
as blending a fuel mixture or otherwise
engaging in activities that do not result
in a chemical transformation. Production
does not include instances where a person
uses a primary feedstock to produce a fuel
that meets the same ASTM standard as the
primary feedstock. Production must occur
in the United States.
(ii) Examples. The following examples
illustrate the definition of production.
(A) Example 1. Minimal processing when stabi-
lizing biodiesel; production in the United States. X,
a domestic corporation, imports fatty acid methyl
ester (FAME) that does not meet the ASTM D6751
specifications for biodiesel. After importation into
the United States, X adds a stabilizing additive so
that the FAME meets the specifications of ASTM
D6751. The resulting fuel is ASTM-compliant bio-
diesel that qualifies as a transportation fuel. X then
sells the ASTM-compliant biodiesel to an unrelated
person for use as a fuel in that person’s trade or
business. X has not produced the ASTM-compliant
biodiesel, as X merely engaged in minimal process-
ing by adding an additive to the imported FAME.
Further, the ASTM-compliant biodiesel sold by X
was not produced in the United States, as X did
not engage in substantial processing in the United
States. Substantial processing, and thus production,

Bulletin No. 2025–6 695 February 3, 2025
occurred before X imported the FAME into the
United States.
(B) Example 2. Minimal processing when dehy-
drating hydrous ethanol; production in the United
States. Y, a domestic corporation, imports hydrous
ethanol into the United States. The hydrous etha-
nol has excessive water content and does not meet
the ASTM D4806 specifications for ethanol. After
importation into the United States, Y reduces the
water content of the hydrous ethanol. The resulting
fuel is ASTM-compliant anhydrous ethanol that
qualifies as a transportation fuel. Y then sells the
ASTM-compliant anhydrous ethanol to an unrelated
person for use in the production of a gasoline blend.
Y has not produced the ASTM-compliant anhydrous
ethanol, as Y merely engaged in minimal processing
by dehydrating the imported hydrous ethanol. Fur-
ther, the ASTM-compliant anhydrous ethanol sold
by Y was not produced in the United States, as Y did
not engage in substantial processing in the United
States. Substantial processing, and thus production,
occurred before Y imported the hydrous ethanol into
the United States.
(24) Qualified facility—(i) In general.
As provided in section 45Z(d)(4), the
term qualified facility means a facility (as
defined in paragraph (b)(14) of this sec-
tion) used for the production of transpor-
tation fuel and excludes any facility for
which an anti-stacking credit is allowed
under section 38 for the taxable year. See
§1.45Z-4(b) for more information on the
application of the anti-stacking rules.
(ii) Anti-stacking credit. The term
anti-stacking credit means any one of the
following credits:
(A) The credit for production of clean
hydrogen under section 45V (section 45V
credit).
(B) The credit determined under section
46 to the extent that such credit is attribut-
able to the energy credit determined under
section 48 with respect to any specified
clean hydrogen production facility for
which an election is made under section
48(a)(15) (section 48(a)(15) election).
(C) The credit for carbon oxide seques-
tration under section 45Q (section 45Q
credit).
(25) Qualifying sale—(i) In general.
As provided in section 45Z(a)(4), the term
qualifying sale means a sale of transpor-
tation fuel by the taxpayer to an unrelated
person if—
(A) The fuel is sold for use in the pro-
duction of a fuel mixture by such person,
(B) The fuel is sold for use in a trade or
business by such person, or
(C) Such person sells such fuel at retail
to another person and places such fuel in
the fuel tank of such other person.
(ii) Sold for use in a trade or business.
The term sold for use in a trade or busi-
ness means sold for use as a fuel in a trade
or business within the meaning of sec-
tion 162 of the Code. The term does not
include a sale for blending or for further
processing, including use as a primary
feedstock to produce another fuel.
(iii) Sale by another member of a con-
solidated group. In the case of a corpora-
tion that is a member of an affiliated group
of corporations filing a consolidated return
(that is, a member of a consolidated group
(as defined in §1.1502-1(b) and (h))), such
corporation will be treated as selling fuel
to an unrelated person if such fuel is sold
to the unrelated person by another mem-
ber of such consolidated group.
(iv) Example. Qualifying sale related
to ethanol to SAF production. A pro-
duces 12,000 gallons of ethanol. A sells
the ethanol to B. A and B are unrelated.
B uses the 12,000 gallons of ethanol to
produce 4,500 gallons of a synthetic
blending component under ASTM 7566,
Annex A5 (ATJ-SPK). B then blends the
4,500 gallons of synthetic blending com-
ponent with petroleum-based kerosene.
B’s resulting 9,000-gallon SAF blend is
50 percent synthetic blending component
and 50 percent kerosene and meets the
requirements of ASTM D7566. B sells
the SAF blend to an unrelated person for
use in an aircraft in a trade or business
under section 162.
A, the producer of the 12,000 gallons
of ethanol, is not eligible to claim a sec-
tion 45Z credit for the 12,000 gallons of
ethanol that it sold to B. A sold the eth-
anol to B for use as a primary feedstock
to produce another fuel, which paragraph
(b)(25)(ii) of this section excludes from
the definition of sold for use in a trade or
business, and the sale is not otherwise a
qualifying sale. B is the producer of the
4,500 gallons of ATJ-SPK, the synthetic
blending component, that it made and
sold as part of the SAF blend. Assum-
ing all other requirements of the section
45Z credit are met, B is eligible to claim
a section 45Z credit for the 4,500 gallons
of synthetic blending component because
it sold such fuel for use in an aircraft in
a trade or business within the meaning of
section 162.
(26) SAF transportation fuel—(i) In
general. The term SAF transportation fuel
means sustainable aviation fuel (SAF) as
defined in section 45Z(a)(3)(B). That term
means the non-kerosene portion of any
liquid fuel that is a transportation fuel, is
sold for use in an aircraft, and:
(A) meets the requirements of—
(1) ASTM D7566, or
(2) the Fischer Tropsch provisions of
ASTM D1655, Annex A1; and
(B) is not derived from palm fatty acid
distillates or petroleum.
(ii) Synthetic blending component.
The term synthetic blending component
means the SAF portion of a fuel mixture
described in ASTM D7566 that meets the
specifications of one of the ASTM D7566
Annexes and is not derived from palm
fatty acid distillates or petroleum.
(iii) Sold for use in an aircraft. A syn-
thetic blending component sold to a per-
son that blends the fuel into a fuel mixture
described in ASTM D7566 is sold for use
in an aircraft.
(iv) FT hydrocarbons. The term FT
hydrocarbons means the Fischer Tropsch
hydrocarbons that are derived from bio-
mass, used to produce jet fuel described in
section A1.2.2.2 of ASTM D1655, Annex
A1, and not derived from palm fatty acid
distillates or petroleum.
(v) ASTM D7566 Annexes. The term
ASTM D7566 Annexes means any of the
annexes in ASTM D7566 that provide
the specifications for a pathway to create
a synthetic blending component that can
be blended with ASTM D1655-compliant
kerosene.
(vi) ASTM D1655, Annex A1. The
term ASTM D1655, Annex A1 means the
Fischer Tropsch provisions of ASTM
D1655 Annex A1 that are contained in
section A1.2.2.2, which provides a path-
way for coprocessing up to five percent
of FT hydrocarbons with petroleum to
make a liquid fuel that qualifies as jet
fuel. For purposes of this definition, the
term petroleum includes any conven-
tionally sourced hydrocarbons permitted
under ASTM D1655, Annex A1. Liquid
fuel produced in accordance with sec-
tion A1.2.2.1 of ASTM D1655, Annex
A1 does not qualify for the section 45Z
credit because section A1.2.2.1 defines
a pathway for producing a liquid fuel
from coprocessing an applicable material
(or materials derived therefrom) with a
non-biomass feedstock.

February 3, 2025 696 Bulletin No. 2025–6
(27) Secretary; IRS—(i) Secretary. The
term Secretary means the Secretary of the
Treasury or her delegate.
(ii) IRS. The term IRS means the Inter-
nal Revenue Service.
(28) Section 45Z credit. The term sec-
tion 45Z credit means the clean fuel pro-
duction credit determined under section
45Z of the Code and the section 45Z reg-
ulations.
(29) Section 45Z regulations. The term
section 45Z regulations means the regu-
lations in this section, §§1.45Z-2 through
1.45Z-6, and §1.4101-1.
(30) Taxpayer. The term taxpayer
means the person that is registered as the
producer of a clean fuel under section
4101 (or that is treated as the registrant for
purposes of filing a claim for the section
45Z credit). See §1.45Z-6, Procedures for
filing a claim for clean fuel production
credit.
(31) Transportation fuel—(i) In gen-
eral. As provided in section 45Z(d)(5)(A),
the term transportation fuel means a fuel
that—
(A) Is suitable for use as a fuel in a
highway vehicle or aircraft,
(B) Has an emissions rate that is not
greater than 50 kilograms of CO
2
e per
mmBTU, and
(C) Is not derived from coprocess-
ing an applicable material (or materials
derived from an applicable material) with
a feedstock that is not biomass.
(ii) Suitable for use as a fuel in a
highway vehicle or aircraft (suitable for
use)—(A) A fuel is suitable for use if the
fuel either has practical and commercial
fitness for use as a fuel in a highway vehi-
cle or aircraft, or may be blended into a
fuel mixture that has practical and com-
mercial fitness for use as a fuel in a high-
way vehicle or aircraft. A fuel may pos-
sess this practical and commercial fitness
even though use in a highway vehicle or
aircraft is not the fuel’s predominant use.
However, a fuel does not possess this
practical and commercial fitness solely by
reason of its possible or rare use as a fuel
in a highway vehicle or aircraft. A fuel is
suitable for use at the point at which no
further production, refinement, or other
step is necessary before the fuel is ready
to be sold in a qualifying sale, except, as
specified in paragraph (b)(31)(ii)(B) of
this section, for CANG. To be considered
suitable for use, a fuel need not actually
be used as a fuel in a highway vehicle or
aircraft.
(B) CANG is suitable for use once it is
produced such that if further compressed
it would meet the specifications of ASTM
D8080.
(C) A fuel that does not require further
processing and that may be blended with
or used as a component of taxable fuel
(within the meaning of section 4083 of the
Code) is suitable for use.
(32) United States. As provided in sec-
tion 45Z(f)(1)(B), the term United States
includes any territory of the United States.
(33) Unrelated person. As provided
in section 45Z(f)(3), the term unrelated
person means a person not related to the
taxpayer. Persons will be treated as related
to each other if such persons would be
treated as a single employer under the reg-
ulations prescribed under section 52(b) of
the Code.
(c) Applicability date. This section
applies to qualifying sales occurring on
or after the date proposed regulations are
published in the Federal Register.
§1.45Z-2 General rules.
(a) Amount of credit. For purposes of
section 38 of the Code, the section 45Z
credit is determined under section 45Z of
the Code and the section 45Z regulations.
(1) In general. The amount of the sec-
tion 45Z credit for any taxable year is an
amount equal to the product of—
(i) The applicable amount per gallon or
gallon equivalent (as defined in §1.45Z-
1(b)(16)) with respect to any transporta-
tion fuel which is—
(A) Produced by the taxpayer at a qual-
ified facility, and
(B) Sold by the taxpayer in a qualifying
sale during the taxable year, and
(ii) The emissions factor for such fuel.
(2) Fuel measurement. The volume
of a liquid fuel is measured on the basis
of gallons adjusted to ambient pressure
and temperature of 1 atmosphere and 60
degrees Fahrenheit. The gallon equivalent
of a non-liquid fuel is calculated accord-
ing to §1.45Z-1(b)(16).
(3) Rounding. As provided in section
45Z(a)(5), if the amount of any section
45Z credit is not a multiple of 1 cent, a
taxpayer must round such amount to the
nearest cent. A taxpayer must round up
any amount ending in 0.5 cents or higher,
and round down any amount ending in
less than 0.5 cents.
(4) Applicable amount—(i) In general.
The term applicable amount means the
base amount described in paragraph (a)
(4)(ii) of this section or the alternative
amount described in paragraph (a)(4)(iii)
of this section. The applicable amount is
subject to inflation adjustment. See sec-
tion 45Z(c).
(ii) Base amount. As provided in sec-
tion 45Z(a)(2)(A) and (a)(3)(A)(i), in the
case of any transportation fuel produced
at a qualified facility that does not sat
-
isfy the prevailing wage and apprentice-
ship requirements, the term base amount
means—
(A) For non-SAF transportation fuel,
20 cents subject to inflation adjustment for
calendar years beginning after 2024; and
(B) For SAF transportation fuel, 35
cents subject to inflation adjustment for
calendar years beginning after 2024.
(iii) Alternative amount. As provided
in section 45Z(a)(2)(B) and (a)(3)(A)(ii),
in the case of any transportation fuel pro-
duced at a qualified facility that satisfies
the prevailing wage and apprenticeship
requirements, the term alternative amount
means—
(A) For non-SAF transportation fuel,
$1.00 subject to inflation adjustment for
calendar years beginning after 2024; and
(B) For SAF transportation fuel, $1.75
subject to inflation adjustment for calen-
dar years beginning after 2024.
(5) Inflation adjustment—(i) In gen-
eral. As provided in section 45Z(c)(1), for
calendar years beginning after 2024, the
base amount and the alternative amount
for both non-SAF and SAF transportation
fuel (that is, the $0.20, $0.35, $1.00, and
$1.75 amounts described in paragraphs (a)
(4)(ii) and (iii) of this section), will each
be adjusted by multiplying such amount
by the inflation adjustment factor for the
calendar year in which the sale of the
transportation fuel occurs. If an inflation
adjusted amount is not a multiple of 1
cent, such amount will be rounded to the
nearest multiple of 1 cent.
(ii) Inflation adjustment factor. As pro-
vided in section 45Z(c)(2), the term infla-
tion adjustment factor means the inflation
adjustment factor determined and pub-

Bulletin No. 2025–6 697 February 3, 2025
lished by the Secretary pursuant to section
45Y(c) of the Code, determined by substi-
tuting “calendar year 2022” for “calendar
year 1992” in section 45Y(c)(3). Accord-
ingly, the inflation adjustment factor for
purposes of section 45Z means, with
respect to a calendar year, a fraction the
numerator of which is the GDP implicit
price deflator for the preceding calendar
year and the denominator of which is the
GDP implicit price deflator for the calen-
dar year 2022. In this context, the term
GDP implicit price deflator means the
most recent revision of the implicit price
deflator for the gross domestic product as
computed and published by the Depart-
ment of Commerce before March 15 of
the calendar year. See section 45Y(c)(3).
(iii) Publication of inflation adjustment
factor. The Secretary will publish guid-
ance in the Internal Revenue Bulletin (see
§601.601 of this chapter) no more fre-
quently than annually that will provide the
inflation adjustment factor.
(b) Qualifying sale after production
required. For transportation fuel produced
during or after 2025, a taxpayer is eligi-
ble to claim the section 45Z credit only
for the taxable year in which the qualify-
ing sale of that fuel occurs, provided the
taxpayer meets all other requirements to
claim the credit. However, such qualify-
ing sale must occur before the termination
date provided in section 45Z(g) (or as oth-
erwise provided by Congress). A taxpayer
may produce a transportation fuel in an
earlier taxable year than the taxable year
in which the qualifying sale of such fuel
occurs. However, a qualifying sale may
take place no earlier than the date the fuel
is produced. Transportation fuel produced
before 2025 is ineligible for the section
45Z credit.
(c) Emissions factor—(1) In general.
As provided in section 45Z(b)(1)(A), the
emissions factor of a transportation fuel is
an amount equal to the quotient of—
(i) An amount equal to—
(A) 50 kilograms of CO
2
e per mmBTU,
minus
(B) The emissions rate for such fuel,
divided by
(ii) 50 kilograms of CO
2
e per mmBTU.
(2) Rounding—(i) In general. As pro-
vided in section 45Z(b)(2), if the emis-
sions factor for a transportation fuel is not
a multiple of 0.1, a taxpayer must round
such amount to the nearest multiple of 0.1.
A taxpayer must round up if the digit in
the hundredths place is a 5 or higher, and
round down if the digit in the hundredths
place is less than 5.
(ii) Example. Y produces a transporta-
tion fuel with an emissions rate of 21.25
kilograms of CO
2
e per mmBTU. The
emissions factor for Y’s fuel is initially
calculated as follows: (50 – 21.25) ÷ 50 =
0.575. Because 0.575 is not a multiple of
0.1, Y must round it to the nearest multiple
of 0.1. Thus, the emissions factor for Y’s
fuel is 0.6. If Y’s initial calculation had
instead resulted in an emissions factor of
0.54, Y would have been required to round
the emissions factor down to 0.5.
(d) Emissions rate. The emissions rate
for a transportation fuel is such fuel’s
lifecycle greenhouse gas emissions rate
expressed as kilograms of CO
2
e per
mmBTU, based on the amount of lifecy-
cle greenhouse gas emissions of such fuel
(determined pursuant to section 45Z(b)
(1)(B) through (D) and paragraph (e) of
this section), the applicable emissions
rate table published by the Secretary, and,
in the case of any transportation fuel for
which an emissions rate has not been
established in the applicable emissions
rate table, any provisional emissions rate
(PER) determined by the Secretary with
respect to such fuel.
(e) Emissions rate table—(1) In gen-
eral. As provided in section 45Z(b)(1)(B)
(i), the Secretary will annually publish a
table that sets forth the emissions rate for
similar types and categories of transpor-
tation fuels (emissions rate table) based
on the lifecycle greenhouse gas emissions
for such fuels, expressed as kilograms of
CO
2
e per mmBTU, which a taxpayer must
use for purposes of section 45Z. A tax-
payer must use the applicable emissions
rate table as specified in paragraph (e)(2)
of this section (applicable emissions rate
table).
(2) Applicable emissions rate table—
(i) In general. A taxpayer that produces
a type and category of transportation
fuel that is established in the emissions
rate table for the taxable year in which
the taxpayer produces such fuel must use
the emissions rate table to determine the
emissions rate for such fuel for all of the
taxpayer’s production of such fuel during
the taxable year. See paragraph (f)(1) of
this section for additional discussion of
types and categories of transportation fuel
in the applicable emissions rate table.
(ii) Emissions rate table updated
during taxable year. If, during the taxable
year of production, the Secretary pub-
lishes an updated emissions rate table that
adds a type and/or category of fuel pro-
duced by the taxpayer, the taxpayer must
use such table to determine the emissions
rate for such fuel(s).
(3) Allowed methodologies for emis-
sions rate table—(i) Methodologies for
non-SAF transportation fuel generally. If
a type and category of non-SAF transpor-
tation fuel is established in the applicable
emissions rate table, a taxpayer producing
such type and category of fuel must deter-
mine the fuel’s emissions rate using the
45ZCF-GREET model, as directed by the
applicable emissions rate table.
(ii) 45ZCF-GREET model as a succes-
sor model. For purposes of section 45Z(b)
(1)(B)(ii), the 45ZCF-GREET model is
a successor model (as determined by the
Secretary).
(iii) Methodologies for SAF transpor-
tation fuels. If a type and category of SAF
transportation fuel is established in the
applicable emissions rate table, a taxpayer
producing such type and category of fuel
must determine the fuel’s emissions rate
using the most recent version of CORSIA
Default or CORSIA Actual or the 45ZCF-
GREET model, as directed by the appli-
cable emissions rate table. A taxpayer
may choose, for each type and category of
SAF transportation fuel that it produces,
which of these methodologies to use. For
each type and category of SAF transpor-
tation fuel, a taxpayer must use the same
methodology to calculate lifecycle green-
house gas emissions associated with all
stages of fuel feedstock production and
distribution. See §1.45Z-5, Procedures for
certification of lifecycle greenhouse gas
emissions rates, for information on how
to certify these methodologies.
(iv) Use of the most recent version of
methodology. A taxpayer must use the
most recent version of a methodology
allowed under paragraphs (e)(3)(i) and
(iii) of this section (allowed methodology)
that is publicly available on the first day
of the taxable year during which the tax-
payer produced the transportation fuel for
which the section 45Z credit is claimed. If

February 3, 2025 698 Bulletin No. 2025–6
a version of an allowed methodology adds
a type or category of fuel after the first
day of a taxable year, taxpayers must use
such version of the allowed methodology
for such new type or category of fuel for
the entire taxable year. If an updated ver-
sion of an allowed methodology becomes
publicly available after the first day of the
taxable year of production (but still within
such taxable year), then the taxpayer may,
in its discretion, treat such updated ver-
sion as the most recent version of such
methodology.
(v) Additional instructions on method-
ologies. A taxpayer must use an allowed
methodology in accordance with the
applicable emissions rate table, accu-
rately enter all information requested by
such methodology, and follow all publicly
available instructions for the use of such
methodology.
(vi) Accounting for certain emissions
in 45ZCF-GREET model. In the 45ZCF-
GREET model, for purposes of account-
ing for emissions associated with hydro-
gen (as a production input), natural gas
alternatives (as a production input or as
the transportation fuel produced), electric-
ity, and carbon capture and sequestration,
rules similar to the rules under section
45V apply.
(f) Provisional emissions rate (PER)—
(1) In general. If the applicable emissions
rate table does not establish the type and
category of transportation fuel produced
by a taxpayer, such taxpayer may file
a petition with the Secretary for deter-
mination of the emissions rate for such
fuel. See section 45Z(b)(1)(D). A tax-
payer requesting a PER is referred to as
an “applicant.” An applicant may use the
PER process if the transportation fuel that
it is producing is (1) a novel type of fuel
not established in the applicable emis-
sions rate table, or (2) if the type of fuel
is established in the emissions rate table,
but such fuel is produced using a pathway
or primary feedstock not established in
the applicable emissions rate table. For
non-SAF transportation fuels, an appli-
cant may not request a PER for a type and
category of transportation fuel if the path-
way or primary feedstock is established in
the applicable emissions rate table, even
if the applicant disagrees with the under-
lying assumptions (that is, background
data) or calculation approach used by the
most recent 45ZCF-GREET model. For
SAF transportation fuels, an applicant
may not request a PER for a type and cat-
egory of transportation fuel if the pathway
or primary feedstock is established in the
applicable emissions rate table, even if
the applicant disagrees with the underly-
ing assumptions or calculation approach
used by the allowed methodology used to
determine emissions rates for the appli-
cable emissions rate table (including the
45ZCF-GREET model and the CORSIA
program).
(2) Procedures for requesting a PER.
An applicant seeking a PER must follow
the latest procedures for obtaining a PER
as published by the Secretary in the sec-
tion 45Z regulations and in the Internal
Revenue Bulletin (see §601.601 of this
chapter), including the process for obtain-
ing an emissions value from the DOE that
is used by the applicant to request a PER
determination. For purposes of the section
45Z PER process, an emissions value is a
value obtained from the DOE setting forth
the DOE’s analytical assessment of the
lifecycle greenhouse gas emissions rate
associated with the production of a type of
transportation fuel using a particular pri-
mary feedstock and pathway.
(g) New emissions rates (including PER)
apply on January 1, 2025. The emissions
rate for any new type or category of fuel
established on the applicable emissions rate
table or determined through the PER pro-
cess will apply on January 1, 2025, regard-
less of when the Treasury Department and
the IRS publish guidance establishing an
emissions rate or PER procedures.
(h) Credit not allowed for production
before January 1, 2025. The section 45Z
credit is not allowed for fuel produced
before January 1, 2025.
(i) Applicability date. This section
applies to qualifying sales occurring on
or after the date proposed regulations are
published in the Federal Register, except
that paragraph (e) of this section applies
to taxable periods ending on or after Jan-
uary 10, 2025.
§1.45Z-4 Special Rules.
(a) Registered production in the United
States required—(1) In general. As pro-
vided in section 45Z(f)(1)(A)(i)(I) and
(ii), no section 45Z credit shall be deter-
mined with respect to any transportation
fuel unless the taxpayer is registered as a
producer of clean fuel under section 4101
of the Code at the time of production and
such fuel is produced in the United States.
(2) Registration rules and procedures.
The registration rules in §1.4101-1 apply
for purposes of the section 45Z credit.
A taxpayer will be considered registered
as a producer of clean fuel under section
4101 at the time of production if, at such
time, the taxpayer is registered in accor-
dance with section 4101, §1.4101-1, and
any applicable guidance published in the
Internal Revenue Bulletin (see §601.601
of this chapter).
(b) Anti-stacking rules—(1) In general.
This paragraph provides rules for deter-
mining if an anti-stacking credit has been
allowed for a taxable year with respect
to a facility. Such determination impacts
whether the facility is a qualified facility
as provided in section 45Z(d)(4)(B).
(2) Application of anti-stacking rules
on a taxable-year and per-facility basis—
(i) In general. The determination of
whether a facility is a qualified facility
is made separately for each taxable year
and each facility. Whether a facility is a
qualified facility for a given taxable year
depends on whether the facility produced
transportation fuel sold during that taxable
year and whether an anti-stacking credit
was allowed for that taxable year with
respect to the facility. A facility may be a
qualified a facility in one taxable year but
not in another taxable year. If a taxpayer
produces transportation fuel at multiple
facilities, the determination of whether
such fuel was produced at a qualified facil-
ity is made separately for each facility.
(ii) Section 48(a)(15) election. A sec-
tion 48(a)(15) election is irrevocable,
and if made, will permanently disqualify
a facility from being a qualified facility
under section 45Z for the taxable year of
the election and all subsequent taxable
years.
(3) Carbon capture equipment at a
facility. In the case of any transportation
fuel produced at a facility that includes
carbon capture equipment for which the
section 45Q credit is allowed for the tax-
able year, such facility is not a qualified
facility, and no section 45Z credit will be
determined with respect to such facility
for such taxable year.

Bulletin No. 2025–6 699 February 3, 2025
(4) Examples. The following examples
illustrate the application of the anti-stack-
ing rules. For purposes of these examples,
X, Y, and Z are all C corporations and
unrelated calendar-year taxpayers, unless
otherwise stated.
(i) Example 1: Interaction of section 45Z and
section 45V credits; transportation fuel and quali-
fied clean hydrogen produced at the same facility by
persons with the same taxable year. During 2025 and
2026, X produces a transportation fuel at a facility
and sells such fuel in a qualifying sale. X is other-
wise eligible to claim the section 45Z credit with
respect to the facility. During 2025 and 2026, Y pro-
duces qualified clean hydrogen, as defined in section
45V(c)(2), at the same facility. Y is allowed a section
45V credit with respect to the facility for 2025, but
not for 2026. No other person is allowed a section
45V credit with respect to the facility for 2025 or
2026. Because Y is allowed a section 45V credit with
respect to the facility for 2025, such facility is not a
qualified facility for section 45Z purposes for 2025.
Thus, X is not eligible to claim a section 45Z credit
with respect to the facility for 2025. The result in this
example would be the same if a person other than
Y is allowed the section 45V credit with respect to
the facility for 2025. A separate analysis is conducted
for 2026. Because no section 45V credit is allowed
with respect to the facility for 2026, the facility is a
qualified facility for section 45Z purposes for 2026.
Therefore, X is eligible to claim a section 45Z credit
with respect to the facility for 2026.
(ii) Example 2: Interaction of section 45Z and
section 45V credits; transportation fuel and quali-
fied clean hydrogen produced at the same facility by
persons with different taxable years. During 2025,
X produces a transportation fuel at a facility and
sells such fuel in a qualifying sale. X is otherwise
eligible to claim the section 45Z credit with respect
to the facility. During 2025, Y produces qualified
clean hydrogen, as defined in section 45V(c)(2),
at the same facility. Y has a taxable year of Octo-
ber 1 to September 30. Y is allowed a section 45V
credit with respect to the facility for its taxable year
of October 1, 2024, to September 30, 2025, but not
for its taxable year of October 1, 2025, to September
30, 2026. No other person is allowed a section 45V
credit with respect to the facility for any portion of
2025. Such facility is not a qualified facility for sec-
tion 45Z purposes for the period in 2025 for which
Y is allowed a section 45V credit (that is, January 1
through September 30, 2025). However, such facility
is a qualified facility for section 45Z purposes for the
period in 2025 for which no section 45V credit is
allowed with respect to the facility (that is, October
1 through December 31, 2025). Thus, X is eligible to
claim a section 45Z credit with respect to the facil-
ity for 2025, but only for the period during which
the facility is a qualified facility (that is, October 1
through December 31, 2025).
(iii) Example 3: Interaction of section 45Z credit
and section 48(a)(15) election. During 2025, X pro-
duces a transportation fuel at a facility and sells such
fuel in a qualifying sale. During 2025, X also pro-
duces qualified clean hydrogen, as defined in section
45V(c)(2), at the same facility, which is a specified
clean hydrogen production facility, as defined in sec-
tion 48(a)(15)(C). X is otherwise eligible to claim
the section 45Z credit and to make a section 48(a)
(15) election with respect to the facility. For 2025, X
makes an election under section 48(a)(15) to treat the
facility as energy property for purposes of the energy
credit under section 48, which credit then forms
part of the investment credit under section 46 that is
allowed to X. Because the transportation fuel and the
qualified clean hydrogen are produced at the same
facility, and X is allowed a section 46 credit attrib-
utable to a section 48(a)(15) election with respect to
the facility for 2025, such facility is not a qualified
facility for section 45Z purposes for 2025. Because a
section 48(a)(15) election is irrevocable, the facility
also will not be a qualified facility for section 45Z
purposes for any subsequent taxable year. Thus, X
is not eligible to claim the section 45Z credit with
respect to the facility for 2025 or for any subsequent
taxable year.
(iv) Example 4: Interaction of section 45Z and
section 45Q credits; transportation fuel produced
at a facility that includes carbon capture equip-
ment. During 2025 and 2026, X produces a trans-
portation fuel at a facility and sells such fuel in a
qualifying sale. X is otherwise eligible to claim the
section 45Z credit with respect to the facility. The
facility includes carbon capture equipment. Y owns
and uses the carbon capture equipment at the facil-
ity to capture carbon oxide. During 2025, Y utilizes
or disposes of the carbon oxide in a manner that
qualifies for the section 45Q credit. Y is allowed
a section 45Q credit with respect to the facility for
2025, but not for 2026. No other person is allowed
a section 45Q credit with respect to the facility for
2025 or 2026. Because Y is allowed a section 45Q
credit with respect to the facility for 2025, such
facility is not a qualified facility for section 45Z
purposes for 2025. Thus, X is not eligible to claim
a section 45Z credit with respect to the facility for
2025. The result in this example would be the same
if a person other than Y utilizes or disposes of the
carbon oxide and is allowed a section 45Q credit
with respect to the facility for 2025. A separate
analysis is conducted for 2026. Because no section
45Q credit is allowed with respect to the facility for
2026, the facility is a qualified facility for section
45Z purposes for 2026. Therefore, X is eligible to
claim a section 45Z credit with respect to the facil-
ity for 2026.
(c) Production attributable to the tax-
payer—(1) In general. Except as provided
in paragraph (d)(2) of this section, in the
case of a facility in which more than one
person has an ownership interest (and the
arrangement is not classified as a partner-
ship for Federal tax purposes), production
from the facility is allocated among such
persons in proportion to their respective
ownership interests in the gross sales from
such facility. See section 45Z(f)(2). In the
case of such an allocation, the amount of
each person’s section 45Z credit is deter-
mined pursuant to section 45Z(a) and the
section 45Z regulations based on each
person’s allocable share of production.
(2) Example. A, B, and C, all calendar
year taxpayers, each own an interest in
Facility, which is a qualified facility. A has
a 45 percent ownership interest in Facility,
B has a 35 percent ownership interest in
Facility, and C has a 20 percent owner-
ship interest in Facility. Gross sales from
Facility are allocated among A, B, and C
in proportion to their ownership interests.
During 2025, Facility produced 10 million
gallons of transportation fuel. A, B, and C
will each determine the amount of their
section 45Z credit for 2025 based on their
allocable share of the 10 million gallons
of transportation fuel produced at Facility
during 2025. Thus, A will determine the
amount of its section 45Z credit based on
4.5 million gallons, B will determine the
amount of its section 45Z credit based on
3.5 million gallons, and C will determine
the amount of its section 45Z credit based
on 2 million gallons.
(3) Section 761(a) election. If a facility
is owned through an unincorporated orga-
nization that has made a valid election
under section 761(a) of the Code, each
member’s undivided ownership interest
in the facility will be treated as a separate
facility owned by such member.
(d) No requirement of facility owner-
ship—(1) In general. A taxpayer is not
required to own the qualified facility at
which the taxpayer produces transporta-
tion fuel in order for a section 45Z credit
to be determined with respect to such fuel.
(2) Application of production attribu-
tion rules if taxpayer does not own facil-
ity. If a taxpayer produces transportation
fuel at a facility owned by another person,
production of such fuel will be attributed
to the taxpayer unless otherwise specified
in the Code or in the section 45Z regula-
tions. In the case of a production arrange-
ment under which multiple taxpayers pro-
duce transportation fuel at a facility that
is not owned by all such taxpayers, the
production of such transportation fuel will
be allocated among the taxpayers in pro-
portion to their respective interests in the
gross sales from such fuel, as determined
under the applicable contract or other legal
arrangement with respect to such fuel.
(e) Recordkeeping and substantia-
tion—(1) In general. A taxpayer claiming
the section 45Z credit must keep records
sufficient to establish the taxpayer’s eli-
gibility for the section 45Z credit and the

February 3, 2025 700 Bulletin No. 2025–6
amount of the credit claimed. At a mini-
mum, those records must include records
establishing that each fuel produced is a
transportation fuel, records on the primary
feedstock(s) used to produce each fuel,
records establishing that each fuel meets
any additional specifications for the type
of fuel under §1.45Z-1(b)(20) and §1.45Z-
1(b)(26), records substantiating how the
emissions rate for each fuel was deter-
mined (including, if applicable, the spe-
cific type(s) and category(ies) under the
applicable emissions rate table), records
relating to any fuel testing obtained by the
taxpayer, records establishing that each
facility used to produce fuel is a qualified
facility, records establishing the date each
facility was placed in service, records
establishing that each fuel was sold in a
qualifying sale, and records establishing
any unrelated party certification and sub-
stantiating the information therein. If a
taxpayer is claiming an increased credit
amount based on a qualified facility sat-
isfying the prevailing wage and appren-
ticeship requirements, the taxpayer must
also maintain records in accordance with
§1.45-12. A taxpayer must also keep all
information, including raw data, used for
or related to any petition for a PER.
(2) Safe harbor for substantiation of
emissions rate. A taxpayer may substanti-
ate the emissions rate for a non-SAF trans-
portation fuel that was determined using
the 45ZCF-GREET model by obtaining
certification with respect to such fuel sub-
stantially in the form and manner described
in §1.45Z-5 for certifying a SAF transpor-
tation fuel emissions rate determined using
the 45ZCF-GREET model and attaching
such certification to its Form 7218 for the
taxable year in which it claims a section
45Z credit for such fuel. To qualify for
this emissions rate substantiation safe har-
bor, a taxpayer must provide the qualified
certifier with all information necessary to
determine the emissions rate for a non-
SAF transportation fuel using the 45ZCF-
GREET model, including all information
the taxpayer entered into 45ZCF-GREET,
the specific type and category under the
applicable emissions rate table for such
fuel, and all other applicable information
described in §1.45Z-5. The Secretary may
provide other methods through which a
taxpayer may substantiate the emissions
rate for a non-SAF transportation fuel. The
Secretary will describe any such methods
in guidance published in the Internal Rev-
enue Bulletin or in IRS forms, instructions,
or publications. See §601.601 of this chap-
ter.
(f) Applicability date. This section
applies to qualifying sales occurring on
or after the date proposed regulations are
published in the Federal Register.
§1.45Z-5 Procedures for certification
of lifecycle greenhouse gas emissions
rates.
(a) In general. This section provides
rules on unrelated party certification for
SAF transportation fuel pursuant to sec-
tion 45Z(f)(1)(A)(i)(II) of the Code.
(b) Certification requirements—(1) In
general. A taxpayer must attach a certi-
fication to the taxpayer’s Form 7218 (as
provided in the Form 7218 instructions),
which is filed with the taxpayer’s Federal
income tax return or Federal information
return, for each qualified facility at which
the taxpayer produces SAF transportation
fuel and for each taxable year in which the
taxpayer claims the section 45Z credit.
(2) A certification specified in this para-
graph (b) must be prepared by a qualified
certifier under penalties of perjury and
must contain—
(i) A statement from the qualified cer-
tifier regarding the production of SAF
transportation fuel, including that the
inputs used to determine the lifecycle
greenhouse gas emissions rate of the pro-
duction process are accurate (production
statement);
(ii) A statement from the qualified cer-
tifier regarding the amount of SAF trans-
portation fuel sold (sale statement);
(iii) A statement from the qualified cer-
tifier regarding conflicts of interest (con
-
flict statement);
(iv) Information regarding the qualified
certifier, including documentation of the
qualified certifier’s qualifications (quali-
fied certifier statement);
(v) Certain general information about
the qualified facility at which the SAF
transportation fuel production undergoing
certification occurred;
(vi) Any documentation necessary to
substantiate the certification process given
the standards and best practices prescribed
by the qualified certifier’s accrediting
body and the circumstances of the tax-
payer and the qualified facility; and
(vii) Any other information or docu-
mentation required by applicable IRS tax
forms or instructions.
(3) Qualified certifier. (i) For taxpay-
ers using CORSIA Default or CORSIA
Actual to determine the emissions rate for
SAF transportation fuel, the term qualified
certifier means any individual or organi-
zation with active accreditation from
International Sustainability and Carbon
Certification, Roundtable on Sustainable
Biomaterials, or other sustainability certi-
fication scheme approved by the Interna-
tional Civil Aviation Organization.
(ii) For taxpayers using the 45ZCF-
GREET model to determine the emissions
rate for SAF transportation fuel, the term
qualified certifier means any individual or
organization with active accreditation—
(A) From the American National Stan-
dards Institute National Accreditation
Board to conduct validation and verifica-
tion in accordance with the requirements
of ISO 14065; or
(B) As a verifier, lead verifier, or ver-
ification body under the California Air
Resources Board Low Carbon Fuel Stan-
dard program.
(iii) Qualified certifiers are qualified
to provide certification only for the asso-
ciated methodologies identified in this
paragraph (b)(3). A qualified certifier
must have active accreditation for the
associated methodology as of the date it
provides a certification to a taxpayer. A
taxpayer must use the qualified certifier
identified in this paragraph (b)(3) for the
identified emissions rate methodology
used by the taxpayer.
(c) Requirements for the production
statement. The requirements set forth in
this paragraph (c) apply to the production
statement.
(1) The production statement must
be a statement that the qualified certifier
performed a certification sufficient to
determine that any lifecycle greenhouse
gas emissions data inputs and the opera-
tion, during the applicable taxable year,
of the qualified facility that produced the
SAF transportation fuel for which the sec-
tion 45Z credit is claimed are accurately
reflected in—
(i) The number of gallons of SAF trans-
portation fuel produced by the taxpayer

Bulletin No. 2025–6 701 February 3, 2025
that is entered on the Form 7218 to which
the certification is attached; and
(ii) Either—
(A) The data the taxpayer entered into
the methodology under §1.45Z-2(e)(3)
(iii) the taxpayer selected to determine the
lifecycle greenhouse gas emissions rate
that is entered on the Form 7218 to which
the certification is attached; or
(B) The data the taxpayer submitted in
a provisional emissions rate (PER) petition
relating to the SAF transportation fuel for
which the section 45Z credit is claimed,
including data provided to the DOE in sup-
port of the taxpayer’s request for the emis-
sions value provided in the PER petition.
(2) If the production statement includes
the information specified in paragraph (c)
(1)(ii)(B) of this section, then the produc-
tion statement must also specify the emis-
sions value received from the DOE that
was calculated using such data, expressed
in kilograms of CO
2
e per mmBTU.
(3) The production statement must
specify the lifecycle greenhouse gas
emissions rate (expressed in kilograms
of CO
2
e per mmBTU) and the amount of
SAF transportation fuel produced by the
taxpayer (expressed in gallons), that are
entered on the Form 7218 to which the
certification is attached.
(d) Requirements for the sale statement.
The sale statement must state that the
qualified certifier performed a certification
sufficient to determine that the number of
gallons of SAF transportation fuel that is
specified in the production statement pur-
suant to paragraph (c)(1) of this section,
and that is entered on the Form 7218 to
which the certification is attached, has
been sold in a qualifying sale.
(e) Requirements for the conflict state-
ment—(1) In general. The conflict state-
ment must state that—
(i) The qualified certifier has not
received a fee based to any extent on the
value of any section 45Z credit that has
been or is expected to be claimed by the
taxpayer and no arrangement has been
made for such fee to be paid at any time
in the future;
(ii) The qualified certifier has not been
a party to any transaction involving the
sale of SAF transportation fuel the tax-
payer produced or in which the taxpayer
purchased primary feedstocks for the pro-
duction of such SAF transportation fuel;
(iii) The qualified certifier is not related,
within the meaning of section 267(b) or
707(b)(1) of the Code, to the taxpayer, or
an employee of, the taxpayer; and
(iv) The qualified certifier is not mar-
ried to anyone who is related to, or an
employee of, the taxpayer.
(2) Additional attestations required in
certain circumstances. If the qualified cer-
tifier is acting in his or her capacity as a
partner in a partnership, an employee of
any person, whether an individual, corpo-
ration, or partnership, or an independent
contractor engaged by a person other than
the taxpayer, the attestations under para-
graphs (e)(1)(i) through (iv) of this sec-
tion must also be made with respect to the
partnership or the person that employs or
engages the qualified certifier.
(f) Requirements for the qualified certi-
fier statement. The qualified certifier state-
ment must include the items set forth in
this paragraph (f).
(1) The qualified certifier’s name,
address, and certifier identification num-
ber (ex. CARB LCFS Verifier Executive
Order Number);
(2) The qualified certifier’s qualifica-
tions to conduct the certification, includ-
ing a description of the certification
the qualified certifier received from the
accrediting body;
(3) If the qualified certifier is acting
in his or her capacity as a partner in a
partnership, an employee of any person,
whether an individual, corporation, or
partnership, or an independent contrac-
tor engaged by a person other than the
taxpayer, the name, address, and certifier
identification number of the partnership
or the person that employs or engages the
qualified certifier;
(4) The signature of the qualified certi
-
fier and the date of signature; and
(5) A statement that the certification
was conducted for Federal tax purposes.
(g) General information on qualified
facility. The certification must include the
information set forth in this paragraph (g)
for the qualified facility at which the SAF
transportation fuel production undergoing
certification occurred:
(1) The location of the qualified facil-
ity;
(2) A description of the qualified facil-
ity, including its method of producing
SAF transportation fuel;
(3) The type(s) of primary feedstock(s)
used by the qualified facility to produce
SAF transportation fuel during the taxable
year of production;
(4) The amount(s) of primary feed-
stock(s) used by the qualified facility
during the taxable year of production;
(5) The locations from which primary
feedstock(s) used by the qualified facility
during the taxable year of production are
sourced;
(6) A list of the metering devices used
to record any data used by the qualified
certifier to support the production state-
ment under paragraph (c) of this section
along with a statement that the qualified
certifier is reasonably assured that the
device(s) underwent industry-appropriate
quality assurance and quality control, and
the accuracy and calibration of the device
has been tested in the last year prior to the
time of observation; and
(7) Confirmation that the emissions
rate is accurate to the higher of +/-5% or 2
grams of CO
2
e per mmBTU.
(h) Timely certification—(1) In gen-
eral. A certification must be signed and
dated by the qualified certifier no later
than—
(i) The due date, including extensions,
of the Federal income tax return or Fed-
eral information return for the taxable
year during which the SAF transportation
fuel undergoing certification is sold; or
(ii) In the case of a credit first claimed
for the taxable year on an amended return
or administrative adjustment request,
the date on which the amended return
or administrative adjustment request is
filed.
(2) Certification in a year other than
the year of sale. A taxpayer may obtain a
certification with respect to a SAF trans-
portation fuel in a different taxable year
than the taxable year in which the qualify-
ing sale of such fuel occurs.
(i) Applicability date. This section
applies to qualifying sales occurring on
or after the date proposed regulations are
published in the Federal Register.
§1.45Z-6 Procedures for filing a claim
for the clean fuel production credit.
(a) Time and manner of filing a claim.
To claim the section 45Z credit, a tax-
payer must file a completed Form 7218

February 3, 2025 702 Bulletin No. 2025–6
with the taxpayer’s timely filed (includ-
ing extensions) Federal income tax return
or Federal information return for the tax-
able year in which the taxpayer claims the
section 45Z credit. A taxpayer must file
a separate Form 7218 for each qualified
facility at which transportation fuel for
which the taxpayer is claiming the sec-
tion 45Z credit is produced. A taxpayer
must complete Form 7218 in accordance
with the instructions to that form. A tax-
payer must include with its Form 7218
any applicable certification required by
§1.45Z-5.
(b) Special rules if producer is not
credit claimant—(1) Producer that is
a disregarded entity or a qualified sub-
chapter S subsidiary. If an entity that
is disregarded as an entity separate
from its owner within the meaning of
§301.7701-2(c)(2)(i) of this chapter
(disregarded entity) or a qualified sub-
chapter S subsidiary within the meaning
of section 1361(b)(3)(B) (QSub) pro-
duces transportation fuel that is eligible
for the section 45Z credit, the owner
of such disregarded entity or QSub
will be treated as registered as a pro-
ducer of clean fuel under section 4101
for purposes of claiming the section
45Z credit. The producer’s registration
number (within the meaning of section
45Z(f)(1)(A)(i)(I) and §1.4101-1) of
a disregarded entity or a QSub will be
attributed to its owner. The owner of a
disregarded entity or QSub that claims
and is allowed a section 45Z credit with
respect to transportation fuel produced
by such disregarded entity or QSub must
satisfy the recordkeeping requirements
in §1.45Z-4(e).
(2) Producer that is a member of a con-
solidated group. If a member of a consol-
idated group (as defined in §1.1502-1(b)
and (h), respectively) produces transporta-
tion fuel that is eligible for the section 45Z
credit, such member is the person eligible
to claim the section 45Z credit. The mem-
ber must satisfy all requirements under
section 45Z (for example, the recordkeep-
ing requirements in §1.45Z-4(e)). For
rules regarding the status of the common
parent as generally the agent for members
of its consolidated group, see §1.1502-77.
The agent of a consolidated group, when
filing a Form 7218 to claim the section
45Z credit, must use the producer’s reg-
istration number (within the meaning of
section 45Z(f)(1)(A)(i)(I) and §1.4101-1)
of the member that produced the transpor-
tation fuel.
(c) Applicability date. This section
applies to qualifying sales occurring on
or after the date proposed regulations are
published in the Federal Register.
§1.4101-1 Registration
(a) In general. This section provides
rules relating to registration for purposes
of the section 45Z credit.
(1) Letter of Registration required. A
person is registered under section 4101
of the Code only if the IRS has issued a
Letter of Registration to the person and
the registration has not been revoked or
suspended.
(2) Separate entity treatment—(i) In
general. Each business unit that has, or
is required to have, a separate employer
identification number is treated as a sepa-
rate person. Thus, two business units (for
example, a parent corporation and a sub-
sidiary corporation), each of which has a
different employer identification number,
are two persons.
(ii) Disregarded entity. Section
301.7701-2(c)(2)(i) of this chapter
(relating to certain wholly owned enti-
ties) does not apply for purposes of reg-
istration under this section. An entity
that is disregarded as an entity separate
from its owner for any purpose under
§301.7701-2 of this chapter and that
has, or is required to have, an employer
identification number is treated as a cor-
poration (consistent with §301.7701-2(c)
(2)(v)(B) of this chapter) for purposes of
registration under this section. Therefore,
an entity that is treated as a corporation,
that has an employer identification num-
ber, and that is a producer of transporta-
tion fuel for purposes of the section 45Z
credit must register as a producer of clean
fuel in order to be eligible to claim the
section 45Z credit.
(iii) Qualified subchapter S subsidiary.
Section 1.1361-4(a)(1)(i) (providing that a
corporation that is a qualified subchapter
S subsidiary as defined in section 1361(b)
(3)(B) (QSub) is not treated as a separate
corporation) does not apply for purposes
of registration under this section. There-
fore, a QSub that has an employer iden-
tification number and that is a producer
of transportation fuel for purposes of the
section 45Z credit must register as a pro-
ducer of clean fuel to be eligible to claim
the section 45Z credit.
(3) Reregistration—(i)
Reregistration
in the event of change of ownership. As
provided in section 4101(a)(5), a person
is required to reregister under this section
if after a transaction (or series of related
transactions) more than 50 percent of
ownership interests in, or assets of, such
person are held by persons other than
persons (or persons related thereto) who
held more than 50 percent of such inter-
ests or assets before the transaction (or
series of related transactions). Reregistra-
tion does not apply to a company whose
stock is regularly traded on an established
securities market, but such companies
are required to notify the IRS about the
change in ownership.
(ii) Reregistration in the event of
change of employer identification number.
If a registrant changes its employer iden-
tification number, such registrant must
reregister under this section using its new
employer identification number.
(iii) Safe harbor for purposes of section
45Z credit. A person that is approved for
reregistration is eligible to claim a section
45Z credit (provided that all requirements
of section 45Z are met) as of the date the
IRS received the application for reregis-
tration, even if, at the time of fuel pro-
duction, the IRS has not yet approved the
reregistration.
(b) Definitions—(1) Applicant. An
applicant is a person that has applied for
registration under paragraph (d) of this
section.
(2) Letter of registration. A Letter of
Registration is a letter issued by the IRS to
confirm approval of a registration required
under section 4101 and this section. A Let-
ter of Registration includes the registrant’s
registration number and the effective date
of the registration.
(3) Penalized for a wrongful act. A per-
son has been penalized for a wrongful act
if the person has—
(i) Been assessed any penalty under
chapter 68 of the Code (or similar provi-
sion of the law of any State) for fraudu-
lently failing to file any return or pay any
tax, and the penalty has not been wholly
abated, refunded, or credited;

Bulletin No. 2025–6 703 February 3, 2025
(ii) Been assessed any penalty under
chapter 68 of the Code, such penalty has
not been wholly abated, refunded, or
credited, and the IRS determines that the
conduct resulting in the penalty is part of
a consistent pattern of failing to deposit,
pay, or pay over a substantial amount of
tax;
(iii) Been convicted of a crime under
chapter 75 of the Code (or similar pro-
vision of the law of any State), or of
conspiracy to commit such a crime,
and the conviction has not been wholly
reversed by a court of competent juris-
diction;
(iv) Been convicted, under the laws of
the United States or any State, of a felony
for which an element of the offense is
theft, fraud, or the making of false state-
ments, and the conviction has not been
wholly reversed by a court of competent
jurisdiction;
(v) Been assessed any tax under section
4103 of the Code and the tax has not been
wholly abated, refunded, or credited; or
(vi) Had its registration under section
4101, 4222, 4662, or 4682 of the Code
revoked.
(4) Related person. A related person is
a person that—
(i) Directly or indirectly exercises con-
trol over an activity of the applicant;
(ii) Owns, directly or indirectly, five
percent or more of the applicant;
(iii) Is under a duty to assure the pay-
ment of a tax for which the applicant is
responsible;
(iv) Is a member, with the applicant,
of a group of organizations (as defined
in §1.52-1(b)) that would be treated as a
group of trades or businesses under com-
mon control for purposes of §1.52-1; or
(v) Distributed or transferred assets
to the applicant in a transaction in which
the applicant’s basis in the assets is deter-
mined by reference to the basis of the
assets in the hands of the distributor or
transferor.
(5) Registrant. A registrant is a per-
son that the IRS has, in accordance with
paragraph (f)(3) of this section, registered
under section 4101 and whose registration
has not been revoked or suspended.
(c) Requirement to register—(1) In
general. Every person intending to claim a
section 45Z credit with respect to the pro-
duction of a fuel eligible for the section
45Z credit is required to register with the
IRS under this section.
(2) Consequences of failing to regis-
ter. For the criminal penalty imposed for
failure to register, see section 7232 of the
Code. For the civil penalty imposed for
failure to register or reregister, see section
7272 of the Code. For the civil penalty
imposed for failure to register or reregis-
ter under section 4101, see section 6719
of the Code.
(d) Application instructions. Applica-
tion for registration under section 4101
must be made in accordance with the
instructions for Form 637, Application
for Registration (For Certain Excise Tax
Activities), or such other form as the Com-
missioner may designate. See §601.602 of
this chapter.
(e) Registration tests—(1) In general.
The IRS will register an applicant only
if the IRS determines that the applicant
meets the following three tests (collec-
tively, the registration tests):
(i) The activity test of paragraph (e)(2)
of this section.
(ii) The acceptable risk test of para-
graph (e)(3) of this section.
(iii) The satisfactory tax history test of
paragraph (e)(4) of this section.
(2) Activity test—(i) In general. An
applicant meets the activity test of this
paragraph (e)(2) only if the IRS deter-
mines that the applicant—
(A) Is, in the course of its trade or busi-
ness, regularly engaged in the activity for
which they are requesting registration; or
(B) Is likely to be (because of such fac-
tors as the applicant’s business experience,
financial standing, or trade connections),
in the course of its trade or business, reg-
ularly engaged in the activity for which
they are requesting registration, within a
reasonable time after becoming registered
under section 4101.
(ii) Example 1. Reasonable time standard; pro-
duction to begin more than 6 months after registra-
tion. An applicant submits a Form 637 requesting to
become registered as a producer of fuel that may be
eligible for the section 45Z credit, stating in its appli-
cation that it will not be able to produce such fuel
for at least three years from the date of the applica-
tion. Such applicant is not likely to be, in the course
of its trade or business, regularly engaged as a pro-
ducer of transportation fuel within a reasonable time
(6 months) after becoming registered under section
4101.
(iii) Example 2. Reasonable time standard; pro-
duction to begin within 6 months of registration. An
applicant submits a Form 637 requesting to become
registered as a producer of fuel that may be eligible
for the section 45Z credit, stating in its application
that it will be able to produce such fuel within six
months after it becomes registered. Such applicant is
likely to be, in the course of its trade or business, reg-
ularly engaged as a producer of transportation fuel
within a reasonable time after becoming registered
under section 4101.
(3) Acceptable risk test—(i) In gen-
eral. An applicant meets the acceptable
risk test of this paragraph (e)(3) if neither
the applicant nor a related person has been
penalized for a wrongful act. If an appli-
cant or a related person has been penalized
for a wrongful act, the IRS may nonethe-
less determine that an applicant meets the
acceptable risk test based on consideration
of the factors enumerated in paragraph (e)
(3)(ii) of this section.
(ii) Factors to consider. In making the
determination described in paragraph (e)
(3)(i) of this section, the IRS may consider
factors such as the following:
(A) The time elapsed since the appli-
cant or related person was penalized for a
wrongful act.
(B) The present relationship between
the applicant and any related person that
was penalized for any wrongful act.
(C) The degree of rehabilitation of the
person penalized for any wrongful act.
(4) Satisfactory tax history test—(i)
In general. An applicant meets the satis-
factory tax history test of this paragraph
(e)(4) only if the IRS determines that the
applicant has a satisfactory tax history as
described in paragraph (e)(4)(ii) of this
section.
(ii) Satisfactory tax history. An appli-
cant has a satisfactory tax history only
if the Commissioner determines that the
filing, deposit, and payment history for
all Federal taxes of the applicant and any
related person support the conclusion that
the applicant will comply with its obliga-
tions under this section.
(f) Action on the application by the
IRS—(1) Review of application. The IRS
may investigate the accuracy and com-
pleteness of any representations made by
an applicant and request any additional
relevant information from the applicant.
(2) Denial. If the IRS determines that
an applicant does not meet all of the regis-
tration tests described in paragraph (e) of
this section, the IRS will notify the appli-
cant, in writing, that its application for

February 3, 2025 704 Bulletin No. 2025–6
registration is denied and state the basis
for the denial.
(3) Approval. If the IRS determines
that an applicant meets all of the regis-
tration tests described in paragraph (e)
of this section, the IRS will register the
applicant under section 4101 and issue
the applicant a Letter of Registration
containing the effective date of the reg-
istration. The effective date of a regis-
tration under this section is the effective
date provided in the Letter of Registra-
tion. A copy of an application for regis-
tration (Form 637) is not a Letter of Reg-
istration.
(g) Terms and conditions of registra-
tion—(1) Affirmative duties. Each appli-
cant or registrant must—
(i) Make deposits, file returns, and pay
taxes as required by the Code and the reg-
ulations;
(ii) Keep records sufficient to show eli-
gibility for the section 45Z credit;
(iii) Notify the IRS of any change in
the information the registrant submitted in
connection with its application for regis-
tration, or previously submitted under this
paragraph (g)(1)(iii), within 10 days after
the change occurs. Changes requiring IRS
notification include, but are not limited to,
changes in ownership, address, and busi-
ness activities.
(2) Prohibited actions. A registrant or
applicant may not—
(i) Sell, lease, or otherwise allow
another person to use its registration, or
(ii) Make any false statement to the
IRS in connection with a submission
under section 4101.
(h) Effect of Letter of Registration. A
Letter of Registration is not a determina-
tion of liability for tax, eligibility for a
tax credit or deduction, or any other tax
treatment under the Code. For example,
a Letter of Registration issued to a regis-
trant producing a fuel that may be eligible
for the section 45Z credit is not a determi-
nation that the fuel that the registrant pro-
duces is a transportation fuel under section
45Z(d)(5)(A) or that the facility at which
the registrant produces such fuel is a qual-
ified facility under section 45Z(d)(4). A
Letter of Registration is also not a deter-
mination letter, as defined in §601.201(a)
(3) of this chapter.
(i) Adverse actions by the IRS against a
registrant—(1) Mandatory revocation or
suspension. The IRS will revoke or sus-
pend the registration of any registrant if
the IRS determines that the registrant, at
any time—
(i) Does not meet one or more of the
registration tests under paragraph (e) of
this section and has not corrected the defi-
ciency within a reasonable period of time
after notification by the IRS;
(ii) Has used its registration to evade,
or attempt to evade, the payment of any
tax, or to postpone or in any manner to
interfere with the collection of any such
tax, or to make a fraudulent claim for a
credit or payment;
(iii) Has aided or abetted another per-
son in evading, or attempting to evade,
payment of any tax, or in making a fraud-
ulent claim for a credit or payment; or
(iv) Has sold, leased, or otherwise
allowed another person to use its registra-
tion.
(2) Remedial action permitted in other
cases. If the IRS determines that a reg-
istrant has, at any time, failed to comply
with the terms and conditions of registra-
tion under paragraph (g) of this section,
made a false statement to the IRS in con-
nection with its application for registra-
tion or retention of registration, or other-
wise used its registration in a manner that
creates a significant risk of nonpayment
or late payment of tax, then the IRS may
revoke or suspend the registrant’s registra-
tion.
(3) Action by the IRS to revoke or sus-
pend a registration. If the IRS revokes or
suspends a registration, the IRS will notify
the registrant in writing and state the basis
for the revocation or suspension. The
effective date of the revocation or suspen-
sion may not be earlier than the date on
which the IRS notifies the registrant.
(j) Applicability date. This section
applies to persons producing transpor-
tation fuel on or after the date proposed
regulations are published in the Federal
Register.
Section 45Z Clean
Fuel Production Credit;
Emissions Rates; Request
for Comments
Notice 2025-11
SECTION 1. PURPOSE
This notice provides initial guidance on
emissions rates under § 45Z(b)(1)(B) of
the Internal Revenue Code (Code)
1
for the
clean fuel production credit determined
under § 45Z (§ 45Z credit). This notice
also requests comments from the public
related to emissions rates for the § 45Z
credit to assist the Department of the Trea-
sury (Treasury Department) and the Inter-
nal Revenue Service (IRS) in developing
additional guidance. See also Notice 2025-
10, this Bulletin, that describes forthcom-
ing proposed regulations that the Treasury
Department and the IRS intend to issue
that would address definitions, emissions
rates, credit eligibility, calculation of the
credit amount, registration, certification,
claim filing, and required recordkeeping.
The Treasury Department and the IRS
developed this notice and Notice 2025-10
in consultation with the Department of
Energy (DOE), the Environmental Pro-
tection Agency (EPA), the United States
Department of Agriculture, and other fed-
eral agencies.
SECTION 2. BACKGROUND
.01 In general. Section 45Z, added to
the Code by § 13704 of Public Law 117-
169, 136 Stat. 1818, 1997 (August 16,
2022), commonly known as the Infla-
tion Reduction Act of 2022, provides an
income tax credit for clean transportation
fuel produced domestically after Decem-
ber 31, 2024, and sold by December 31,
2027. The § 45Z credit is a general busi-
ness credit under § 38.
A taxpayer must meet several require-
ments to be eligible to claim the § 45Z
credit. Generally, a taxpayer must: (1)
produce a transportation fuel that has a
lifecycle greenhouse gas emissions rate
1
Unless otherwise specified, all references to “section” or “§” are references to sections of the Code.

Bulletin No. 2025–6 705 February 3, 2025
(emissions rate) of not greater than 50
kilograms (kg) of carbon dioxide equiv-
alent based on relative global warming
potential (CO
2
e) per million British ther-
mal units (mmBTU) and that satisfies cer-
tain suitability and coprocessing require-
ments;

(2) produce the fuel in the United
States at a qualified facility; (3) be reg-
istered as a producer of clean fuel under
§ 4101 at the time of production; and (4)
sell the fuel to an unrelated person in a
qualifying manner during the taxable year.
See § 45Z(a)(1) & (4), (d)(4)-(5)(A), and
(f)(1). A taxpayer producing a transporta-
tion fuel that is sustainable aviation fuel
(SAF transportation fuel) must also pro-
vide unrelated party certification demon-
strating compliance with certain require-
ments. See § 45Z(f)(1)(A)(i)(II).
For purposes of § 38, the § 45Z credit
is an amount equal to the product of (A)
the applicable amount per gallon (or gal-
lon equivalent) with respect to any trans-
portation fuel which is produced by the
taxpayer at a qualified facility and sold
in the manner described in § 45Z(a)(4)
during the taxable year and (B) the emis-
sions factor for such fuel as determined
under § 45Z(b). See § 45Z(a)(1).
For a fuel to be eligible for the § 45Z
credit, one requirement is that it must have
an emissions rate that is not greater than
50 kg of CO
2
e per mmBTU. See § 45Z(d)
(5)(A)(ii). This is the baseline emissions
rate. The amount of the credit is based on
the transportation fuel’s emissions factor,
which is a calculation of the fuel’s emis-
sions rate against the baseline emissions
rate. See § 45Z(b)(1)(A)(i).
.02 Emissions factor. The emis-
sions factor for a transportation fuel is
the quotient of 50 kilograms of CO
2
e
per mmBTU, minus the emissions rate
for such fuel, divided by 50 kilograms of
CO
2
e per mmBTU. See § 45Z(b)(1)(A)(i).
Expressed mathematically, the calculation
is as follows: Emissions factor = (50 kg
of CO
2
e per mmBTU - emissions rate in
kg of CO
2
e per mmBTU) ÷ 50 kg of CO
2
e
per mmBTU.
Under § 45Z(b)(2), if any amount
determined under § 45Z(b)(1)(A) is not
a multiple of 0.1, such amount must be
rounded to the nearest multiple of 0.1.
.03 Applicable amount. Section 45Z(a)
(2) and (3) provide the applicable amounts
for transportation fuels. Section 45Z(c)(1)
provides that for calendar years begin-
ning after 2024, the applicable amounts in
§ 45Z(a)(2) and (3) must each be adjusted
by multiplying such amount by the infla-
tion adjustment factor for the calendar
year in which the sale of the transporta-
tion fuel occurs. Section 45Z(c)(2) pro-
vides that the inflation adjustment factor
for the § 45Z credit is the inflation adjust-
ment factor determined and published by
the Secretary of the Treasury or her del-
egate (Secretary) pursuant to § 45Y(c),
determined by substituting “calendar
year 2022” for “calendar year 1992” in
§ 45Y(c)(3).
2
The Treasury Department
and the IRS intend to provide guidance
on the inflation adjustment factor for the
2025 calendar year at a later time. Such
guidance will be published in the Internal
Revenue Bulletin.
04. Emissions rates. Section 45Z
divides transportation fuel into two cate-
gories: non-SAF transportation fuel and
SAF transportation fuel. Section 45Z(b)
(1)(B)(ii) and (iii) provides the methods
for determining emissions rates for non-
SAF transportation fuel and SAF trans-
portation fuel.
Section 45Z(b)(1)(B)(i) directs the
Secretary, subject to § 45Z(b)(1)(B)(ii)
and (iii), to annually publish a table that
sets forth the emissions rates for similar
types and categories of transportation
fuels based on the amount of lifecycle
greenhouse gas emissions
3
as described
in § 211(o)(1)(H) of the Clean Air Act
(42 U.S.C. 7545(o)(1)(H)) as in effect on
August 16, 2022 (CAA)
4
for such fuels,
expressed as kg of CO
2
e per mmBTU.
This notice contains the initial table that
sets forth such emissions rates for pur-
poses of the § 45Z credit. See section 4.05
of this notice and the appendix to this
notice.
Regarding the determination of emis-
sions rates, § 45Z(b)(1)(B)(ii) provides
that in the case of non-SAF transporta-
tion fuel, the lifecycle greenhouse gas
emissions of such fuel must be based on
the most recent determinations under the
Greenhouse gases, Regulated Emissions,
and Energy use in Transportation model
developed by the Argonne National Lab-
oratory (ANL), or a successor model as
determined by the Secretary.
Section 45Z(b)(1)(B)(iii) provides that
for SAF transportation fuel, the lifecycle
greenhouse gas emissions of such fuel
is determined in accordance with (I) the
most recent Carbon Offsetting and Reduc-
tion Scheme for International Aviation
(CORSIA) which has been adopted by the
International Civil Aviation Organization
(ICAO) with the agreement of the United
States or (II) any methodology similar to
the most recent CORSIA that satisfies the
criteria under § 211(o)(1)(H) of the CAA.
Section 3 of this notice provides back-
ground on the methodologies used to
determine emissions rates.
Section 4 of this notice instructs tax-
payers how to calculate emissions rates
using either (1) determinations under the
most recent version of the 45ZCF-GREET
model or (2) determinations from fuel
pathways approved under the most recent
CORSIA Default Life Cycle Emissions
Values for CORSIA Eligible Fuels lifecycle
approach (CORSIA Default) or the most
recent CORSIA Methodology for Calcu-
lating Actual Life Cycle Emissions Values
lifecycle approach (CORSIA Actual).
Section 45Z(b)(1)(D) provides that
in the case of any transportation fuel for
2
Accordingly, the inflation adjustment factor for purposes of § 45Z means, with respect to a calendar year, a fraction the numerator of which is the GDP implicit price deflator for the preceding
calendar year and the denominator of which is the GDP implicit price deflator for the calendar year 2022. In this context, the term “GDP implicit price deflator” means the most recent revision
of the implicit price deflator for the gross domestic product as computed and published by the Department of Commerce before March 15 of the calendar year. See
§ 45Y(c)(3).
3
Section § 211(o)(1)(H) of the Clean Air Act defines the term “lifecycle greenhouse gas emissions” as “the aggregate quantity of greenhouse gas emissions (including direct emissions and
significant indirect emissions such as significant emissions from land use changes), as determined by the [EPA] Administrator, related to the full fuel lifecycle, including all stages of fuel
and feedstock production and distribution, from feedstock generation or extraction through the distribution and delivery and use of the finished fuel to the ultimate consumer, where the mass
values for all greenhouse gases are adjusted to account for their relative global warming potential.” See also 42 U.S.C. 7602(a).
4
This notice cites to the CAA as added by § 1501(a)(2) of the Energy Policy Act of 2005, Public Law 109-58, 119 Stat. 594, 1067 (2005) and amended by § 202(a)(1) of the Energy Indepen-
dence and Security Act of 2007, Public Law 110-140, 121 Stat. 1492, 1521-22 (2007).

February 3, 2025 706 Bulletin No. 2025–6
which an emissions rate has not been
established under § 45Z(b)(1)(B), a tax-
payer producing such fuel may file a peti-
tion with the Secretary for determination
of the emissions rate with respect to such
fuel, also known as a provisional emis-
sions rate (PER). See section 4.05 and
4.06 of this notice.
SECTION 3. ALLOWED
METHODOLOGIES FOR
DETERMINING EMISSIONS RATES
.01 CORSIA Program. Emissions
rates for SAF transportation fuels are
determined under the CORSIA program
based on the modeling of the fuel life-
cycle, including all stages of fuel and
feedstock production through to the end
use of the finished fuel, to calculate and
reduce greenhouse gas emissions from
international aviation. In 2016, ICAO
adopted CORSIA, which is set out in
Annex 16 - Environmental Protection:
Carbon Offsetting and Reduction Scheme
for International Aviation (CORSIA)
(2018), https://elibrary.icao.int/home/
product-details/229739.
Using the CORSIA program, there
are two ways of obtaining the lifecycle
emissions value of a SAF transportation
fuel: (1) CORSIA Default and (2)
CORSIA Actual. Additional information
about CORSIA Default and CORSIA
Actual is available at https://www.icao.
int/environmental-protection/CORSIA/
Pages/CORSIA-Eligible-Fuels.aspx.
.02 45ZCF-GREET model.
Administration of the § 45Z credit
requires a determination of the emissions
rates of different types and categories of
fuels consistently and accurately, includ-
ing fuels made from different pathways
and primary feedstocks (as provided in the
emissions rate table). ANL developed, and
the DOE published, the 45ZCF-GREET
model to determine emissions rates for
the § 45Z credit that also meets three key
parameters: (1) user-friendliness and con-
sistency, (2) technical robustness of the
pathways represented, and (3) consistency
with the other requirements of § 45Z.
The first version of the 45ZCF-GREET
model, anticipated to be released on Janu-
ary 10, 2025, is available at https://www.
energy.gov/eere/greet. The first version of
the 45ZCF-GREET model includes the
most commonly used types and categories
of fuel that are anticipated to meet the eli-
gibility requirements to claim the § 45Z
credit. Additional types and categories of
fuel may be added in future versions of the
45ZCF-GREET model. See the 45ZCF-
GREET User Manual
5
for additional
background.
SECTION 4. DETERMINATION OF
EMISSIONS RATES
.01 Most recent determinations under
the 45ZCF-GREET model. Taxpayers
must use the most recent determinations
under the 45ZCF-GREET model for non-
SAF and SAF transportation fuels. The
term “the most recent determinations”
means determinations under the latest
version of the 45ZCF-GREET model
(described in section 3.02 of this notice)
that is publicly available on the first day
of the taxable year in which the trans-
portation fuel for which the taxpayer is
claiming the § 45Z credit was produced.
See also Notice 2025-10.
If a version of the 45ZCF-GREET
model adds a type or category of fuel after
the first day of a taxable year, taxpayers
must use such version of the 45ZCF-
GREET model for the new type or cat-
egory of fuel for the entire taxable year.
Additionally, if an updated version of the
45ZCF-GREET model becomes publicly
available after the first day of the taxable
year of production (but still within such
taxable year), then the taxpayer may, in
its discretion, treat such updated version
as the most recent version of the 45ZCF-
GREET model.
.02 Most recent version of CORSIA
Default or CORSIA Actual. For purposes
of § 45Z(b)(1)(B)(iii)(I), the term “most
recent” means the latest version of COR-
SIA Default or CORSIA Actual (described
in section 3.01 of this notice) that is pub-
licly available on the first day of the tax-
able year in which the SAF transportation
fuel for which the taxpayer is claiming the
§ 45Z credit was produced. Additionally,
if an updated version of CORSIA Default
or CORSIA Actual becomes publicly
available after the first day of the taxable
year of production (but still within such
taxable year), then the taxpayer may, in
its discretion, treat such updated version
as the most recent version of CORSIA
Default or CORSIA Actual.
At the time of publication of this notice,
the most recently published versions of
CORSIA Default (Sixth Edition, October
2024) and CORSIA Actual (Fifth Edition,
October 2024) are both available at:
https://www.icao.int/environmental-
protection/CORSIA/Pages/CORSIA-
Eligible-Fuels.aspx
.03 Determining emissions rates for
non-SAF transportation fuels. If an emis-
sions rate for a non-SAF transportation
fuel is established under § 45Z(b)(1)(B)(i)
(which means that the type and category
of non-SAF transportation fuel is estab-
lished in the most recent determinations
under the emissions rate table), a taxpayer
producing such type and category of fuel
must use the most recent determinations
under the emissions rate table to deter-
mine the fuel’s emissions rate. See sec-
tion 4.06 of this notice if the non-SAF
transportation fuel is not established in
the most recent determinations under the
45ZCF-GREET model.
.04 Determining emissions rates for
SAF transportation fuel. If an emissions
rate for a SAF transportation fuel is estab-
lished under § 45Z(b)(1)(B)(i) (which
means that the type and category of SAF
transportation fuel is established in the
most recent determinations under the
emissions rate table), a taxpayer produc-
ing such type and category of fuel must
determine the SAF emissions rate pursu-
ant to (1) an analysis using the most recent
version of CORSIA Default or CORSIA
Actual (see section 4.02 of this notice
or (2) an analysis using the most recent
determinations under the 45ZCF-GREET
model (see section 4.01 of this notice).
For a given SAF transportation fuel, a tax-
payer must use the same methodology for
determining the emissions associated with
all stages of fuel feedstock production and
distribution.
If the Treasury Department and the IRS
conclude that an additional methodology
5
The 45ZCF-GREET User Manual, along with the 45ZCF-GREET model, is available at: https://www.energy.gov/eere/greet.

Bulletin No. 2025–6 707 February 3, 2025
qualifies under § 45Z(b)(1)(B)(iii)(II),
instructions for how to use such method-
ology will be provided in additional guid-
ance.
See section 4.06 of this notice if a type
or category of SAF transportation fuel is
not established in the most recent version
of CORSIA Default or CORSIA Actual.
.05 Initial emissions rate table. The
initial emissions rate table required by
§ 45Z(b)(1)(B)(i) is provided in the
appendix of this notice. Each emissions
rate determined under section 4 of this
notice must be determined by calculat-
ing the lifecycle greenhouse gas emis-
sions (as defined in § 211(o)(1)(H) of the
CAA) for such type and category of fuel
and must be expressed in kg of CO
2
e per
mmBTU.
When calculating the emissions rate
for purposes of determining the amount of
the § 45Z credit, the taxpayer must accu-
rately enter all information requested for
the allowed methodology and must follow
the publicly available instructions pro-
vided by the relevant authority (the DOE
or ICAO). For example, a taxpayer cal-
culating an emissions rate using the most
recent determinations under the 45ZCF-
GREET model must enter all informa-
tion requested within the interface of the
45ZCF-GREET model and must follow
the instructions in the most recent version
of the 45ZCF-GREET User Manual.
.06 Provisional emissions rate (PER).
Section 45Z(b)(1)(D) provides that for
any transportation fuel for which an
emissions rate has not been established
under § 45Z(b)(1)(B), meaning a type or
category of fuel that is not established
in the most recent determinations under
the 45ZCF-GREET model (for non-SAF
transportation fuel) or that is not estab-
lished in the most recent determinations
under the 45ZCF-GREET model or the
most recent version of CORSIA Default
or CORSIA Actual (for SAF transporta-
tion fuel), a taxpayer producing such type
or category of fuel may file a petition with
the Secretary for determination of a PER.
A taxpayer requesting a PER is referred to
as an “applicant.”
The Treasury Department and the IRS
intend to provide guidance related to the
PER petition process, including the pro-
cess for obtaining an emissions value
from the DOE that an applicant will use
to request a PER determination, at a later
time. The IRS will not accept requests for
PER determinations for the § 45Z credit,
and the DOE will not issue emissions val-
ues, until after such guidance is published.
For purposes of the § 45Z PER process, an
emissions value is a value obtained from
the DOE setting forth the DOE’s analyti-
cal assessment of the lifecycle greenhouse
gas emissions rate associated with the
production of a type of transportation fuel
using a particular primary feedstock and
pathway.
.07 New emissions rates (including
PER) apply on January 1, 2025. The
emissions rate for any new type or cate-
gory of fuel established on the applicable
emissions rate table or determined through
the PER process will apply on January 1,
2025, regardless of when the Treasury
Department and the IRS publish guidance
establishing an emissions rate or PER.
SECTION 5. DEFINITIONS AND
ADDITIONAL GUIDANCE
Terms used in this notice have the same
meaning as in § 45Z and in the appen-
dix to Notice 2025-10. For additional
guidance regarding the § 45Z credit, see
Notice 2025-10.
SECTION 6. REQUEST FOR
COMMENTS
.01 General request for comments. The
Treasury Department and the IRS gener-
ally request comments about all aspects of
this notice.
.02 Specific request for comments. The
Treasury Department and the IRS spe-
cifically request comments on how the
fuel pathways approved under the EPA’s
Renewable Fuel Standards Program (RFS)
could be adapted for purposes of the emis-
sions rate table if the Treasury Department
and the EPA were to determine that the
RFS program is a methodology “similar”
to CORSIA that also satisfies the crite-
ria under § 211(o)(1)(H) of the CAA (as
required by § 45Z(b)(1)(B)(iii)(II)).
SECTION 7. SUBMISSION OF
COMMENTS
Written comments should be submitted
by April 10, 2025. The subject line for the
comments should include a reference to
Notice 2025-11. Comments may be sub-
mitted in one of two ways:
(1) electronically via the Federal
eRulemaking Portal at http://www.
regulations.gov (type IRS-2025-0002 in
the search field on the regulations.gov
homepage to find this notice and submit
comments); or
(2) by mail to: Internal Revenue Ser-
vice, CC:PA:01:PR (Notice 2025-11),
Room 5203, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
All commenters are strongly encour-
aged to submit comments electroni-
cally. The Treasury Department and the
IRS will publish for public availability
any comment submitted electronically,
or on paper, to its public docket on
www.regulations.gov.
SECTION 8. EFFECTIVE DATE
This notice is effective January 10,
2025.
SECTION 9. DRAFTING
INFORMATION
The principal author of this notice is
Camille Edwards Bennehoff of the Office
of Associate Chief Counsel (Passthroughs
& Special Industries). For questions
regarding this notice, contact Ms. Edwards
Bennehoff at (202) 317-6855 (not a toll-
free number).

February 3, 2025 708 Bulletin No. 2025–6
Appendix
Section 45Z Emissions Rate Table
For Use For Fuel Produced After 12/31/2024
Type of Fuel
Category of FuelDetermination of Emissions Rate
(calculated to be expressed in kg
of CO
2
e/mmBTU)
PathwayPrimary feedstock
EthanolFermentationU.S. corn starch
Calculate using the most recent
determinations under the 45ZCF-
GREET model (see section 4.01 of
this notice).
U.S. sorghum grain
Brazilian sugarcane (for use as feedstock
for SAF-Alcohol-to-Jet (ATJ) only)
Hydrolysis and
Fermentation
U.S. corn stover
BiodieselTransesterificationU.S. soybean oil
Calculate using the most recent
determinations under the 45ZCF-
GREET model (see section 4.01 of
this notice).
U.S./Canadian canola oil/rapeseed oil
U.S. used cooking oil (UCO)
Tallow
U.S. distillers corn oil (DCO)
U.S. carinata oil (intermediate crop)
U.S. camelina oil (intermediate crop)
U.S. pennycress oil (intermediate crop)
Renewable Diesel Hydroprocessed esters
and fatty acids (HEFA)
U.S. soybean oil
Calculate using the most recent
determinations under the 45ZCF-
GREET model (see section 4.01 of
this notice).
U.S./Canadian canola oil/rapeseed oil
U.S. UCO
Tallow
U.S. DCO
U.S. carinata oil (intermediate crop)
U.S. camelina oil (intermediate crop)
U.S. pennycress oil (intermediate crop)
ATJEthanol (from fermentation pathways listed
above)
Gasification and
Fischer-Tropsch
U.S. corn stover
Renewable Natural
Gas
Anaerobic Digestion
and Biogas Upgrading
U.S. wastewater sludgeCalculate using the most recent
determinations under the 45ZCF-
GREET model (see section 4.01 of
this notice).
U.S. animal manures
U.S. landfill gas
PropaneHEFAU.S. soybean oil
Calculate using the most recent
determinations under the 45ZCF-
GREET model (see section 4.01 of
this notice).
U.S./Canadian canola/rapeseed oil
U.S. UCO
Tallow
U.S. DCO
U.S. carinata oil (intermediate crop)
U.S. camelina oil (intermediate crop)
U.S. pennycress oil (intermediate crop)

Bulletin No. 2025–6 709 February 3, 2025
Type of Fuel
Category of FuelDetermination of Emissions Rate
(calculated to be expressed in kg
of CO
2
e/mmBTU)
PathwayPrimary feedstock
Naphtha
HEFA
U.S. soybean oil
Calculate using the most recent
determinations under the 45ZCF-
GREET model (see section 4.01 of
this notice).
U.S. /Canadian Canola/rapeseed oil
U.S. UCO
Tallow
U.S. DCO
U.S. carinata oil (intermediate crop)
U.S. camelina oil (intermediate crop)
U.S. pennycress oil (intermediate crop)
HydrogenVarious, as defined in
the user manual for the
most recent 45VH2-
GREET model*
Various, as defined in the user manual for
the most recent 45VH2-GREET model
Calculate well-to-gate
emissions using the most recent
determinations under the 45VH2-
GREET model; then calculate the
full well-to-wheel emissions using
the most recent determinations
under the 45ZCF-GREET model
(see section 4.01 of this notice).
See the 45ZCF-GREET User
Manual for additional instructions.
Sustainable
Aviation Fuel
(SAF)
HEFA
U.S. soybean oil
Calculate using one of the
following: 1) the most recent
determinations under the 45ZCF-
GREET model (see section 4.01 of
this notice) or 2) the most recent
version of CORSIA Default or
CORSIA Actual (see section 4.02
of this notice).
U.S./Canadian canola/rapeseed oil
U.S. UCO
Tallow
U.S. DCO
U.S. carinata oil (intermediate crop)
U.S. camelina oil (intermediate crop)
U.S. pennycress oil (intermediate crop)
ATJ
Ethanol (from fermentation pathways
above)
Gasification and
Fischer-Tropsch
U.S. corn stover
Any pathway
established in
CORSIA Default or
CORSIA Actual for
a transportation fuel
that is SAF that is not
represented above.
Any feedstock for a pathway established
in CORSIA Default or CORSIA Actual for
a transportation fuel that is SAF that is not
represented above.
Calculate using the most recent
version of CORSIA Default or
CORSIA Actual (see section 4.02
of this notice).
* The 45VH2-GREET model and the 45VH2-GREET User Manual are both available at https://www.energy.gov/eere/greet.

February 3, 2025 710 Bulletin No. 2025–6
Update for Weighted
Average Interest Rates,
Yield Curves, and Segment
Rates
Notice 2025-13
This notice provides guidance on the
corporate bond monthly yield curve, the
corresponding spot segment rates used
under § 417(e)(3), and the 24-month aver-
age segment rates under § 430(h)(2) of the
Internal Revenue Code. In addition, this
notice provides guidance as to the inter-
est rate on 30-year Treasury securities
under § 417(e)(3)(A)(ii)(II) as in effect for
plan years beginning before 2008 and the
30-year Treasury weighted average rate
under § 431(c)(6)(E)(ii)(I).
YIELD CURVE AND SEGMENT
RATES
Section 430 specifies the minimum
funding requirements that apply to sin-
gle-employer plans (except for CSEC plans
under § 414(y)) pursuant to § 412. Section
430(h)(2) specifies the interest rates that
must be used to determine a plan’s target
normal cost and funding target. Under
this provision, present value is generally
determined using three 24-month average
interest rates (“segment rates”), each of
which applies to cash flows during speci-
fied periods. To the extent provided under
§ 430(h)(2)(C)(iv), these segment rates
are adjusted by the applicable percentage
of the 25-year average segment rates for
the period ending September 30 of the
year preceding the calendar year in which
the plan year begins.
1
However, an elec-
tion may be made under § 430(h)(2)(D)
(ii) to use the monthly yield curve in place
of the segment rates.
Section 1.430(h)(2)-1(d) provides
rules for determining the monthly cor-
porate bond yield curve,
2
and § 1.430(h)
(2)-1(c) provides rules for determining
the 24-month average corporate bond
segment rates used to compute the target
normal cost and the funding target. Con-
sistent with the methodology specified in
§ 1.430(h)(2)-1(d), the monthly corporate
bond yield curve derived from Decem-
ber 2024 data is in Table 2024-12 at the
end of this notice. The spot first, second,
and third segment rates for the month of
December 2024 are, respectively, 4.65,
5.28, and 5.63.
The 24-month average segment rates
determined under § 430(h)(2)(C)(i)
through (iii) must be adjusted pursuant to
§ 430(h)(2)(C)(iv) to be within the appli-
cable minimum and maximum percent-
ages of the corresponding 25-year aver-
age segment rates. Those percentages are
95% and 105% for plan years beginning
in 2023, 2024 and 2025. For this purpose,
any 25-year average segment rate that is
less than 5% is deemed to be 5%. The
25-year average segment rates for plan
years beginning in 2023, 2024 and 2025
were published in Notice 2022-40, 2022-
40 I.R.B. 266, Notice 2023-66, 2023-40
I.R.B. 992, and Notice 2024-67, 2024-41
I.R.B. 726, respectively.
24-MONTH AVERAGE CORPORATE
BOND SEGMENT RATES
The three 24-month average corpo-
rate bond segment rates applicable for
January 2025 without adjustment for the
25-year average segment rate limits are
as follows:
24-Month Average Segment Rates Without 25-Year Average Adjustment
Applicable Month First Segment Second Segment Third Segment
January 2025 5.00 5.27 5.40
The adjusted 24-month average seg-
ment rates set forth in the chart below
reflect § 430(h)(2)(C)(iv) of the Code. The
24-month averages applicable for January
2025, adjusted to be within the applicable
minimum and maximum percentages of
the corresponding 25-year average seg-
ment rates in accordance with § 430(h)(2)
(C)(iv) of the Code, are as follows:
Adjusted 24-Month Average Segment Rates
For Plan Years
Beginning InApplicable MonthFirst SegmentSecond SegmentThird Segment
2023January 20255.005.275.74
2024January 20255.005.275.59
2025January 20255.005.275.50
1
Pursuant to § 433(h)(3)(A), the third segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount
of the full funding limitation under § 433(c)(7)(C)).
2
For months before February 2024, the monthly corporate bond yield curve was determined in accordance with Notice 2007-81, 2007-44 I.R.B. 899. Section 1.430(h)(2)-1(d) generally adopts
the methodology for determining the monthly corporate bond yield curve under Notice 2007-81 but includes two enhancements to take into account subsequent changes in the bond market.
Those enhancements are described in the preamble to TD 9986 (89 FR 2127).

Bulletin No. 2025–6 711 February 3, 2025
30-YEAR TREASURY SECURITIES
INTEREST RATES
Section 431 specifies the minimum
funding requirements that apply to mul-
tiemployer plans pursuant to § 412. Sec-
tion 431(c)(6)(B) specifies a minimum
amount for the full-funding limitation
described in § 431(c)(6)(A), based on the
plan’s current liability. Section 431(c)
(6)(E)(ii)(I) provides that the interest
rate used to calculate current liability for
this purpose must be no more than 5 per-
cent above and no more than 10 percent
below the weighted average of the rates
of interest on 30-year Treasury securi-
ties during the four-year period ending
on the last day before the beginning of
the plan year. Notice 88-73, 1988-2 C.B.
383, provides guidelines for determin-
ing the weighted average interest rate.
The rate of interest on 30-year Treasury
securities for December 2024 is 4.58
percent. The Service determined this
rate as the average of the daily determi-
nations of yield on the 30-year Treasury
bond maturing in November 2054. For
plan years beginning in January 2025,
the weighted average of the rates of
interest on 30-year Treasury securities
and the permissible range of rates used
to calculate current liability are as fol-
lows:
Treasury Weighted Average Rates
For Plan Years Beginning In30-Year Treasury Weighted AveragePermissible Range 90% to 105%
January 20253.823.44 to 4.01
MINIMUM PRESENT VALUE
SEGMENT RATES
In general, the applicable interest rates
under § 417(e)(3)(D) are segment rates
computed without regard to a 24-month
average. Section 1.417(e)-1(d)(3) pro-
vides guidelines for determining the
minimum present value segment rates.
Pursuant to that section, the minimum
present value segment rates determined
for December 2024 are as follows:
Minimum Present Value Segment Rates
Month First Segment Second Segment Third Segment
December 2024 4.65 5.28 5.63
DRAFTING INFORMATION
The principal author of this notice is
Tom Morgan of the Office of Associ-
ate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment
Taxes). However, other personnel from
the IRS participated in the development
of this guidance. For further information
regarding this notice, contact Mr. Morgan
at 202-317-6700 or Tony Montanaro at
626-927-1475 (not toll-numbers).

February 3, 2025 712 Bulletin No. 2025–6
Table 2024-12
Monthly Yield Curve for December 2024
Derived from December 2024 Data
MaturityYieldMaturityYieldMaturityYieldMaturityYieldMaturityYield
0.54.6020.55.5640.55.6460.55.6980.55.72
1.04.6021.05.5741.05.6461.05.6981.05.72
1.54.6021.55.5741.55.6461.55.6981.55.72
2.04.6022.05.5742.05.6462.05.6982.05.72
2.54.6222.55.5842.55.6462.55.6982.55.72
3.04.6323.05.5843.05.6563.05.6983.05.72
3.54.6623.55.5843.55.6563.55.7083.55.72
4.04.6924.05.5844.05.6564.05.7084.05.72
4.54.7224.55.5844.55.6564.55.7084.55.72
5.04.7625.05.5845.05.6565.05.7085.05.72
5.54.8025.55.5745.55.6565.55.7085.55.72
6.04.8426.05.5746.05.6666.05.7086.05.72
6.5
4.8826.55.5746.55.6666.55.7086.55.72
7.04.9327.05.5747.05.6667.05.7087.05.72
7.54.9727.55.5747.55.6667.55.7087.55.72
8.05.0128.05.5748.05.6668.05.7088.05.72
8.55.0628.55.5748.55.6668.55.7088.55.73
9.05.1029.05.5749.05.6769.05.7089.05.73
9.55.1329.55.5849.55.6769.55.7089.55.73
10.05.1730.05.5850.05.6770.05.7190.05.73
10.55.2030.55.5850.55.6770.55.7190.55.73
11.05.2431.05.5951.05.6771.05.7191.05.73
11.55.2731.55.5951.55.6771.55.7191.55.73
12.05.3032.05.5952.05.6772.05.7192.05.73
12.55.3232.55.6052.55.6772.55.7192.55.73
13.05.3533.05.6053.0
5.6873.05.7193.05.73
13.55.3733.55.6053.55.6873.55.7193.55.73
14.05.4034.05.6154.05.6874.05.7194.05.73
14.55.4234.55.6154.55.6874.55.7194.55.73
15.05.4435.05.6155.05.6875.05.7195.05.73
15.55.4535.55.6155.55.6875.55.7195.55.73
16.05.4736.05.6256.05.6876.05.7196.05.73
16.55.4936.55.6256.55.6876.55.7196.55.73
17.05.5037.05.6257.05.6877.05.7197.05.73
17.55.5137.55.6257.55.6977.55.7197.55.73
18.05.5338.05.6358.05.6978.05.7298.05.73
18.55.5438.55.6358.55.6978.55.7298.55.73
19.05.5439.05.6359.05.6979.05.7299.05.73
19.55.5539.55.6359.55.6979.55.7299.5
5.73
20.05.5640.05.6360.05.6980.05.72100.05.73

Bulletin No. 2025–6 713 February 3, 2025
[26 CFR 601.204]: Changes in account-
ing periods and in methods of accounting.
(Also: Part 1, §§ 442: 1.442-1)
Rev. Proc. 2025-6
SECTION 1. PURPOSE
This revenue procedure provides the
exclusive procedures for certain appli-
cable entities, as defined in § 6417(d)(1)
(A) of the Internal Revenue Code (Code)
1

and the regulations thereunder that are not
required to file either a federal income tax
return under § 6011
2
or an annual informa-
tion return under § 6033(a), but previously
filed a Form 990-T solely to make an elec-
tive payment election under § 6417, to
change their annual accounting period.
An in-scope applicable entity (as defined
in section 3.02 of this revenue procedure)
that complies with all the applicable pro-
visions of this revenue procedure will
have obtained the approval of the Com-
missioner of Internal Revenue (Commis-
sioner) to change its annual accounting
period.
SECTION 2. BACKGROUND
.01 Definitions. The following defini-
tions apply solely for purposes of this rev-
enue procedure.
(1) Annual accounting period. The
term “annual accounting period” means
the annual period (calendar year or fiscal
year) on the basis of which an in-scope
applicable entity regularly keeps its books
and records for purposes of making an
elective payment election under § 6417.
(2) First Effective Year. The “first
effective year” for an in-scope applica-
ble entity that adopted a taxable year by
filing its first Form 990-T solely to make
an elective payment election under §
6417 is the first taxable year for which
a change in annual accounting period
is effective and for which an in-scope
applicable entity must comply with all
the terms and conditions under this rev-
enue procedure. The first effective year
generally is the short period required to
effect the change.
(3) Short Period. In the case of a change
in annual accounting period, an in-scope
applicable entity’s “short period” is the
period beginning with the day following
the close of the old taxable year and end-
ing with the day preceding the first day of
the new taxable year.
(4) Taxable year. The term “taxable
year” generally means the in-scope appli-
cable entity’s annual accounting period,
regardless of whether it is a calendar or
fiscal year.
.02 Adoption of Taxable Year.
(1) In general. A taxpayer may adopt
any taxable year that satisfies § 441
and the regulations thereunder without
the approval of the Commissioner. See
§ 1.441-1(c).
(2) Adopting a taxable year for pur-
poses of § 6417. The regulations under §
6417 provide that an applicable entity that
is not required to file a federal income tax
return under § 6011 or an annual infor-
mation return under § 6033(a), but is
filing an annual return solely to make an
elective payment election under § 6417,
adopts a taxable year upon filing an ini-
tial Form 990-T to make the elective
payment election. The applicable entity
may choose to adopt a taxable year for
purposes of § 6417 based upon either a
calendar or fiscal year. The applicable
entity must maintain adequate books and
records, including a reconciliation of any
differences between its regular books of
account and those using its chosen tax-
able year, to support making an elective
payment election on the basis of its cho-
sen taxable year.
.03 Change in Taxable Year.
(1) In general. A taxpayer that wants to
change its annual accounting period and
use a new taxable year generally must
obtain the approval of the Commissioner.
To secure such approval, a taxpayer must
file an application, generally on Form
1128, Application to Adopt, Change, or
Retain a Tax Year, with the Commissioner
within such time and in such manner as
is provided in administrative procedures
published by the Commissioner. In gen-
eral, a change in annual accounting period
will be approved if the taxpayer estab-
lishes a business purpose for the requested
annual accounting period, agrees to the
Commissioner’s prescribed terms, con-
ditions, and adjustments for effecting the
change, and files the requested change in
annual accounting period under the Com-
missioner’s prescribed administrative pro-
cedures.
(2) No retroactive change in annual
accounting period. Unless specifically
authorized by the Commissioner, a tax-
payer may not request, or otherwise make,
a retroactive change in annual accounting
period, regardless of whether the change
is to a required taxable year.
SECTION 3. SCOPE
.01 Applicability. The procedures
in section 4 of this revenue procedure
apply only to in-scope applicable entities
described in section 3.02 of this revenue
procedure.
.02 In-scope applicable entity. An
in-scope applicable entity is an applicable
entity described in section 3.02(1) of this
revenue procedure that is also described in
section 3.02(2) of this revenue procedure.
(1) An applicable entity is described
in this section 3.02(1) if it is one of the
following—
(a) An organization exempt from the
tax imposed by subtitle A of the Code
because it is the government of any U.S.
territory or a political subdivision thereof.
See § 1.6417-1(c)(1)(ii).
(b) Any State, the District of Colum-
bia, or political subdivision thereof. See
§ 1.6417-1(c)(2).
(c) A Tribal entity that is—
(i) An Indian Tribal government or a
subdivision thereof (See § 1.6417-1(c)
(3)),
(ii) A Tribe incorporated under § 17 of
the Indian Reorganization Act of 1934,
as amended, or incorporated under § 3
of the Oklahoma Indian Welfare Act, as
amended, that seeks to make an elective
1
Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).
2
For this purpose, filing Form 990-T, Exempt Organization Business Income Tax Return (and proxy tax under section 6033(e)), solely to make an elective payment election under § 6417 is
not considered a requirement to file a federal income tax return under § 6011.

February 3, 2025 714 Bulletin No. 2025–6
payment election with respect to any
applicable section 6417 credit,
3
or
(iii) A wholly owned entity organized
or incorporated under the laws of the
Indian Tribal government(s) that owns it
and that seeks to make an elective pay-
ment election with respect to any applica-
ble § 6417 credit.
4
(d) An agency of any applicable entity
described in section 3.02(1)(a), (b), or (c)
of this revenue procedure.
(2) An applicable entity is described in
this section 3.02(2) if it—
(a) Is not required to file either a fed-
eral income tax return under § 6011 or an
annual information return under § 6033(a),
(b) Has adopted a taxable year by filing
a Form 990-T for the sole purpose of mak-
ing an elective payment election under §
6417, and
(c) Desires to change its taxable year to
match the accounting period used in keep-
ing its books and records.
.03 Inapplicability. The procedures in
section 4 of this revenue procedure do
not apply to entities that are not in-scope
applicable entities described in section
3.02 of this revenue procedure, includ-
ing entities that have either filed a federal
income tax return under § 6011 or filed an
annual information return under § 6033(a)
with the Internal Revenue Service Center
and were required to use their established
taxable year when making an elective
payment election under § 6417. Entities
described in the preceding sentence may
request a change in annual accounting
period under Rev. Proc. 2006-45, 2006-45
I.R.B. 851 (relating to corporations and
certain other entities), Rev. Proc. 2006-46,
2006-45 I.R.B. 859 (relating to partner-
ships, S corporations, electing S corpora-
tions (as described therein), and personal
service corporations), Rev. Proc. 85-58,
1985-2 C.B. 740 (relating to organizations
exempt from federal income tax under §
501(a)), or Rev. Proc. 2002-39, 2002-22
I.R.B. 1046 (relating to entities not eligi-
ble under the automatic approval proce-
dures), as applicable.
SECTION 4. PROCEDURE
.01 In-scope applicable entities chang-
ing their annual accounting period. An
in-scope applicable entity that desires to
change its taxable year may effectuate the
change by timely filing the Form 990-T for
the first effective year with the appropri-
ate Internal Revenue Service Center. The
Form 990-T must be filed by the fifteenth
day of the fifth month following the close
of the short period (absent filing a Form
8868, Application for Extension of Time
to File an Exempt Organization Return or
Excise Taxes Related to Employee Bene-
fit Plans, requesting an extension to file
a Form 990-T). The Form 990-T should
indicate that a change of annual account-
ing period is being made and include a
statement describing the present annual
accounting period and the proposed
annual accounting period. The in-scope
applicable entity is not required to file
Form 1128 with the Form 990-T.
.02 Automatic approval. An in-scope
applicable entity that complies with all the
applicable provisions of this revenue pro-
cedure will have obtained the approval of
the Commissioner for a change in annual
accounting period, beginning with the first
effective year.
.03 Examples.
(1) Example (1). XYZ is an applicable entity
described in section 3.02(1) of this revenue pro-
cedure. XYZ is not required to file either a federal
income tax return under § 6011 or an annual infor-
mation return under § 6033(a) and has never filed
a return or adopted a taxable year. XYZ keeps its
books and records on the basis of a fiscal year that
ends on September 30. In February 2023, XYZ
places into service an applicable credit property, as
defined in § 1.6417-1(e), that meets the requirements
to generate an applicable credit under § 6417. XYZ
desires to make an elective payment election under
§ 6417. Applying § 1.6417-2(b)(3)(i), XYZ adopts
a calendar year taxable year ending on December
31, 2023, for the sole purpose of making an elec-
tive payment election under § 6417, by timely filing
Form 990-T on the basis of a calendar year and by
declaring on Form 990-T that XYZ has adopted as
its taxable year a calendar year ending December 31,
2023. XYZ maintains adequate books and records,
including a reconciliation of any differences between
its regular books and records year and those of its
chosen taxable year, to support making an elective
payment election based on its chosen taxable year.
XYZ has adopted a calendar tax year. If XYZ desires
to change its taxable year to an accounting period
that matches its books and records, it will be an
“in-scope applicable entity” within the meaning of
section 3.02 of this revenue procedure.
(2) Example (2). Same facts as Example (1),
except that XYZ now wishes to conform its taxable
year to its accounting period used in keeping its
books and records and, accordingly, wants to change
to a taxable year ending September 30 effective for
the taxable year beginning January 1, 2024, and end-
ing September 30, 2024 (that is, the first effective
year). Pursuant to section 4.01 of this revenue pro-
cedure, XYZ files a Form 990-T for the short period
beginning January 1, 2024, and ending September
30, 2024, by the fifteenth day of the fifth month after
the end of XYZ’s short taxable year (or Tuesday,
February 18, 2025, accounting for February 15 fall-
ing on a Saturday and Monday, February 17 being a
Federal holiday) and attaches a statement to the Form
990-T indicating that a change of taxable year from
a calendar year taxable year to a taxable year ending
September 30 is being made. XYZ has changed its
taxable year to a taxable year ending September 30
and has obtained the approval of the Commissioner
for the requested change.
(3) Example (3). Same facts as Example (2),
except that XYZ, instead of timely filing its Form
990-T on or before February 18, 2025, timely files
the Form 8868 on or before February 18, 2025. XYZ
is now entitled to a 6-month automatic extension
to file its Form 990-T. Thus, XYZ has until August
15, 2025, to timely file the Form 990-T on which
it makes the desired change in its taxable year to
a taxable year ending September 30 and to obtain
the approval of the Commissioner for the requested
change.
SECTION 5. RECORDS
The books and records of the in-scope
applicable entity must be closed as of
the last day of the first effective year. An
in-scope applicable entity must continue
to maintain adequate books and records.
See § 6001.
3
See Notice of Proposed Rulemaking (REG-113628-21) published October 9, 2024, 89 F.R. 81877. (The proposed regulations would amend the § 6417 final regulations published on March
11, 2024, which provide that these entities are disregarded. See
§ 1.6417-1(f), T.D. 9988, 89 F.R. 17585.)

REG-113628-21 would, upon being finalized after a notice and comment period, apply to taxable years ending after October 9, 2024. REG-113628-21 would also generally allow an
entity the option to apply proposed § 1.6417-1(c)(7) and (f) to taxable years ending on or before October 9, 2024, provided that the Indian Tribal government(s) that own the entity also apply
proposed § 1.6417-1(c)(7) and (f) consistently with respect to such entity for all such taxable years. However, this option would not be available for any taxable period for a federal excise tax
or employment tax with respect to which the entity was, as of October 9, 2024, a party to any administrative or judicial proceeding.

A taxpayer may rely upon proposed § 1.6417-1(c)(7) before it is finalized for purposes of this revenue procedure if the taxpayer complies with the requirement to apply proposed § 1.6417-
1(c)(7) and (f) consistently with respect to such entity for all such taxable years.
4
This rule would encompass wholly owned Tribal housing authorities and utilities. See Notice of Proposed Rulemaking (REG-113628-21), described in footnote 3.

Bulletin No. 2025–6 715 February 3, 2025
SECTION 6. EXTENSION OF TIME
FOR CHANGE IN ACCOUNTING
PERIOD
An in-scope applicable entity described
in section 3.02 of this revenue procedure
that timely files Form 8868 is granted an
automatic extension of 6 months from the
original due date of Form 990-T to request
a change in accounting period under sec-
tion 4 of this revenue procedure. (If the
entity is also filing the Form 990-T to
make an elective payment election, the
Form 8868 extends the due date for that
election as well.)
SECTION 7. EFFECTIVE DATE
This revenue procedure is effective
for changes in annual accounting periods
of in-scope applicable entities for which
the first effective year begins on or after
January 1, 2024, and the period for filing
the Form 990-T for such year has not yet
expired.
SECTION 8. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Peter A. Holiat of the Office
of Associate Chief Counsel (Employee
Benefits, Exempt Organizations, and
Employment Taxes). For further infor-
mation regarding this revenue procedure
contact Mr. Holiat on (202) 317-4541 (not
a toll-free number).

February 3, 2025 716 Bulletin No. 2025–6
Part IV
Notice of Proposed
Rulemaking
Excise Tax on Designated
Drugs
REG-115560-23
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing.
SUMMARY: This document contains
proposed regulations relating to the excise
tax on certain sales of designated drugs by
manufacturers, producers, and importers
during statutorily defined periods. The
proposed regulations would provide sub-
stantive rules that relate to the imposition
and calculation of the tax. The proposed
regulations would affect manufacturers,
producers, and importers of designated
drugs that sell such drugs during statuto-
rily defined periods.
DATES: Written or electronic comments
and requests for a public hearing must be
received by March 3, 2025. Requests for a
public hearing must be submitted as pre-
scribed in the “Comments and Requests
for a Public Hearing” section.
ADDRESSES: Commenters are
strongly encouraged to submit public
comments electronically via the Fed-
eral eRulemaking Portal at https://
www.regulations.gov (indicate IRS
and REG-115560-23) by following the
online instructions for submitting com-
ments. Once submitted to the Federal
eRulemaking Portal, comments cannot
be edited or withdrawn. The Department
of the Treasury (Treasury Department)
and the IRS will publish for public
availability any comments submitted
to the IRS’s public docket. Send paper
submissions to: CC:PA:01:PR (REG-
115560-23), Room 5203, Internal Reve-
nue Service, P.O. Box 7604, Ben Frank-
lin Station, Washington, DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, contact James S. Williford
or Jacob W. Peeples at (202) 317-6855
(not a toll-free number); concerning the
submission of comments and requests
for a public hearing, contact the Publi-
cations and Regulations Section of the
Office of Associate Chief Counsel (Pro-
cedure and Administration) by phone at
(202) 317-6901 (not a toll-free number)
or by email at publichearings@irs.gov
(preferred).
SUPPLEMENTARY INFORMATION:
Authority
This notice of proposed rulemaking
contains proposed regulations that would
amend 26 CFR part 47 (Designated Drugs
Excise Tax Regulations) related to the
excise tax imposed by section 5000D of
the Internal Revenue Code (Code) on cer-
tain sales by manufacturers, producers,
or importers of designated drugs (section
5000D tax). These proposed regulations
are issued under the express delegation
of authority granted to the Secretary of
the Treasury or her delegate (Secretary)
by section 5000D(h), which states: “The
Secretary shall prescribe such regulations
and other guidance as may be necessary to
carry out the provisions of this section.”
These proposed regulations are also issued
under the express delegation of authority
provided in section 7805(a), which autho-
rizes the Secretary to prescribe all needful
rules and regulations for the enforcement
of the Code, including all rules and regu-
lations as may be necessary by reason of
any alteration of law in relation to internal
revenue.
Background
Sections 1191 through 1198 of the
Social Security Act (SSA) (42 U.S.C.
1320f to 1320f-7), added by sections
11001 and 11002 of Public Law 117-169,
136 Stat. 1818 (August 16, 2022), com-
monly known as the Inflation Reduction
Act of 2022 (IRA), require the Secretary
of Health and Human Services (HHS)
to establish a Medicare prescription
drug price negotiation program (Pro-
gram) to negotiate maximum fair prices
(MFPs) for certain high expenditure,
single-source drugs covered by Medi-
care. Under the Program, the Secretary
of HHS must, among other things: (1)
publish a list of selected drugs in accor-
dance with section 1192 of the SSA; (2)
enter into agreements with willing manu-
facturers of selected drugs in accordance
with section 1193 of the SSA; and (3)
negotiate MFPs for such selected drugs
in accordance with section 1194 of the
SSA. Under section 1193(a)(3) of the
SSA, manufacturers of selected drugs
that choose to enter into agreements with
the Secretary of HHS and that agree to
an MFP commit to provide access to
selected drugs at the negotiated prices to
MFP-eligible individuals (as defined in
section 1191(c)(2) of the SSA), as well
as to pharmacies and other dispensers,
hospitals, physicians, other providers of
services, and suppliers with respect to
MFP-eligible individuals.
Section 5000D was added to a new
chapter 50A of the Code by section 11003
of the IRA and is effective for sales on and
after August 16, 2022. Section 5000D(a)
imposes the section 5000D tax on the sale
by the manufacturer, producer, or importer
of any designated drug during a day
described in section 5000D(b), referred to
herein as a “statutory period,” with respect
to such designated drug. In the case of a
sale of a designated drug timed for the
purpose of avoiding the section 5000D
tax, section 5000D(f)(2) authorizes the
Secretary to treat such sale as occurring
during a statutory period.
Section 5000D(e)(1) provides that a
“designated drug” is any “negotiation-el-
igible drug,” as defined in section 1192(d)
of the SSA, included on the list published
under section 1192(a) of the SSA that is
manufactured or produced in the United
States, as defined in section 5000D(e)(2),
or entered into the United States for con-
sumption, use, or warehousing.
Under section 5000D(a), the amount of
section 5000D tax imposed on the sale of a
designated drug during a statutory period
is the amount that causes the ratio of (1)

Bulletin No. 2025–6 717 February 3, 2025
the section 5000D tax, divided by (2) the
sum of the section 5000D tax and the price
for which the designated drug was sold,
when such ratio is expressed as a percent-
age, to equal the “applicable percentage”
(as defined in section 5000D(d)):
Applicable Percentage = Ta x/(Tax + Price)
The applicable percentage ranges from
65 percent to 95 percent, depending on
the number of days a sale is made after
the start of a statutory period. Section
5000D(d).
As noted previously, section 5000D(h)
authorizes the Secretary to prescribe such
regulations and other guidance as may be
necessary to carry out the provisions of
section 5000D. On August 28, 2023, the
Treasury Department and the IRS pub-
lished Notice 2023–52, 2023-35 I.R.B.
650, announcing the Secretary’s intent
to issue proposed regulations address-
ing substantive and procedural issues
related to section 5000D. Notice 2023–52
described certain rules that those proposed
regulations would include and provided
taxpayers with interim guidance.
On October 2, 2023, the Treasury
Department and the IRS published a
notice of proposed rulemaking (REG-
115559-23) in the Federal Register (88
FR 67690) proposing amendments to the
Excise Tax Procedural Regulations under
26 CFR part 40 to address tax return fil-
ing and other procedural requirements
related to the section 5000D tax applica-
ble to returns filed for calendar quarters
beginning on or after October 1, 2023.
On July 5, 2024, the Treasury Department
and the IRS published a Treasury decision
(T.D. 10003) in the Federal Register (89
FR 55507) finalizing, with minor modifi-
cations, the proposed amendments to 26
CFR part 40 and adding part 47 to 26 CFR.
These proposed regulations would
amend the Designated Drugs Excise Tax
Regulations by providing substantive rules
related to the section 5000D tax, including
rules consistent with the substantive rules
described in Notice 2023-52. Specifically,
these proposed regulations would pro-
vide definitions of certain terms, such as
“manufacturer, producer, or importer,”
“sale,” and “price,” and rules govern-
ing the imposition and calculation of the
section 5000D tax. Concurrently with the
filing for public inspection of these pro-
posed regulations, the Treasury Depart-
ment and the IRS are releasing Revenue
Procedure 2025-9 to provide a safe harbor
that taxpayers may use to identify the sub-
set of each sale in units of a designated
drug made during a statutory period that is
subject to the section 5000D tax. After its
release, Revenue Procedure 2025-9 will
be published in the Internal Revenue Bul-
letin (see §601.601(d) of the Statement of
Procedural Rules (26 CFR part 601)).
Explanation of Provisions
These proposed regulations are
organized into two sections: proposed
§47.5000D-2 (relating to definitions) and
proposed §47.5000D-3 (relating to the
imposition and calculation of the section
5000D tax).
I. Definitions
Proposed §47.5000D-2 would provide
definitions necessary to clarify the appli-
cation of section 5000D.
A. Applicable Percentage
Proposed §47.5000D-2(b)(1) would
incorporate the substance of the statutory
definition of the term “applicable per-
centage” provided in section 5000D(d).
Proposed §47.5000D-2(b)(1) would also
clarify that, to determine the appropri-
ate applicable percentage for a specific
applicable sale, days described in section
5000D(b) are cumulative regardless of
whether such days are consecutive.
B. Applicable Sale
Proposed §47.5000D-2(b)(2) would
define the term “applicable sale” to mean
the sale transaction that is the subset of
each sale in units of a designated drug,
as defined in section 5000D(e)(1), by the
manufacturer, producer, or importer that
will be dispensed, furnished, or admin-
istered to MFP-eligible individuals, as
defined in section 1191(c)(2) of the Social
Security Act (42 U.S.C. 1320f(c)(2))
and any regulations or guidance issued
thereunder by the Secretary of HHS. As
explained in part II.A of this Explanation
of Provisions, the proposed definition of
“applicable sale” would reflect the scope
of the section 5000D tax provided by the
statutory context of its enactment.
C. Manufacturer, Producer, or Importer
The section 5000D tax is imposed on the
sale of a designated drug by the “manufac-
turer, producer, or importer” of that desig-
nated drug. While the statute does not define
“manufacturer, producer, or importer,” the
language of section 5000D(a) makes clear
that these terms are not limited to the per-
sons directly responsible for the conduct
that gives rise to statutory periods. Proposed
§47.5000D-2(b)(3)(i) would define the term
“manufacturer, producer, or importer” to
mean the person that makes the first sale
(the definition of “sale” is explained in
part I.F of this Explanation of Provisions)
of units of a designated drug or, in the case
of imports, the person that makes the first
sale of such units after they are entered into
the United States for consumption, use,
or warehousing. See section 5000D(e)(1).
Under this proposed definition, the section
5000D tax would typically be imposed on
persons colloquially considered drug mak-
ers (that is, persons that physically or chem-
ically create units of a drug).
The proposed definition of “manu-
facturer, producer, or importer” would
also clarify that a sale of units of a des-
ignated drug would be the “first sale” if
that sale precedes in time all other sales
of those units. The “first sale” of any units
of a designated drug would not, therefore,
generally be the sale of such units to an
MFP-eligible individual or other sales of
such units that typically occur “down” or
“later” in the supply chain that begins with
the maker of a drug and ends with its ulti-
mate user. For example, sales of units of a
designated drug by a wholesaler, relabeler,
repackager,
1
retail pharmacy, healthcare
1
The Treasury Department and the IRS understand that, for purposes of the SSA and regulations and guidance issued thereunder, relabelers and repackagers are considered “manufacturers,”
and drugs, once relabeled or repackaged, new drugs. That regulatory regime is, however, nondeterminative with regard to the section 5000D tax.

February 3, 2025 718 Bulletin No. 2025–6
provider, or other person that typically
sells drugs or biological products “down”
or “later” in the supply chain, would not,
under most circumstances, be the first sale
of those units and, consequently, such per-
son would not be the manufacturer, pro-
ducer, or importer with respect to such
units for purposes of the section 5000D
tax. That designation would, under most
circumstances, fall to a person “up” or
“earlier” in the supply chain. If, however,
a wholesaler, relabeler, repackager, retail
pharmacy, healthcare provider, or other
person were to make the first sale of units
of a designated drug after entry into the
United States for consumption, use, or
warehousing, such person would be the
manufacturer, producer, or importer with
respect to such units for purposes of the
section 5000D tax.
The first sale concept is consistent with
almost a century of case law regarding
the imposition of excise taxes on first or
initial sales by manufacturers, producers,
or importers. See, e.g., Indian Motorcycle
Co. v. United States, 283 U.S. 570, 574
(1931) (“[T]he requirement that the tax
be paid by ‘the manufacturer, producer,
or importer’ [...] is intended to be no
more than a comprehensive and conve-
nient mode of reaching all first or initial
sales[.]”); Smith v. United States, 319 F.2d
776, 778-79 (5th Cir. 1963) (excise tax is
designed “to impose a tax on the initial
sale made in the United States by a man-
ufacturer, producer, or importer”); Texas
Truck Parts and Tire v. United States,
118 F.4th 687, 697 (5th Cir. 2024) (“Our
reading of the relevant law comports with
this principle, providing that Texas Truck
is liable for the excise tax upon the initial
sale in the United States.”).
Proposed §47.5000D-2(b)(3)(ii) would
clarify that the proposed definition of
“manufacturer, producer, or importer”
would apply independently of whether the
sale in question occurs during a statutory
period, meaning that the person that makes
the first sale of a unit of a designated drug
is the manufacturer, producer, or importer
of that unit, to the exclusion of others in
the supply chain, even if such sale is not
taxable. See the example provided in pro-
posed §47.5000D-2(c)(2).
D. Sale Prior to Publication of Selected
Drug List
Under proposed §47.5000D-2(b)(3)
(iii), a person that would meet the defi-
nition of “manufacturer, producer, or
importer” but for the timing of the publica-
tion of the list of selected drugs published
under section 1192(a) of the SSA would
be considered a manufacturer, producer,
or importer for purposes of the section
5000D tax. As illustrated in the example
provided in proposed §47.5000D-2(c)(3),
this proposed rule would ensure that sub-
sequent sales by other persons, “down”
or “later” in the supply chain, that take
possession of a drug or biological product
prior to the publication of that list are not
subject to taxation if such drugs or bio-
logical products become designated drugs
while in such persons’ possession.
E. Price
Under section 5000D(a)(2), the sec-
tion 5000D tax is calculated, in part, by
reference to the price of the designated
drug sold during a statutory period; how-
ever, section 5000D does not define the
term “price” for this purpose. Proposed
§47.5000D-2(b)(4) would define “price”
broadly,
2
capturing all amounts (other
than the amount of the section 5000D tax)
required by a manufacturer, producer, or
importer to be paid as consideration for,
or otherwise as a condition of, a sale of the
subset of units of such sale that comprise
an applicable sale. Because, as explained
in part II.A of this Explanation of Provi-
sions, section 5000D(a) imposes a tax only
on sales of designated drugs dispensed,
furnished, or administered to MFP-eligi-
ble individuals, the price charged by the
manufacturer, producer, or importer for
such units would generally be the relevant
price for purposes of determining the sec-
tion 5000D tax. For purposes of this pro-
posed definition, it would be immaterial
that any amount constituting the price may
be paid to a person other than the manu-
facturer, producer, or importer, or that it
may be separately billed to the buyer as an
amount earmarked for expenses incurred
or to be incurred on such buyer’s behalf.
Rebates and other price adjustments
are common in the prescription drug
supply chain. To account for such adjust-
ments, proposed §47.5000D-2(b)(4)(ii)
would allow a manufacturer, producer,
or importer to adjust the amount charged
in an applicable sale, for purposes of cal-
culating the section 5000D tax, to reflect
bona fide discounts, rebates, or allow-
ances that are connected to that applicable
sale and either paid to the buyer in such
applicable sale, credited to the account of
such buyer, or reimbursed to a third party
for the benefit of such buyer by such man-
ufacturer, producer, or importer. Under
the proposed rule, a bona fide discount,
rebate, or allowance would be made when
the amount actually paid by, or charged
against the account of, the buyer in the
applicable sale is reduced by subsequent
transactions between the parties. For
example, a wholesaler chargeback paid by
a manufacturer, producer, or importer to
reflect a discounted sale of drugs “down-
stream” by the wholesaler would con-
stitute a bona fide discount, rebate, or
allowance, provided that such chargeback
is connected to the applicable sale giving
rise to the section 5000D tax liability (and
not any other sale, ongoing sales gener-
ally, or any other goods or services) and
reduces the amount paid by, or charged
against the account of, the buyer in that
applicable sale (and not any other sale).
Proposed §47.5000D-2(b)(4)(iii)
would provide that the amount of any
bona fide discount, rebate, or allow-
ance described in §47.5000D-2(b)(4)(ii)
that may be used to reduce the amount
charged for an applicable sale is limited
to the percentage of a sale that constitutes
such applicable sale. See Identification of
Applicable Sales in part II.C of this Expla-
nation of Provisions.
Proposed §47.5000D-2(b)(4)(ii) and
(iii) are intended to reflect the amount
charged for the applicable sale in light
of industry practices related to bona fide
discounts, rebates, and allowances. The
Treasury Department and the IRS request
comments on other types of discounts,
rebates, or allowances, including dis-
counts, rebates, and allowances occurring
at other points in the supply chain, that
2
“Price,” as defined in proposed §47.5000D-2(b)(4), does not apply beyond section 5000D.

Bulletin No. 2025–6 719 February 3, 2025
should be considered or treated as price
adjustments under proposed §47.5000D-
2(b)(4)(ii) and (iii).
Proposed §47.5000D-2(b)(4)(iv) would
provide the method for allocating the
amount described in proposed §47.5000D-
2(b)(4)(iii)—that is, the amount by which
any bona fide discount, rebate, or allow-
ance reduces the amount charged in an
applicable sale—between tax and price.
This proposed rule would treat an applica-
ble sale, including the extent to which the
amount charged includes price and tax,
as provided in §47.5000D-3(b)(2)(i), as
though such applicable sale was initially
made at the adjusted price.
Proposed §47.5000D-2(c)(6) would
provide an example of a price adjustment
under proposed §47.5000D-2(b)(4)(ii)
and (iii) and the allocation required under
proposed §47.5000D-2(b)(4)(iv).
F. Sale
Proposed §47.5000D-2(b)(5) would
define “sale” as any agreement by which
substantial incidents of ownership in units
of a designated drug serve, in whole or in
part, as consideration.
II. Imposition and Calculation of Tax
Proposed §47.5000D-3 would provide
rules relating to the imposition and calcu-
lation of the section 5000D tax.
A. Imposition of Tax
Proposed §47.5000D-3(a)(1) would
provide that section 5000D imposes a
tax on an applicable sale made by a man-
ufacturer, producer, or importer during
a day described in section 5000D(b). As
described in part I.B of this Explanation
of Provisions, the term “applicable sale”
refers to the subset of a sale in units of a
designated drug that will be dispensed,
furnished, or administered to MFP-eli-
gible individuals, as defined in section
1191(c)(2) of the SSA and any regulations
or guidance issued thereunder by the Sec-
retary of HHS.
The scope of sales potentially subject
to the section 5000D tax, as expressed
in this proposed rule, reflects the broader
statutory context of the Program, which
defines both the substance and opera-
tion of the tax. Among other things, the
objects of the tax, “designated drug[s],”
are defined by section 5000D(e)(1), in
part, by reference to the “negotiation-el-
igible drugs,” as defined in section
1192(d) of the SSA, included on the list
published under section 1192(a) of the
SSA. Such negotiation-eligible drugs
are identified, under the Program, on the
basis of historical Medicare expendi-
tures (see section 1192(b) and (c) of the
SSA) and for the sole purpose of affect-
ing prices paid by Medicare beneficia-
ries (see section 1192(a)(3) of the SSA).
Similarly, the statutory periods during
which the section 5000D tax may arise
are defined by reference to milestones
of the Program. See section 5000D(b).
And, more generally, the applicability
of the section 5000D tax is expressly
linked to whether the manufacturer of a
designated drug has a statutorily defined
agreement with Medicare in place. See
section 5000D(c). Because the section
5000D tax depends substantively on,
and operates only in relation to, the Pro-
gram, the scope of the Program—which
provides access to selected drugs at the
negotiated prices only to Medicare ben-
eficiaries and their pharmacies, mail
order services, and other dispensers, as
well as hospitals, physicians, and other
providers of services and suppliers—is
reflected in the scope of the tax.
B. Attachment of and Person Liable for
the Tax
Proposed §47.5000D-3(a)(2) would
clarify that the section 5000D tax attaches
when a manufacturer, producer, or
importer of a designated drug makes an
applicable sale of such designated drug
during a statutory period. Under proposed
§47.5000D-3(a)(3), the manufacturer,
producer, or importer of a designated drug
that sells units of such designated drug
during a statutory period would be liable
for any section 5000D tax arising from
that sale.
C. Identification of Applicable Sales
Consistent with Notice 2023-52, pro-
posed §47.5000D-3(a)(4) would require
a manufacturer, producer, or importer
to employ a reasonable method to iden-
tify any applicable sales it made during
a statutory period. The proposed rule
would require a manufacturer, producer,
or importer’s method of identifying such
applicable sales to be based on recent
transactions reflected in books, records, or
other information pertaining to the drug or
biological product selected under the Pro-
gram. For this purpose, recent transactions
would include those occurring no more
than 24 months before the first day of the
calendar quarter in which the applicable
sales occurred.
For statutory periods that begin prior
to March 1, 2026, proposed §47.5000D-
3(a)(4)(iii) would allow a manufacturer,
producer, or importer to disregard sales
of drugs or biological products furnished
or administered by a hospital, physician,
or other provider of services or sup-
plier, where the recipient is an individual
enrolled under Medicare part B of title
XVIII of the SSA, including an individ-
ual enrolled in a Medicare Advantage
plan under part C of title XVIII of the
SSA, if payment may be made under part
B for such units, consistent with section
1192(b)(2) of the SSA, which provides for
the temporary exclusion of expenditures
under part B of title XVIII of the SSA for
purposes of ranking negotiation-eligible
drugs.
The Treasury Department and the IRS
are aware that identifying applicable sales
made during a statutory period may be dif-
ficult or burdensome. To help a manufac-
turer, producer, or importer comply with
this requirement, the Treasury Department
and the IRS are proposing a safe harbor
for identifying such applicable sales. Spe-
cifically, proposed §47.5000D-3(a)(4)(iv)
would provide that a manufacturer, pro-
ducer, or importer may satisfy the require-
ment to identify applicable sales by using
the safe harbor percentage provided in
guidance published in the Internal Rev-
enue Bulletin. A manufacturer, producer,
or importer that uses the safe harbor pro-
vided in proposed §47.5000D-3(a)(4)
(iv) to identify the applicable sales made
during a statutory period would be deemed
to have complied with the requirements of
proposed §47.5000D-3(a)(4)(i) through
(iii), as applicable.
To ensure consistent reporting and
reduce the potential for abuse, proposed
§47.5000D-3(a)(4)(iv)(C) and (D) would

February 3, 2025 720 Bulletin No. 2025–6
require the safe harbor to be applied uni-
formly to all sales of a designated drug
by a manufacturer, producer, or importer
subject to the section 5000D tax during a
calendar quarter and, unless the safe har-
bor percentage is changed by subsequent
guidance, for a period of three consecutive
calendar quarters thereafter.
Under proposed §47.5000D-3(a)(4)
(iv)(E), any update of to the safe har-
bor percentage described in proposed
§47.5000D-3(a)(4)(iv)(A) would use a
calculation methodology similar to that
described in proposed §47.5000D-3(a)
(4)(iv)(A), use the most recent analy-
sis that the IRS has received from CMS
of data available to CMS, and relieve a
manufacturer, producer, or importer from
an existing obligation under proposed
§47.5000D-3(a)(4)(iv)(C) to use the safe
harbor described in proposed §47.5000D-
3(a)(4)(iv) as of the effective date of such
updated safe harbor percentage. If a man-
ufacturer, producer, or importer contin-
ues to use the safe harbor described in
proposed §47.5000D-3(a)(4)(iv) after
the safe harbor percentage is updated,
such manufacturer, producer, or importer
would be required to use the updated
safe harbor percentage on and after the
effective date of such updated safe harbor
percentage and for the remainder of any
period required by proposed §47.5000D-
3(a)(4)(iv)(C).
Finally, proposed §47.5000D-3(a)
(4)(v) would provide that once a section
5000D tax liability is reported to the IRS
for a particular calendar quarter, the man-
ufacturer, producer, or importer liable
for the section 5000D tax may not later
recalculate its section 5000D tax liability
for that quarter using a different method
to identify its applicable sales. However,
the correction of a mathematical or cleri-
cal error or the use of corrected data from
the same historical period used to identify
the applicable sales originally would not
alone constitute the recalculation of a sec-
tion 5000D tax liability using a different
method.
D. Calculation of Tax
Proposed §47.5000D-3(b)(1) would
provide the tax rate by restating the stat-
utory formula for calculating the section
5000D tax. As described in the Back-
ground section of this preamble, section
5000D(a) provides a formula for calcu-
lating the section 5000D tax by which an
applicable percentage, ranging from 65 to
95 percent, equals the tax divided by the
sum of the tax and the price. The appli-
cable percentage varies depending on the
number of days that have passed since a
statutory period began.
E. Effect of Invoicing Tax on Tax
Calculation
Consistent with Notice 2023-52, pro-
posed §47.5000D-3(b)(2)(i) would pro-
vide that if a manufacturer, producer, or
importer makes no separate charge on its
invoice or similar document with respect
to a sale, the amount charged is presumed
to include the proper amount of the sec-
tion 5000D tax. The price would, under
those circumstances, exclude the portion
of the amount charged that is alloca-
ble to the section 5000D tax; no section
5000D tax would be calculated on the
amount allocated to the section 5000D
tax. See the example provided in proposed
§47.5000D-3(b)(3).
If a manufacturer, producer, or importer
includes the section 5000D tax as a sep-
arate line item on an invoice or similar
document, proposed §47.5000D-3(b)(2)
(ii) would provide that the amount of sec-
tion 5000D tax so charged is not included
in the price; thus, no section 5000D tax
would be due on the amount of section
5000D tax so charged.
Although this rule is modeled on a
similar rule found in §48.4216(a)-2(a) of
the Manufacturers and Retailers Excise
Tax Regulations, neither that rule nor
any other found in 26 CFR part 48 would
apply or provide any interpretive guidance
with respect to any rule proposed or issued
under section 5000D because the part 48
regulations apply to taxes imposed by
chapters 31 and 32 of the Code, and sec-
tion 5000D is in chapter 50A.
F. Anti-Abuse Rule
Pursuant to the authority provided in
section 5000D(h), proposed §47.5000D-
3(c) would provide an anti-abuse rule
under which a transaction or series of
transactions, including transactions
made other than at arm’s length, may be
adjusted, recharacterized, or otherwise
recast by the IRS in circumstances in
which the parties engaged in such transac-
tion or series of transactions with a princi-
pal purpose of avoiding the section 5000D
tax or substantially reducing the purported
price on which the section 5000D tax is
calculated.
Proposed Applicability Date
These regulations are proposed to
apply to sales of designated drugs on and
after the date the Treasury decision adopt-
ing these rules as final regulations is pub-
lished in the Federal Register.
Effect on Other Documents
Taxpayers may continue to rely on
sections 3.01 and 3.02 of Notice 2023-52
until these proposed regulations are final-
ized.
Special Analyses
I. Regulatory Planning and Review—
Economic Analysis
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520) generally requires
that a Federal agency obtain the approval
of the Office of Management and Bud-
get (OMB) before collecting information
from the public, whether such collection
of information is mandatory, voluntary,
or required to obtain or retain a benefit.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number.
Any collection burden associated with
rules described in these proposed regula-
tions is previously accounted for in OMB
Control Number 1545-0023, which cov-

Bulletin No. 2025–6 721 February 3, 2025
ers Form 720, Quarterly Federal Excise
Tax Return. The recordkeeping require-
ments associated with Form 720 have
already been approved by OMB. More-
over, a taxpayer may avail itself of the
safe harbor proposed in these proposed
regulations without filing any formal
election or statement or performing any
other affirmative act. These proposed
regulations do not, therefore, alter pre-
viously accounted for information col-
lection requirements or create new col-
lection requirements. For PRA burden
estimated for procedural rules related to
the section 5000D tax, see the preamble
to TD 10003.
III. Regulatory Flexibility Act
Pursuant to the Regulatory Flexibility
Act (5 U.S.C. chapter 6) (RFA), the Sec-
retary of the Treasury hereby certifies that
these proposed regulations will not have a
significant economic impact on a substan-
tial number of small entities. This certifi-
cation is based on the fact that the section
5000D tax is imposed only when certain
drug manufacturers, producers, or import-
ers sell certain designated drugs during
periods described in section 5000D(b).
The periods described in section 5000D(b)
relate to milestones in the Program, the
scope of which is limited to a subset of
drugs with high Medicare expenditures.
To the extent any section 5000D tax lia-
bility arises, taxpayers will be few and
unlikely to meet the relevant definitions of
small entities under the RFA and regula-
tions thereunder. These proposed regula-
tions will not, therefore, create additional
obligations for, or have a significant eco-
nomic impact on, a substantial number of
small entities, and analysis under the RFA
is not required. Notwithstanding this certi-
fication, the Treasury Department and the
IRS welcome comments on the impact of
these proposed regulations on small enti-
ties.
IV. Section 7805(f)
Pursuant to section 7805(f) of the
Code, this notice of proposed rulemaking
has been submitted to the Chief Counsel
for the Office of Advocacy of the Small
Business Administration for comment on
its impact on small business.
V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agencies
assess anticipated costs and benefits and
take certain other actions before issuing a
final rule that includes any Federal man-
date that may result in expenditures in any
one year by a State, local, or Tribal gov-
ernment, in the aggregate, or by the pri-
vate sector, of $100 million in 1995 dol-
lars, updated annually for inflation. These
proposed regulations do not include any
Federal mandate that may result in expen-
ditures by State, local, or Tribal govern-
ments, or by the private sector, in excess
of that threshold.
VI. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Execu-
tive order. These proposed regulations
do not have federalism implications, do
not impose substantial direct compliance
costs on State and local governments, and
do not preempt State law within the mean-
ing of the Executive order.
Comments and Requests for a Public
Hearing
Before these proposed amendments
to the regulations are adopted as final
regulations, consideration will be given
to comments that are submitted timely
to the IRS as prescribed in the preamble
under the ADDRESSES section. The
Treasury Department and the IRS request
comments on all aspects of the proposed
regulations. All commenters are strongly
encouraged to submit comments electron-
ically. The Treasury Department and the
IRS will publish for public availability
any comment submitted electronically or
on paper to its public docket on https://
www.regulations.gov.
A public hearing will be scheduled if
requested in writing by any person who
timely submits electronic or written com-
ments. Requests for a public hearing are
also encouraged to be made electronically.
If a public hearing is scheduled, notice of
the date and time for the public hearing
will be published in the Federal Register.
Statement of Availability of IRS
Documents
The IRS notice cited in this preamble is
published in the Internal Revenue Bulletin
and is available from the Superintendent
of Documents, U.S. Government Publish-
ing Office, Washington, DC 20402, or by
visiting the IRS website at https://www.
irs.gov.
Drafting Information
The principal author of these regula-
tions is the Office of the Associate Chief
Counsel (Passthroughs & Special Indus-
tries). However, other personnel from the
Treasury Department and the IRS partici-
pated in their development.
List of Subjects in 26 CFR Part 47
Excise taxes.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 47 as follows:
PART 47—DESIGNATED DRUGS
EXCISE TAX REGULATIONS
Paragraph 1. The authority citation
for part 47 is amended by adding entries
in numerical order for §§47.5000D-2 and
47.5000D-3 to read in part as follows:
Authority: 26 U.S.C. 7805.
* * * * *
Section 47.5000D-2 also issued under
26 U.S.C. 5000D(h).
Section 47.5000D-3 also issued under
26 U.S.C. 5000D(h).
Par. 2. Section 47.5000D-0 is amended
by:
a. Removing the entry “§§
47.5000D-2—47.5000D-4 [Reserved]”.
b. Adding entries for §§47.5000D-2 and
47.5000D-3 and the entry Ҥ47.5000D-4
[Reserved]” in numerical order.

February 3, 2025 722 Bulletin No. 2025–6
The additions read as follows:
§47.5000D-0 Table of contents.
* * * * *
§47.5000D-2 Definitions.
(a) Overview.
(b) Definitions.
(1) Applicable percentage.
(2) Applicable sale.
(3) Manufacturer, producer, or importer.
(i) In general.
(ii) Sale made other than on a day
described in section 5000D(b).
(iii) Sale made prior to publication of
the list of selected drugs under section
1192(a) of the Social Security Act.
(4) Price.
(i) In general.
(ii) Adjustment to amount charged.
(iii) Amount of adjustment.
(iv) Allocation between price and tax.
(5) Sale.
(c) Examples.
(1) Example 1: First sale of units of a
designated drug.
(i) Facts.
(ii) Analysis.
(2) Example 2: Manufacturer sale prior
to day described in section 5000D(b).
(i) Facts.
(ii) Analysis.
(3) Example 3: Sale made prior to pub-
lication of the list of selected drugs.
(i) Facts.
(ii) Analysis.
(4) Example 4: Subsequent sale to rela-
beler.
(i) Facts.
(ii) Analysis.
(5) Example 5: Importation.
(i) Facts.
(ii) Analysis.
(6) Example 6: Chargeback reimburse-
ment and allocation.
(i) Facts.
(A) Manufacturer sale.
(B) Wholesaler sale and chargeback.
(ii) Analysis.
(A) Bona fide discount, rebate, or
allowance.
(B) Allocation of chargeback reim-
bursement between tax and price.
(d) Severability.
(e) Applicability date.
§47.5000D-3 Imposition of section
5000D tax.
(a) Imposition of tax.
(1) In general.
(2) Attachment of tax.
(3) Person liable for tax.
(4) Identification of applicable sales.
(i) In general.
(ii) Books, records, and other informa-
tion.
(iii) Disregard of Medicare part B sales
permissible prior to March 1, 2026.
(iv) Safe harbor.
(A) In general.
(B) No election required.
(C) Must use safe harbor for four con-
secutive calendar quarters.
(D) Uniform application required.
(E) Updates to safe harbor percentage.
(v) Recalculation of liability not per-
mitted.
(b) Calculation of tax.
(1) In general.
(2) Charging tax as line item; effect on
price.
(i) Presumption if no separate charge
for tax is made.
(ii) Separately charged tax not part of
price.
(3) Example.
(i) Facts.
(ii) Analysis.
(A) In general.
(B) Step 1.
(C) Step 2.
(D) Step 3.
(E) Step 4.
(c) Anti-abuse rule.
(d) Severability.
(e) Applicability date.
§47.5000D-4 [Reserved]
Par. 3. Sections 47.5000D-2 and
47.5000D-3 are added to read as follows:
§47.5000D-2 Definitions.
(a) Overview. This section provides
definitions for purposes of section 5000D
of the Internal Revenue Code (Code) and
the Designated Drugs Excise Tax Regula-
tions in this part.
(b) Definitions—(1) Applicable per-
centage. The term applicable percent-
age has the meaning provided in section
5000D(d). To determine the applicable
percentage with respect to a specific
applicable sale, days described in section
5000D(b) are cumulative regardless of
whether such days are consecutive.
(2) Applicable sale. The term appli-
cable sale means the sale transaction
that is the subset of each sale in units
of a designated drug, as defined in sec-
tion 5000D(e)(1), made by the manufac-
turer, producer, or importer that will be
dispensed, furnished, or administered to
maximum fair price-eligible individuals,
as defined in section 1191(c)(2) of the
Social Security Act (42 U.S.C. 1320f(c)
(2)) and any regulations (in title 42 of
the Code of Federal Regulations) or
guidance issued thereunder by the Secre-
tary of Health and Human Services. See
§47.5000D-3(a)(4) for methods of identi-
fying applicable sales.
(3) Manufacturer, producer, or
importer—(i) In general. With respect to
any units of a designated drug, the term
manufacturer, producer, or importer
means the person that makes the first sale
of such units or, in the case of imports,
the person that makes the first sale of
such units after such units are entered into
the United States for consumption, use,
or warehousing. A sale is the first sale if
it precedes in time any other sale of the
same units. Each unit of a designated drug,
therefore, has only one manufacturer, pro-
ducer, or importer.
(ii) Sale made other than on a day
described in section 5000D(b). A person
that meets the criteria of paragraph (b)(3)
(i) of this section is a manufacturer, pro-
ducer, or importer regardless of whether
the sale described in paragraph (b)(3)(i)
is made during a day described in section
5000D(b). See Example 2 provided in
paragraph (c)(2) of this section.
(iii) Sale made prior to publication of
the list of selected drugs under section
1192(a) of the Social Security Act. With
respect to particular units of a drug or
biological product, if a person would be
described in paragraph (b)(3)(i) of this
section but for the timing of the publi-
cation of the list of selected drugs under
section 1192(a) of the Social Security
Act, such person will nevertheless be
considered the manufacturer, producer, or
importer of such units. Subsequent sell-
ers of such units would not, therefore, be

Bulletin No. 2025–6 723 February 3, 2025
the manufacturer, producer, or importer
of such units. See Example 3 provided in
paragraph (c)(3) of this section.
(4) Price—(i) In general. Except as
provided in §47.5000D-3(b)(2)(i) and (ii),
the term price means, with respect to an
applicable sale of units of a designated
drug sold during a day described in sec-
tion 5000D(b), any amount (whether in
cash or in kind) that is required by a man-
ufacturer, producer, or importer to be paid
as a condition of such applicable sale. It is
immaterial, for purposes of this paragraph
(b)(4), that such amount may be paid to a
person other than the manufacturer, pro-
ducer, or importer, or that it may be sep-
arately billed to the buyer as an amount
earmarked for expenses incurred or to be
incurred on such buyer’s behalf.
(ii) Adjustment to amount charged. A
manufacturer, producer, or importer may
adjust the amount charged in an applica-
ble sale to reflect a bona fide discount,
rebate, or allowance that is connected
to such applicable sale and paid or cred-
ited by such manufacturer, producer, or
importer against such amount. The basic
consideration in determining, for purposes
of this section, whether a bona fide dis-
count, rebate, or allowance has been made
is whether the amount actually paid by, or
charged against the account of, the buyer
in the applicable sale has been reduced.
Such amount will be considered reduced
by reason of a bona fide discount, rebate,
or allowance only if the manufacturer,
producer, or importer repays part or all of
the amount charged to the buyer, credits
the buyer’s account, or reimburses a third
party for part or all of the amount charged
for the benefit of the buyer.
(iii) Amount of adjustment. The amount
of any bona fide discount, rebate, or allow-
ance described in paragraph (b)(4)(ii) of
this section that may be used to reduce
the amount charged for an applicable sale
is limited by the percentage of a sale that
constitutes such applicable sale.
(iv) Allocation between price and tax.
The amount described in paragraph (b)
(4)(iii) of this section must be allocated
between price and the tax imposed by
section 5000D(a) (section 5000D tax) in
the same manner as the amount charged
for the applicable sale absent such adjust-
ment. See Example 6 provided in para-
graph (c)(6) of this section.
(5) Sale. The term sale means any
agreement by which substantial incidents
of ownership in units of a designated drug
serve as consideration.
(c) Examples. The following examples
illustrate the application of the definitions
provided in this section and the rules pro-
vided in §47.5000D-3. For purposes of
this paragraph (c), all sales are applicable
sales (see paragraph (b)(2) of this section
and §47.5000D-3(a)(4)) and, unless oth-
erwise provided, all designated drugs are
manufactured or produced in the United
States.
(1) Example 1: First sale of units of a designated
drug—(i) Facts. Manufacturer D is a manufacturer
of Designated Drug Y. During the fourth quarter of
2024, Manufacturer D sells 1,000,000 units of Des-
ignated Drug Y to Wholesaler E, a drug wholesaler.
With respect to Designated Drug Y, every day of the
fourth quarter of 2024 is a day described in section
5000D(b).
(ii) Analysis. Manufacturer D incurs liability
under section 5000D(a) and §47.5000D-3(a) for its
sale of the 1,000,000 units of Designated Drug Y to
Wholesaler E. No other person incurs liability under
section 5000D(a) and §47.5000D-3(a) with respect
to those units. Under paragraph (b)(3)(i) of this sec-
tion, Manufacturer D’s sale of the 1,000,000 units of
Designated Drug Y to Wholesaler E is the first sale of
such units of the designated drug. As a result, Manu-
facturer D is the manufacturer, producer, or importer
with respect to such units of Designated Drug Y.
Because Manufacturer D’s sale of the 1,000,000
units of Designated Drug Y is made during a day
described in section 5000D(b), that sale is subject
to taxation under section 5000D(a) and §47.5000D-
3(a). No tax liability under section 5000D arises with
respect to any subsequent sale of the 1,000,000 units
of Designated Drug Y because no subsequent sale
would qualify as the first sale of such units; there-
fore, no other person is the manufacturer, producer,
or importer with respect to such units.
(2) Example 2: Manufacturer sale prior to day
described in section 5000D(b)—(i) Facts. The facts
are the same as those described in paragraph (c)(1)(i)
of this section (Example 1), except that Manufacturer
D’s sale of the 1,000,000 units of Designated Drug Y
is made after it is included on the list published under
section 1192(a) of the Social Security Act, but before
a day described in section 5000D(b).
(ii) Analysis. Manufacturer D incurs no liability
under section 5000D(a) and §47.5000D-3(a) for its
sale of the 1,000,000 units of Designated Drug Y to
Wholesaler E. In addition, no other person incurs
liability under section 5000D(a) and §47.5000D-
3(a) with respect to those units. Under paragraph (b)
(3)(i) of this section, Manufacturer D’s sale of the
1,000,000 units of Designated Drug Y to Whole-
saler E is the first sale of such units of the desig-
nated drug. As a result, Manufacturer D is the man-
ufacturer, producer, or importer with respect to such
units of Designated Drug Y. No tax liability under
section 5000D, however, arises in relation to that sale
because it was not made during a day described in
section 5000D(b). Moreover, no tax liability under
section 5000D arises with respect to any subsequent
sale of the 1,000,000 units of Designated Drug Y
because no subsequent sale would qualify as the first
sale of such units, and therefore no other person is
the manufacturer, producer, or importer with respect
to such units.
(3) Example 3: Sale made prior to publication
of the list of selected drugs—(i) Facts. Manufac-
turer B, a drug manufacturer, sells 1,000,000 units
of Drug J to Wholesaler V, a drug wholesaler. After
such sale and before Wholesaler V resells those
1,000,000 units, Drug J is identified as a selected
drug on the list published under section 1192(a) of
the Social Security Act, making it a designated drug
(Designated Drug J), as defined in section 5000D(e)
(1). Wholesaler V subsequently sells the 1,000,000
units of Designated Drug J to pharmacies; these sales
occur on a day described in section 5000D(b).
(ii) Analysis. Manufacturer B incurs no liability
under section 5000D(a) and §47.5000D-3(a) for its
sale of the 1,000,000 units of Designated Drug J to
Wholesaler V. In addition, no other person incurs
liability under section 5000D(a) and §47.5000D-3(a)
with respect to those units. At the time of Manufac-
turer B’s sale to Wholesaler V, Drug J had not been
included on the list of selected drugs published under
section 1192(a) of the Social Security Act and, there-
fore, was not a designated drug as defined in sec-
tion 5000D(e)(1). Under paragraph (b)(3)(iii) of this
section, Manufacturer B would nevertheless be con-
sidered the manufacturer, producer, or importer with
respect to the sale to Wholesaler V. No tax liability
under section 5000D(a) and §47.5000D-3(a) would
arise with respect to Manufacturer B’s sale because
that sale did not occur (and could not have occurred)
during a day described in section 5000D(b). More-
over, no tax liability under section 5000D would
arise with respect to Wholesaler V’s sale of the
1,000,000 units of Designated Drug J, even though
such sale occurred during a day described in section
5000D(b), because, as a function of the rule provided
in paragraph (b)(3)(iii) of this section, Wholesaler V
did not make the first sale of such units. Wholesaler
V is not, therefore, the manufacturer, producer, or
importer under paragraph (b)(3)(i) of this section
with respect to such units of Designated Drug J,
and is not subject to tax under section 5000D and
§47.5000D-3(a).
(4) Example 4: Subsequent sale to relabeler—
(i) Facts. The facts are the same as those described
in paragraph (c)(1)(i) of this section (Example 1),
except that during the fourth quarter of 2024, Whole-
saler E sells the same 1,000,000 units to Relabeler
F, a drug relabeler. Relabeler F then relabels the
1,000,000 units of Designated Drug Y and, before the
end of the fourth quarter of 2024, sells all 1,000,000
units to pharmacies.
(ii) Analysis. Manufacturer D incurs liability
under section 5000D(a) and §47.5000D-3(a) for
its sale of the 1,000,000 units of Designated Drug
Y to Wholesaler E. No other person incurs liability
under section 5000D(a) and §47.5000D-3(a) with
respect to those units. Relabeler F’s relabeling of
the 1,000,000 units of Designated Drug Y does not
affect this outcome, regardless of whether such rela-
beling involves affixing a new National Drug Code
or Codes to the units of Designated Drug Y prior to
those units of Designated Drug Y being furnished to

February 3, 2025 724 Bulletin No. 2025–6
a maximum fair price-eligible individual. Relabeler
F’s sales of the 1,000,000 units of Designated Drug
Y to pharmacies are the third sales of such units, not
the first. As a result, Manufacturer D is the manu-
facturer, producer, or importer with respect to such
units under paragraph (b)(3)(i) of this section, not
Relabeler F. Thus, Relabeler F’s sale of such units
is not subject to taxation under section 5000D(a) and
§47.5000D-3(a), but Manufacturer D’s sale of such
units to Wholesaler E is subject to the tax.
(5) Example 5: Importation—(i) Facts. With
respect to Designated Drug Y, every day of the
fourth quarter of 2024 is a day described in section
5000D(b). Manufacturer R is a manufacturer of Drug
Y. During the fourth quarter of 2024, Manufacturer
R sells 1,000,000 units of Drug Y to Wholesaler Q,
a drug wholesaler, before such units are entered into
the United States for consumption, use, or warehous-
ing. Before the end of the fourth quarter of 2024,
Wholesaler Q enters the 1,000,000 units of Drug Y
into the United States for consumption, use or ware-
housing, rendering them units of a designated drug
(Designated Drug Y), as defined in section 5000D(e)
(1), and sells all 1,000,000 units to pharmacies.
(ii) Analysis. Wholesaler Q incurs liability under
section 5000D(a) and §47.5000D-3(a) for its sale of
the 1,000,000 units of Designated Drug Y to the phar-
macies. No other person incurs liability under sec-
tion 5000D(a) and §47.5000D-3(a) with respect to
those units. Under paragraph (b)(3)(i) of this section,
Manufacturer R is not the manufacturer, producer, or
importer with respect to the 1,000,000 units of Drug
Y that Manufacturer R sold to Wholesaler Q during
the fourth quarter of 2024 because Manufacturer R’s
sale occurred before such units were entered into the
United States for consumption, use, or warehousing.
As a result, Manufacturer R’s sale to Wholesaler Q
is not subject to taxation under section 5000D(a) and
§47.5000D-3(a). Wholesaler Q’s sales of the same
1,000,000 units of Designated Drug Y to pharmacies
in the fourth quarter of 2024, however, are subject
to taxation under section 5000D(a) and §47.5000D-
3(a). Wholesaler Q’s sales to such pharmacies are the
first sales of those units after they were entered into
the United States for consumption, use, or warehous-
ing. As a result, Wholesaler Q is the manufacturer,
producer, or importer under paragraph (b)(3)(i) of
this section with respect to such units of Designated
Drug Y, and its sales thereof are subject to taxation
under section 5000D(a) and §47.5000D-3(a).
(6) Example 6: Chargeback reimbursement and
allocation—(i) Facts—(A) Manufacturer sale. Man-
ufacturer P is the manufacturer, producer, or importer
of 100,000 units of Designated Drug Q. During a day
described in section 5000D(b), and no more than 90
days since the first such day, Manufacturer P sells
100,000 units of Designated Drug Q to Wholesaler
V at $1.00 per unit ($100,000). Manufacturer P rea-
sonably determines that 40 percent of the sale is the
applicable sale. See paragraph (b)(2) of this section
and §47.5000D-3(a)(4). Manufacturer P does not
separately invoice any section 5000D tax to Whole-
saler V. See §47.5000D-3(b)(2)(i). Manufacturer P’s
sale to Wholesaler V would, therefore, have resulted
in a section 5000D tax liability of $26,000 ($26,000
÷ $40,000 = 65 percent).
(B) Wholesaler sale and chargeback. Pharmacy
G purchases the 100,000 units of Designated Drug
Q from Wholesaler V at a discount. Wholesaler V
issues a $30,000 chargeback invoice to Manufacturer
P related to the amount of the discount. Manufacturer
P pays Wholesaler V the full amount of the charge-
back.
(ii) Analysis—(A) Bona fide discount, rebate,
or allowance. Manufacturer P’s reimbursement for
Wholesaler V’s chargeback is a bona fide discount,
rebate, or allowance against the price of the appli-
cable sale because it is for the sale of the 100,000
units (and no other sale, goods, or services). Of the
100,000 units sold, 40 percent, or 40,000, constitute
the applicable sale and are therefore subject to the
section 5000D tax. Manufacturer P’s reimbursement
to Wholesaler V reduces the amount charged in that
applicable sale, such that the amount charged per unit
is $0.70 and the total amount charged in the applica-
ble sale is $28,000 ($0.70 per unit × 40,000 units).
The reimbursement proportionally attributable to the
applicable sale is, therefore, $12,000 ($0.30 per unit
× 40,000 units).
(B) Allocation of chargeback reimbursement
between tax and price. (1) The amount by which
the chargeback reimbursement reduces the price and
tax, for purposes of section 5000D, is determined by
allocating the reimbursement according to the same
price-tax ratio that initially applied to the applicable
sale:
Equation 1 to Paragraph (c)(6)(ii)(B)(1)
Tax Inclusive Price Adjustment
× Tax Exclusive Sale Price = Price Adjustment
Tax Inclusive Sale Price
(2) The quotient of the tax-inclusive price adjust-
ment ($12,000) and the tax-inclusive sale price (the
$40,000 amount charged) multiplied by the initial
tax-exclusive sale price of the applicable sale (($1.00
- $0.65) x $40,000, or $14,000) results in a price
adjustment of $4,200, meaning that, of the $12,000
reimbursement, $7,800 is allocated to tax and $4,200
is allocated to price. Thus, Manufacturer P’s liability
under section 5000D for the applicable sale is $18,200
(the $26,000 tax liability arising from the sale as orig-
inally made less the $7,800 of the reimbursement allo-
cated to the tax). In other words, Manufacturer P’s lia-
bility under section 5000D after the price adjustment
is identical to the liability that Manufacturer P would
have incurred under section 5000D had Manufacturer
P originally sold the 100,000 units of Designated Drug
Q to Wholesaler V at the adjusted amount ($18,200 ÷
$28,000 = 65 percent).
(d) Severability. The provisions of this
section are separate and severable from
one another and any other section in this
part. If any provision of this section is
stayed or determined to be invalid, it is the
intention of the Department of the Trea-
sury and the Internal Revenue Service that
the remaining provisions and sections of
this part shall continue in effect.
(e) Applicability date. This section
applies to sales of designated drugs on or
after [date of publication of final regula-
tions in the Federal Register].
§47.5000D-3 Imposition of section
5000D tax.
(a) Imposition of tax—(1) In general.
Section 5000D(a) of the Internal Revenue
Code (Code) imposes a tax (section 5000D
tax) on applicable sales made by a man-
ufacturer, producer, or importer during a
day described in section 5000D(b).
(2) Attachment of tax. The section
5000D tax attaches when a manufacturer,
producer, or importer of units of a desig-
nated drug makes an applicable sale of
such units during a day described in sec-
tion 5000D(b).
(3) Person liable for tax. A manufac-
turer, producer, or importer of units of a
designated drug that makes an applicable
sale of such units during a day described
in section 5000D(b) is liable for the sec-
tion 5000D tax imposed on such sale.
(4) Identification of applicable sales—
(i) In general. A manufacturer, producer,
or importer of units of a designated drug
must employ a reasonable method to iden-
tify the applicable sales of such units, if
any, that it makes during a day described
in section 5000D(b). A manufacturer, pro-
ducer, or importer’s method of identifying
such applicable sales must be based on its
books, records, or other information. For
example, a subsidiary may rely on histori-
cal sales data collected and analyzed by its
parent, provided that such data and anal-
ysis meet the requirements of paragraph
(a)(4)(ii) of this section and are otherwise
reasonable.

Bulletin No. 2025–6 725 February 3, 2025
(ii) Books, records, and other informa-
tion. Books, records, and other informa-
tion used to identify applicable sales must
reflect transactions pertaining to the drug
or biological product selected for inclu-
sion on the list of selected drugs published
under section 1192(a) of the Social Secu-
rity Act that predate the first day of the cal-
endar quarter in which the applicable sales
occurred by no more than 24 months.
(iii) Disregard of Medicare part B sales
permissible prior to March 1, 2026. For
periods described in section 5000D(b)
that begin prior to March 1, 2026, a man-
ufacturer, producer, or importer’s method
may disregard sales of drugs or biological
products furnished or administered by a
hospital, physician, or other provider of
services or supplier, the recipient of which
is an individual enrolled under Medicare
part B of title XVIII of the Social Security
Act, including an individual enrolled in a
Medicare Advantage plan under part C of
such title, if payment may be made under
part B for such units. See section 1192(b)
(2) of the Social Security Act.
(iv) Safe harbor—(A) In general. A
manufacturer, producer, or importer may
satisfy the requirements of this paragraph
(a)(4) by using the safe harbor percent-
age provided in guidance published in the
Internal Revenue Bulletin (see §601.601
of this chapter), as applicable to the rele-
vant calendar quarter, to identify its appli-
cable sales. Such safe harbor percentage
is a rounded average of the percentage of
all sales that are applicable sales of a sam-
ple of qualifying single-source drugs (as
defined in section 1192(e) of the Social
Security Act) that is large enough to yield
meaningful results, as determined by the
analysis of certain manufacturer- and
patient-level data conducted by the Cen-
ters for Medicare and Medicaid Services
(CMS).
(B) No election required. No election is
required for a manufacturer, producer, or
importer to use the safe harbor described
in paragraph (a)(4)(iv)(A) of this section.
(C) Must use safe harbor for four con-
secutive calendar quarters. Except as pro-
vided in paragraph (a)(4)(iv)(E) of this sec-
tion, a manufacturer, producer, or importer
that uses the safe harbor described in para-
graph (a)(4)(iv)(A) of this section must
continue to use the safe harbor for a period
of four consecutive calendar quarters,
including the calendar quarter in which the
safe harbor is first used.
(D) Uniform application required. A
manufacturer, producer, or importer that
uses the safe harbor described in para-
graph (a)(4)(iv)(A) of this section for
sales made during any day described in
section 5000D(b) falling within a calendar
quarter must apply the safe harbor to all
sales by such manufacturer, producer, or
importer during all days described in sec-
tion 5000D(b) falling within that calendar
quarter. Thus, if a manufacturer, producer,
or importer uses the safe harbor described
in paragraph (a)(4)(iii)(A) of this section
with respect to one sale of a designated
drug during a day described in section
5000D(b), it must use the safe harbor for
all sales of that designated drug and all
sales of any other designated drug that
occur in that calendar quarter during a day
described in section 5000D(b).
(E) Updates to safe harbor percentage.
Any update to the safe harbor percentage
described in paragraph (a)(4)(iv)(A) of this
section will use a calculation methodol-
ogy similar to that described in paragraph
(a)(4)(iv)(A) of this section, use the most
recent analysis that the Internal Revenue
Service (IRS) has received from CMS of
data available to CMS, and relieve a man-
ufacturer, producer, or importer from an
existing obligation under paragraph (a)(4)
(iv)(C) of this section to use the safe har-
bor described in this paragraph (a)(4)(iv)
as of the effective date of such updated
safe harbor percentage. If a manufacturer,
producer, or importer continues to use the
safe harbor described in this paragraph (a)
(4)(iv) after the safe harbor percentage is
updated, such manufacturer, producer, or
importer must use the updated safe har-
bor percentage on and after the effective
date of such updated safe harbor percent-
age and for the remainder of any period
required by paragraph (a)(4)(iv)(C) of this
section.
(v) Recalculation of liability not per-
mitted. Once a section 5000D tax liability
is reported to the IRS for a particular cal-
endar quarter, the manufacturer, producer,
or importer liable for the section 5000D
tax may not later recalculate its section
5000D tax liability for that quarter using a
different method to identify its applicable
sales. The correction of a mathematical
or clerical error, or the use of corrected
data from the same historical period used
to originally identify the applicable sales,
does not alone constitute the recalculation
of a section 5000D tax liability using a
different method.
(b) Calculation of tax—(1) In general.
(i) For any applicable sale of units of a
designated drug during a day described in
section 5000D(b), the amount of the sec-
tion 5000D tax is the amount such that the
applicable percentage is equal to the ratio
of such tax divided by the sum of such
tax and the price of such applicable sale
expressed as a percentage. This ratio may
be expressed as follows:
Equation 1 to Paragraph (b)(1)(i)
Applicable Percentage = Ta x/(Tax + Price)
(ii) See paragraph (b)(2) of this section
for rules relating to the effect of certain
invoicing methods on the determination
of price.
(2) Charging tax as line item; effect
on price—(i) Presumption if no separate
charge for tax is made. If no separate
charge is made for the section 5000D tax
on the invoice or similar document per-
taining to an applicable sale, the amount
charged for units of the designated drug
is presumed to include both the proper
amount of section 5000D tax and the
price. In such cases, the price excludes the
portion of the amount charged allocable to
the section 5000D tax so charged, and no
section 5000D tax is due on the amount of
section 5000D tax so charged.
(ii) Separately charged tax not part
of price. If the section 5000D tax is sep-
arately charged on the invoice or similar
document pertaining to an applicable sale,
the section 5000D tax so charged is not
included in the price. Thus, if a manufac-
turer, producer, or importer calculates the
section 5000D tax and charges it as a sep-
arate item on the invoice or similar docu-
ment pertaining to an applicable sale, the
amount of section 5000D tax so charged
is not included in the price for purposes

February 3, 2025 726 Bulletin No. 2025–6
of calculating the section 5000D tax under
paragraph (b)(1) of this section, and no
section 5000D tax is due on the amount of
section 5000D tax so charged.
(3) Example—(i) Facts. Manufac-
turer X is the manufacturer, producer, or
importer of 409,000 units of Designated
Drug H (that is, it makes the first sale of
those units). During a day described in sec-
tion 5000D(b), and no more than 90 days
since the first such day, Manufacturer X
sells 100,000 units of Designated Drug H
to Wholesaler A at $1.00 per unit, 300,000
units of Designated Drug H to Wholesaler
B at $0.90 per unit, and 9,000 units of Des-
ignated Drug H to Wholesaler C at $1.12
per unit. Manufacturer X has reasonably
determined that the applicable sale consists
of 35 percent of the units of Designated
Drug H in each such sale. Manufacturer
X has not separately invoiced any section
5000D tax to Wholesalers A, B, or C.
(ii) Analysis—(A) In general. To cal-
culate its section 5000D tax liability with
respect to its sales of Designated Drug H
to Wholesalers A, B, and C, Manufacturer
X must aggregate its section 5000D tax
liability for the applicable sales by apply-
ing the presumption described in para-
graph (b)(2)(i) of this section.
(B) Step 1. Manufacturer X begins by
determining the applicable sales within
each of the sales described in paragraph (b)
(3)(i) of this section. The applicable sale
within the sale to Wholesaler A is 35,000
units (100,000 units × 0.35). The applica-
ble sale within the sale to Wholesaler B is
105,000 units (300,000 units × 0.35). And
the applicable sale within the sale to Whole-
saler C is 3,150 units (9,000 units × 0.35).
(C) Step 2. Next, Manufacturer X
determines the amount charged for the
applicable sales. The amount charged
for the applicable sale to Wholesaler A
is $35,000.00 (35,000 units × $1.00 per
unit). The amount charged for the appli-
cable sale to Wholesaler B is $94,500.00
(105,000 units × $0.90 per unit). And the
amount charged for the applicable sale to
Wholesaler C is $3,528.00 (3,150 units ×
$1.12 per unit).
(D) Step 3. Manufacturer X then
determines the correct tax and price with
respect to each amount charged for the
applicable sales under the presumption
provided in paragraph (b)(3)(i) of this
section. Of the $35,000.00 Manufac-
turer X charged for the applicable sale to
Wholesaler A (35,000 of 100,000 units),
Manufacturer X allocates $22,750.00 to
the section 5000D tax and $12,250.00
to the price ($22,750.00 / ($22,750.00 +
$12,250.00) = 0.65). Of the $94,500.00
Manufacturer X charged for the appli-
cable sale to Wholesaler B (105,000 of
300,000 units), Manufacturer X allocates
$61,425.00 to the section 5000D tax and
$33,075.00 to the price ($61,425.00 /
($61,425.00 + $33,075.00) = 0.65). And
of the $3,528.00 Manufacturer X charged
for the applicable sale to Wholesaler C
(3,150 of 9,000 units), Manufacturer X
allocates $2,293.20 to the section 5000D
tax and $1,234.80 to the price ($2,293.20
/ ($2,293.20 + $1,234.80) = 0.65).
(E) Step 4. Manufacturer X’s section
5000D tax liability for the applicable sales
is $86,468.20 ($22,750.00 + $61,425.00
+ $2,293.20 = $86,468.20). This amount,
when divided by the sum of the tax and
the price of the applicable sales, equals
65 percent ($86,468.20 / ($86,468.20 +
$46,559.80) = 0.65).
(c) Anti-abuse rule. If a manufacturer,
producer, or importer engages in any
transaction (or series of transactions) with
a principal purpose of avoiding the section
5000D tax or substantially reducing the
purported price at which a sale is made,
including transactions made other than at
arm’s length, such transaction (or series of
transactions) may be adjusted, recharac-
terized, or otherwise recast by the Secre-
tary for purposes of determining the cor-
rect section 5000D tax liability. Whether a
transaction (or series of transactions) has
a principal purpose of avoiding the sec-
tion 5000D tax or substantially reducing
the purported price of an applicable sale
is determined based on all of the facts and
circumstances, including, but not limited
to, a comparison of the purported business
purpose for, and the section 5000D tax
consequences of, the transaction (or series
of transactions).
(d) Severability. The provisions of this
section are separate and severable from
one another and any other section of this
part. If any provision of this section is
stayed or determined to be invalid, it is the
intention of the Department of the Trea-
sury and Internal Revenue Service that the
remaining provisions and sections of this
part shall continue in effect.
(e) Applicability date. This section
applies to sales of designated drugs on or
after [date of publication of final regula-
tions in the Federal Register].
Douglas W. O’Donnell,
Deputy Commissioner.
(Filed by the Office of the Federal Register Decem-
ber 31, 2024, 8:45 a.m., and published in the issue of
the Federal Register for January 2, 2025, 90 FR 31)
Notice of Proposed
Rulemaking
Section 45W Credit for
Qualified Commercial
Clean Vehicles
REG-123525-23
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing and notice of public hearing.
SUMMARY: This document contains
proposed regulations that would pro-
vide guidance on the qualified commer-
cial clean vehicle credit enacted by the
Inflation Reduction Act of 2022. These
proposed regulations would affect eligi-
ble taxpayers that place a qualified com-
mercial clean vehicle in service during a
taxable year. These proposed regulations
would also affect manufacturers of quali-
fied commercial clean vehicles.
DATES: Written or electronic comments
must be received by March 17, 2025.
The public hearing on these proposed
regulations is scheduled for April 28,
2025, at 10 a.m. eastern standard time
(EST). Requests to speak and outlines of
topics to be discussed at the public hearing
must be received by March 17, 2025. If no
outlines are received by March 17, 2025,
the public hearing will be cancelled.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically via the Federal eRulemak-

Bulletin No. 2025–6 727 February 3, 2025
ing Portal at https://www.regulations.
gov (indicate IRS and REG-123525-23)
by following the online instructions for
submitting comments. Once submitted
to the Federal eRulemaking Portal, com-
ments cannot be edited or withdrawn. The
Department of the Treasury (Treasury
Department) and the IRS will publish for
public availability any comments submit-
ted to the IRS’s public docket. Send paper
submissions to: CC:PA:01:PR (REG-
123525-23), Room 5203, Internal Reve-
nue Service, P.O. Box 7604, Ben Franklin
Station, Washington, DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, David Villagrana or Rika
Valdman at (202) 317-6853 (not a toll-free
number); concerning submissions of com-
ments or the public hearing, Publications
and Regulations Section at (202) 317-
6901 (not a toll-free number) or by email
at publichearings@irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Authority
This document contains proposed
amendments to the Income Tax Regula-
tions (26 CFR part 1) regarding sections
25E, 30D, 45W, and 6417 of the Internal
Revenue Code (Code) as they relate to the
credit for qualified commercial clean vehi-
cles (proposed regulations). The proposed
regulations are issued by the Secretary of
the Treasury or her delegate (Secretary)
under the authority granted by sections
25E(e), 30D(d)(3) and (f)(5), 45W(c)(1),
(d)(1), and (f), 6417(h), and 7805(a) of the
Code.
Section 45W(f) provides an express
delegation authorizing the Secretary to
issue “such regulations or other guidance
as the Secretary determines necessary
to carry out the purposes of this section,
including regulations or other guidance
relating to determination of the incremen-
tal cost of any qualified commercial clean
vehicle.”
Section 45W(c)(1), in part, incorpo-
rates in the definition of the term “qual-
ified commercial clean vehicle” that the
vehicle “meets the requirements of sec-
tion 30D(d)(1)(C).” Section 30D(d)(1)
(C) requires that such vehicle be made by
a “qualified manufacturer,” as defined in
section 30D(d)(3). Section 30D(d)(3) pro-
vides that a qualified manufacturer must
enter “into a written agreement with the
Secretary under which such manufacturer
agrees to make periodic written reports to
the Secretary (at such times and in such
manner as the Secretary may provide)
providing vehicle identification numbers
and such other information related to each
vehicle manufactured by such manufac-
turer as the Secretary may require.”
Section 45W(d)(1), which provides
that rules similar to the rules under section
30D(f) (without regard to section 30D(f)
(10) or (11)) apply for purposes of sec-
tion 45W, incorporates section 30D(f)(5),
which provides an express delegation of
authority stating, “[t]he Secretary shall,
by regulations, provide for recapturing
the benefit of any credit allowable under
subsection (a) with respect to any prop-
erty which ceases to be property eligible
for such credit.”
Section 6417(h) authorizes the Sec-
retary to issue such regulations or other
guidance as may be necessary to carry out
the purposes of section 6417.
Finally, section 7805(a) authorizes the
Secretary “to prescribe all needful rules
and regulations for the enforcement of
[the Code], including all rules and regu-
lations as may be necessary by reason of
any alteration of law in relation to internal
revenue.”
Background
I. Overview
Section 13403(a) of Public Law 117-
169, 136 Stat. 1818 (August 16, 2022),
commonly known as the Inflation Reduc-
tion Act of 2022 (IRA), added section
45W to the Code. Section 13403(b)(1)
of the IRA added section 45W to the list
of general business credits in section 38
of the Code. Section 45W provides a
credit against the tax imposed by chapter
1 of the Code (chapter 1) with respect to
each qualified commercial clean vehicle
placed in service by the taxpayer during
the taxable year (section 45W credit). The
section 45W credit is effective for vehi-
cles placed in service after December 31,
2022. The section 45W credit is one of
three related clean vehicle credits enacted
under or revised by the IRA. Section 25E
provides a credit for previously-owned
clean vehicles. Section 30D provides a
credit for new clean vehicles.
II. Section 45W
Section 45W(a) provides that, for pur-
poses of section 38, the qualified com-
mercial clean vehicle credit for any tax-
able year is an amount equal to the sum
of the credit amounts determined under
section 45W(b) with respect to each qual-
ified commercial clean vehicle placed in
service by the taxpayer during the tax-
able year. The amount of the section 45W
credit is treated as a general business
credit. Section 38(b)(37) lists as a current
year business credit the qualified commer-
cial clean vehicle credit determined under
section 45W.
Section 45W(b)(1) provides that, sub-
ject to the limitation in section 45W(b)(4),
the amount of the section 45W credit is the
lesser of: (A) 15 percent of the taxpayer’s
basis in the vehicle (30 percent in the case
of a vehicle not powered by a gasoline or
diesel internal combustion engine (ICE)),
or (B) the incremental cost of the vehicle.
Section 45W(b)(2) provides that the
incremental cost of any qualified com-
mercial clean vehicle is an amount equal
to the excess of the purchase price for
such vehicle over the purchase price of a
comparable vehicle. Section 45W(b)(3)
defines “comparable vehicle” to mean,
with respect to any qualified commercial
clean vehicle, any vehicle that is powered
solely by a gasoline or diesel ICE and is
comparable in size and use to such vehi-
cle.
Section 45W(b)(4) provides that the
section 45W credit amount determined
under section 45W(b) with respect to any
qualified commercial clean vehicle cannot
exceed: (A) in the case of a vehicle that
has a gross vehicle weight rating of less
than 14,000 pounds, $7,500; and (B) in
the case of a vehicle not described in sec-
tion 45W(b)(4)(A), $40,000.
Section 45W(c) defines “qualified com-
mercial clean vehicle” for purposes of the
section 45W credit as any vehicle which:
(1) meets the requirements of section
30D(d)(1)(C) of the Code, and is acquired
for use or lease by the taxpayer and not for
resale; (2) either meets the requirements

February 3, 2025 728 Bulletin No. 2025–6
of section 30D(d)(1)(D), and is manufac-
tured primarily for use on public streets,
roads, and highways (not including a
vehicle operated exclusively on a rail or
rails), or is mobile machinery, as defined
in section 4053(8) of the Code (including
vehicles that are not designed to perform
a function of transporting a load over the
public highways); (3) either is propelled
to a significant extent by an electric motor
which draws electricity from a battery that
has a capacity of not less than 15 kilowatt
hours (or, in the case of a vehicle that has
a gross vehicle weight rating of less than
14,000 pounds, 7 kilowatt hours) and is
capable of being recharged from an exter-
nal source of electricity, or is a motor
vehicle that satisfies the requirements
under section 30B(b)(3)(A) and (B) of the
Code; and (4) is of a character subject to
the allowance for depreciation.
Section 45W(d) establishes special rules
for purposes of the section 45W credit. Sec-
tion 45W(d)(1) provides that rules similar
to the rules of section 30D(f)(1) through
(9) apply to section 45W. Section 45W(d)
(2) provides that section 45W(c)(4) does
not apply to any vehicle that is not subject
to a lease and which is placed in service by
a tax-exempt entity described in section
168(h)(2)(A)(i), (ii), or (iv) of the Code.
Section 45W(d)(3) provides that no sec-
tion 45W credit is allowed with respect to
any vehicle for which a credit was allowed
under section 30D.
Section 45W(e) provides that no section
45W credit is allowed with respect to any
vehicle unless the taxpayer includes the
vehicle identification number of such vehi-
cle on the return of tax for the taxable year.
Section 45W(f) grants the Secretary
authority to issue regulations or other
guidance to carry out the purposes of sec-
tion 45W, including regulations or other
guidance relating to the determination of
the incremental cost of any qualified com-
mercial clean vehicle.
Section 45W(g) provides that no sec-
tion 45W credit is allowed with respect
to a vehicle acquired after December 31,
2032.
III. Section 25E
Section 13402 of the IRA added sec-
tion 25E to the Code. The credit under
section 25E (section 25E credit) is a per-
sonal credit allowable under subpart A of
the Code that relates to previously-owned
clean vehicles.
IV. Section 30D
Section 30D was originally enacted
by section 205(a) of the Energy Improve-
ment and Extension Act of 2008, Divi-
sion B of Pub. L. 110-343, 122 Stat.
3765, 3835 (October 3, 2008), to provide
a credit for the purchase and placing in
service of new qualified plug-in electric
drive motor vehicles (section 30D credit).
Section 30D was amended several times
since its enactment, most recently by sec-
tion 13401 of the IRA. Section 30D, as
amended by the IRA, relates to new clean
vehicles.
The section 30D credit may be treated
as either a personal credit or a general
business credit, depending on whether the
vehicle is used for personal use or is of
a character subject to the allowance for
depreciation.
Section 30D(d)(1) defines “new clean
vehicle” as a motor vehicle that satisfies
eight requirements set forth in section
30D(d)(1)(A) through (H). As relevant to
section 45W and these proposed regula-
tions, section 30D(d)(1)(C) provides that
the vehicle must be made by a qualified
manufacturer, and section 30D(d)(1)(D)
provides that the vehicle must be treated
as a motor vehicle for purposes of title II
of the Clean Air Act (CAA).
Section 30D(d)(3) defines “quali-
fied manufacturer” as any manufacturer
(within the meaning of the regulations
prescribed by the Administrator of the
Environmental Protection Agency (EPA)
for purposes of the administration of title
II of the CAA (42 U.S.C. 7521–7590)) that
enters into a written agreement with the
Secretary under which such manufacturer
agrees to make periodic written reports to
the Secretary (at such times and in such
manner as the Secretary may provide)
providing vehicle identification numbers
and such other information related to each
vehicle manufactured by such manufac-
turer as the Secretary may require.
Section 30D(f)(1)-(9) provides special
rules for purposes of section 30D that are
relevant to section 45W by virtue of the
cross-reference in section 45W(d)(1). Sec-
tion 30D(f)(1) provides that the basis of
any property for which a credit is allow-
able under section 30D(a) is reduced by the
amount of such credit so allowed (deter-
mined without regard to section 30D(c)).
Section 30D(f)(2) provides that the
amount of any deduction or other credit
allowable under chapter 1 for a vehicle for
which a credit is allowable under section
30D(a) is reduced by the amount of credit
allowed under section 30D(a) for such
vehicle (determined without regard to sec-
tion 30D(c)).
Section 30D(f)(3) provides that in
the case of a vehicle the use of which is
described in section 50(b)(3) or (4) of the
Code (generally, use by tax-exempt orga-
nizations, the United States, a government
entity, or foreign person or entities) and
that is not subject to a lease, the person
who sold such vehicle to the person or
entity using such vehicle is treated as the
taxpayer that placed such vehicle in ser-
vice, but only if such person clearly dis-
closes to such person or entity in a docu-
ment the amount of any credit allowable
under section 30D(a) with respect to such
vehicle (determined without regard to
section 30D(c)). Section 30D(f)(3) was
repealed for vehicles placed in service
after December 31, 2023.
Section 30D(f)(4) provides that no sec-
tion 30D credit is allowable with respect
to any property referred to in section 50(b)
(1) (generally, property used predomi-
nantly outside of the United States).
Section 30D(f)(5) authorizes the Secre-
tary to promulgate regulations providing
for the recapture of the benefit of any sec-
tion 30D credit allowable with respect to
any property which ceases to be property
eligible for such credit.
Section 30D(f)(6) provides that no sec-
tion 30D credit is allowed for any vehicle
if the taxpayer elects to not have section
30D apply to such vehicle.
Section 30D(f)(7) provides that a vehi-
cle is not considered eligible for a section
30D credit unless such vehicle is in com-
pliance with: (A) the applicable provi-
sions of the CAA for the applicable make
and model year of the vehicle (or applica-
ble air quality provisions of State law in
the case of a State which has adopted such
provisions under a waiver under section
209(b) of the CAA), and (B) the motor
vehicle safety provisions of 49 U.S.C.
30101 through 30169.

Bulletin No. 2025–6 729 February 3, 2025
Section 30D(f)(8) provides that in the
case of any vehicle, the credit described in
section 30D(a) is only allowed once with
respect to such vehicle, as determined
based upon the vehicle identification num-
ber of such vehicle, including any vehicle
with respect to which the taxpayer elects
the application of section 30D(g).
Section 30D(f)(9) provides that no sec-
tion 30D credit is allowed with respect to
any vehicle unless the taxpayer includes the
vehicle identification number of such vehi-
cle on the return of tax for the taxable year.
V. Section 6417
Section 6417 of the Code allows an
applicable entity (as defined in section
6417(d)(1)(A)) to make an election with
respect to an applicable credit (as defined
in section 6417(b)) to be treated as making
a payment against the tax imposed by sub-
title A of the Code (related to income taxes)
for the taxable year equal to the amount of
such credit. Under section 6417(b)(6), in
the case of a tax-exempt entity described
in section 168(h)(2)(A)(i), (ii), or (iv), the
term “applicable credit” includes the sec-
tion 45W credit determined under section
45W by reason of section 45W(d)(2).
1

VI. Prior Guidance
A. Notice 2022-56
On November 3, 2022, the Treasury
Department and the IRS published Notice
2022-56, 2022-47 I.R.B. 480, seeking
comments regarding sections 45W and
30C of the Code. The notice requested
general comments on issues arising under
section 45W, as well as specific comments
concerning: (1) factors to determine “com-
parable in size and use” for purposes of
the comparable vehicle definition in sec-
tion 45W(b)(3) used to determine incre-
mental cost; (2) the definition of mobile
machinery; (3) the application of “rules
similar to the rules under section 30D(f)”
to section 45W; (4) the “no double ben-
efit” rule in section 45W(d)(3); (5) com-
pliance considerations for qualified manu-
facturers; (6) the definition of “significant
extent” for purposes of section 45W(c)(3)
(A); (7) the term “property of a character
subject to an allowance for depreciation”
for purposes of section 45W(c)(4); and (8)
other terms in section 45W that require
definition or additional guidance.
The Treasury Department and the IRS
received over 130 comments on Notice
2022-56. These comments were carefully
considered in the preparation of these pro-
posed regulations.
B. Revenue Procedures
On December 27, 2022, the Treasury
Department and the IRS published Rev-
enue Procedure 2022-42, 2022-52 I.R.B.
565. Among other things, Rev. Proc.
2022-42 provided guidance for qualified
manufacturers to enter into written agree-
ments with the IRS, as required in sections
30D, 25E, and 45W, and to report certain
information regarding vehicles produced
by such manufacturers that may be eligi-
ble for credits under these sections.
On October 23, 2023, the Treasury
Department and the IRS published Rev-
enue Procedure 2023-33, 2023-43 I.R.B.
1135. Among other things, Rev. Proc.
2023-33 superseded certain provisions of
Rev. Proc. 2022-42, and provided updated
information on the submission of written
agreements by manufacturers to the IRS
in order to be considered qualified manu-
facturers, as well as updated information
on the method of submission of monthly
reports by qualified manufacturers.
On December 18, 2023, the Treasury
Department and the IRS published Revenue
Procedure 2023-38, 2023-51 I.R.B. 1544.
Among other things, Rev. Proc. 2023-38
updated and consolidated the procedural
rules for qualified manufacturers with
respect to the section 25E credit, the section
30D credit, and the section 45W credit, and
superseded certain provisions of Rev. Proc.
2022-42 and Rev. Proc. 2023-33.
C. Safe Harbor Notices
On January 17, 2023, the Treasury
Department and the IRS published Notice
2023-9, 2023-3 I.R.B. 402, which pro-
vides a safe harbor for purposes of the sec-
tion 45W credit regarding the incremental
cost of certain qualified commercial clean
vehicles placed in service in calendar year
2023, based on a December 2022 incre-
mental cost analysis by the U.S. Depart-
ment of Energy (DOE) across classes of
street vehicles (DOE analysis).
On January 8, 2024, the Treasury
Department and the IRS published Notice
2024-5, 2024-2 I.R.B. 347, which pro-
vides a safe harbor for the purposes of the
section 45W credit regarding the incre-
mental cost of certain qualified commer-
cial clean vehicles placed in service in cal-
endar year 2024. The safe harbor for 2024
is based on the DOE analysis, as amended
by the DOE in December 2023 to incor-
porate minor modifications that did not
alter the incremental cost results. Notice
2024-5 also requested comments regard-
ing additional types or classes of vehicles
that should be included in the safe har-
bor in the future. The Treasury Depart-
ment and the IRS received comments in
response to the Notice. These comments
were carefully considered in the prepara-
tion of these proposed regulations.
D. Final Regulations Under
Sections 25E, 30D, and 6213
On May 6, 2024, the Treasury Depart-
ment and the IRS published final regula-
tions (TD 9995) in the Federal Register
(89 FR 37706) providing rules and defi-
nitions for the section 25E credit and the
section 30D credit. In addition, the final
regulations provide guidance under sec-
tion 6213(g)(2)(T) through (V) of the
Code on the meaning of “mathematical
or clerical error” with regard to certain
assessments of tax without a notice of
deficiency in connection with the section
25E credit, the section 30D credit, and the
section 45W credit.
Explanation of Provisions
I. Overview
Proposed §1.45W-1 would provide
definitions applicable to section 45W and
<?>
The reference in section 6417(b)(6) to section 45W(d)(3) was intended to be a reference to section 45W(d)(2). See General Explanation of Tax Legislation Enacted in the 117th Congress,
JCS-1-23 (December 21, 2023) at 282. Thus, the proposed regulations refer to section 45W(d)(2). See also TD 9988, 89 FR 17546, at 17546 n.1.

February 3, 2025 730 Bulletin No. 2025–6
the section 45W regulations. Proposed
§1.45W-2 would provide rules for deter-
mining the amount of the section 45W
credit, including the determination of
incremental cost for qualified commer-
cial clean vehicles. Proposed §1.45W-3
would provide rules related to a vehicle’s
qualification as a qualified commercial
clean vehicle. Proposed §1.45W-4 would
provide special rules relating to the credit
eligibility of a vehicle involved in certain
transactions and uses, the interaction of
the section 45W credit with other credits,
and recapture of the section 45W credit.
Proposed §1.45W-5 would provide report-
ing requirements for purposes of the sec-
tion 45W credit.
II. Credit for Qualified Commercial
Clean Vehicles; Definitions
Proposed §1.45W-1 would provide
definitions applicable to section 45W and
the section 45W regulations.
A. Battery
Proposed §1.45W-1(b)(1) would
define the term “battery” to mean a col-
lection of one or more battery modules,
each of which has two or more battery
cells, electrically configured in series or
parallel, to create voltage or current. The
term “battery” does not include items
such as thermal management systems or
other parts of a battery cell or module
that do not directly contribute to the elec-
trochemical storage of energy within the
battery, such as battery cell cases, cans,
or pouches. This definition is consistent
with section 45W(c)(3)(A) because bat-
tery modules and cells are the sources
from which an electric motor draws elec-
tricity. The definition is also consistent
with the definition of battery in §1.30D-
2(b)(5).
B. Battery Electric Vehicle
Proposed §1.45W-1(b)(2) would define
the term “battery electric vehicle” (BEV)
as a vehicle propelled solely by an electric
motor that draws electricity from batteries
capable of being recharged from an exter-
nal source of electricity. This definition
is consistent with section 45W(c)(3)(A),
which requires, in part, that a qualified
commercial clean vehicle be propelled to
a significant extent by an electric motor
that draws electricity from a battery.
C. Fuel Cell Electric Vehicle
Proposed §1.45W-1(b)(3) would define
“fuel cell electric vehicle” (FCEV) as
a vehicle (i) that is propelled by power
derived from one or more cells that con-
vert chemical energy directly into electric-
ity by combining oxygen with hydrogen
fuel which is stored on board the vehicle
in any form and may or may not require
reformation prior to use, and (ii) that, in
the case of a light duty vehicle (that is, a
passenger automobile or light truck), has
received on or after August 8, 2005 (the
date of the enactment of section 30B),
a certificate that such vehicle meets or
exceeds the Bin 5 Tier II emission level
established in regulations prescribed by
the Administrator of the Environmental
Protection Agency (EPA) under section
202(i) of the CAA for that make and
model year vehicle. This definition repeats
the substance of section 30B(b)(3)(A) and
(B) and adds the enactment date of sec-
tion 30B (August 8, 2005) to implement
section 45W(c)(3)(B), which incorporates
the requirements of section 30B(b)(3)(A)
and (B).
D. Gross Vehicle Weight Rating
Proposed §1.45W-1(b)(4) would define
“gross vehicle weight rating” (GVWR)
as having the meaning provided in 49
CFR 571.3(b) and 40 CFR 86.082-2. The
Department of Transportation (DOT) defi-
nition of GVWR in 49 CFR 571.3(b) (pro-
viding definitions related to Federal Motor
Vehicle Safety Standards) is substantially
identical to the EPA definition of GVWR
in 40 CFR 86.082-2 (related to the control
of emissions from highway vehicles and
engines). Because “gross vehicle weight
rating” is a term of art embedded in the
regulatory regimes of two other Federal
agencies, proposed §1.45W-1(b)(4) would
provide a definition consistent with exist-
ing DOT and EPA regulations.
E. Manufacturer
Proposed §1.45W-1(b)(5)(i) would
define “manufacturer” as any manufac-
turer within the meaning of the regula-
tions prescribed by the Administrator of
the EPA for purposes of the administra-
tion of title II of the Clean Air Act (42
U.S.C. 7521 et seq.) and as defined in 42
U.S.C. 7550(1). This definition would
repeat the substance of the definition of
“manufacturer” within section 30D(d)
(3)’s definition of “qualified manufac-
turer,” which is incorporated by section
45W(c)(1). Consistent with the definition
of “manufacturer” provided in §1.30D-
2(b)(28), proposed §1.45W-1(b)(5)(i)
would provide that, if multiple manu-
facturers are involved in the production
of a vehicle, the requirements of section
30D(d)(3) must be met by the manufac-
turer that satisfies the reporting require-
ments of the greenhouse gas emissions
standards set by the EPA under the Clean
Air Act (42 U.S.C. 7521 et seq.) for the
subject vehicle.
In addition, the proposed rules would
move the existing rule regarding the
modification of a new motor vehicle that
has not yet been placed in service from
§1.30D-2(b)(28)(ii)(B) to §1.45W-1(b)(5)
(ii) so that all rules related to the section
45W credit would be included in the sec-
tion 45W regulations. This rule allows a
manufacturer that modifies a new motor
vehicle (as defined in 42 U.S.C. 7550(3))
that does not satisfy the requirements
of section 45W(c)(3) so that the vehi-
cle, after modification, does satisfy such
requirements to enter into an agreement
under section 30D(d)(3) if such modifica-
tion occurs prior to the new motor vehicle
being placed in service.
F. Placed in Service
Under proposed §1.45W-1(b)(6),
a qualified commercial clean vehicle
would be considered “placed in service”
on the date the taxpayer takes possession
of the vehicle. This proposed definition
is consistent with the definition provided
in §1.30D-2(b)(36) and §1.25E-1(b)(10),
which gives effect, in the specific con-
text of vehicles, to the general concept
of “placed in service” from other Code
provisions addressing credits and depre-
ciation. See §1.46-3(d)(1)(ii) and (d)(4)
(i) (for qualified investments, property is
considered placed in service in the ear-
lier of the period for depreciation with

Bulletin No. 2025–6 731 February 3, 2025
respect to such property begins or when
placed in a condition or state of readi-
ness and availability for a specifically
assigned function); §1.167(a)-11(e)(1)(i)
(for purposes of depreciation, property is
first placed in service when first placed
in a condition or state of readiness and
availability for a specifically assigned
function); and §1.179-4(e) (property is
considered placed in service when placed
in a condition or state of readiness and
availability for a specifically assigned
function); see also Consumers Power
Co. v. Comm’r, 89 T.C. 710 (1987) (cit-
ing §§1.46-3(d)(1)(ii) and 1.167(a)-11(e)
(1)(i), hydroelectric plant placed in ser-
vice for purposes of depreciation and
investment credit when all phases of
preoperational testing were completed,
thereby demonstrating that the plant was
available for service on a regular basis);
Noell v. Comm’r, 66 T.C. 718, 728–729
(1976) (citing §1.46-3(d)(1)(ii), landing
strip placed in service for purposes of
investment credit when strip was paved
and therefore available for full service).
The proposed definition is also consistent
with regulations issued under Code sec-
tions addressing the excise tax on heavy
trucks and trailers, 26 CFR 145.4051-1(c)
(2) of the Temporary Excise Tax Regula-
tions under the Highway Revenue Act of
1982 (Pub. L. 97-424) (“a vehicle shall
be considered placed in service on the
date on which the owner of the vehicle
took actual possession of the vehicle”).
G. Plug-in Hybrid Electric Vehicle
Proposed §1.45W-1(b)(7) would define
“plug-in hybrid electric vehicle” (PHEV)
as a vehicle that uses batteries that can be
recharged from an external source of elec-
tricity to power an electric motor that pro-
pels the vehicle to a significant extent, and
another fuel, such as gasoline or diesel, to
power an ICE or other propulsion source.
This definition is consistent with section
45W(c)(3)(A), which requires, in part,
a vehicle propelled by an electric motor
that draws electricity from a battery, and
with section 45W(b)(1)(A), which con-
templates differing basis percentages for
purposes of calculating the amount of the
section 45W credit depending on whether
a vehicle is powered in part by a gasoline
or diesel ICE.
H. Plug-in Hybrid Fuel Cell Electric
Vehicle
Proposed §1.45W-1(b)(8) would define
“plug-in hybrid fuel cell electric vehicle”
(PHFCEV) as a vehicle that uses batter-
ies that can be recharged from an external
source of electricity to power an electric
motor that propels the vehicle to a signif-
icant extent and a hydrogen fuel source
that powers an electric motor through the
fuel cell system. This definition is con-
sistent with section 45W(c)(3)(A), which
requires, in part, a vehicle propelled by an
electric motor that draws electricity from
a battery.
I. Qualified Commercial Clean Vehicle
Proposed §1.45W-1(b)(9) would
define “qualified commercial clean
vehicle” to mean a vehicle that meets
the requirements of section 45W(c)
and §1.45W-3(b) through (d). Because
section 30D(d)(1)(C), incorporated by
section 45W(c)(1), requires a qualified
commercial clean vehicle to be made
by a qualified manufacturer, proposed
§1.45W-1(b)(9)(i), (ii), and (iii) would
add that a vehicle does not meet the
requirements of section 45W(c) if the
qualified manufacturer fails to provide a
periodic written report for such vehicle
prior to the vehicle being placed in ser-
vice by the taxpayer claiming the credit
reporting the vehicle identification num-
ber of such vehicle, and certifying com-
pliance with the requirements of section
45W(c); if the qualified manufacturer
provides incorrect information with
respect to the vehicle on such report;
or if the qualified manufacturer fails to
update its report in the event of a material
change with respect to the vehicle. These
proposed rules are consistent with those
that apply to qualified manufacturers in
the context of other clean vehicle credits.
See §1.30D-2(b)(32).
J. Qualified Manufacturer
Proposed §1.45W-1(b)(10) would
define “qualified manufacturer,” con-
sistent with §1.30D-2(b)(42), to mean a
manufacturer that meets the requirements
described in section 30D(d)(3) at the time
the manufacturer submits a periodic writ-
ten report to the IRS under a written agree-
ment described in section 30D(d)(3). The
term “qualified manufacturer” would not,
under the proposed rule, include any man-
ufacturer whose qualified manufacturer
status has been terminated by the IRS.
Proposed §1.45W-1(b)(10) would further
provide that the IRS may terminate qual-
ified manufacturer status for fraud, inten-
tional disregard, or gross negligence with
respect to any requirements of sections
25E, 30D, 45W, regulations or any guid-
ance thereunder, including with respect
to the periodic written reports described
in section 30D(d)(3). See §601.601 of the
Statement of Procedural Rules (26 CFR
part 1).
K. Secretary
Proposed §1.45W-1(b)(11) would pro-
vide that the term “Secretary” has the
meaning provided in section 7701(a)(11)
(B) of the Code.
L. Section 45W Regulations
Proposed §1.45W-1(b)(12) would
define the term “section 45W regulations”
to mean §§1.45W-1 through 1.45W-5.
III. Amount of Section 45W Credit;
Incremental Cost
Proposed §1.45W-2 would provide
rules for determining the amount of the
section 45W credit, including the deter-
mination of incremental cost for qualified
commercial clean vehicles.
A. Per-Vehicle Credit Amount
Section 45W(b)(1) provides that, sub-
ject to section 45W(b)(4), the amount
of the section 45W credit for a qualified
commercial clean vehicle placed in ser-
vice during the taxable year is equal to
the lesser of: (1) 15 percent of the basis
in such vehicle, or 30 percent in the case
of a vehicle not powered by a gasoline
or diesel ICE; or (2) the incremental cost
of such vehicle (as that phrase is defined
in section 45W(b)(2)). Section 45W(b)
(4) limits the amount of the section 45W
credit with respect to any qualified com-
mercial clean vehicle to $7,500 in the case
of a vehicle that has a GVWR of less than

February 3, 2025 732 Bulletin No. 2025–6
14,000 pounds, and $40,000 in the case of
any other vehicle.
Proposed §1.45W-2(a) would therefore
provide that, subject to the limitation in
section 45W(b)(4), the per-vehicle credit
amount under section 45W(b)(1) with
respect to any qualified commercial clean
vehicle is the lesser of 15 percent of the
basis of such vehicle (or 30 percent in the
case of a vehicle not powered by a gaso-
line or diesel ICE), or the incremental cost
of such vehicle.
B. Incremental Cost of a Qualified
Commercial Clean Vehicle
Section 45W(b)(2) provides that the
incremental cost of any qualified commer-
cial clean vehicle is an amount equal to
the excess of the purchase price for such
vehicle over such price of a comparable
vehicle. Section 45W(b)(3) defines a com-
parable vehicle, with respect to any qual-
ified commercial clean vehicle, as a vehi-
cle powered solely by a gasoline or diesel
ICE that is comparable in size and use to
such vehicle.
Section 45W incentivizes taxpayers to
purchase vehicles with certain clean pro-
pulsion technologies instead of vehicles
powered solely by a gasoline or diesel
ICE. Any cost comparison between such
vehicles and their ICE alternatives, no
matter how precisely defined, would inev-
itably reflect cost differences beyond those
associated with the propulsion technolo-
gies (for example, a custom body would
likely create a cost difference between two
otherwise similar vehicles). If such cost
differences were reflected in the amount
of the credit, the credit could incentivize
adoption of vehicle features unrelated to
the purposes of section 45W.
Proposed §1.45W-2(b) would there-
fore provide that incremental cost is deter-
mined by multiplying the manufacturer’s
cost of the components necessary for the
powertrain of the qualified commercial
clean vehicle by the retail price equivalent
(RPE) of that vehicle, and then subtracting
from that amount the product of the man-
ufacturer’s cost of the powertrain of the
comparable vehicle and the RPE of that
vehicle. Expressed formulaically, the rule
is as follows:
Incremental cost = (cost of qualified
commercial clean vehicle powertrain ×
RPE of qualified commercial clean vehi-
cle) – (cost of comparable vehicle power-
train × RPE of comparable vehicle)
This approach attempts to eliminate, to
the extent possible, any cost differences
unrelated to the propulsion technologies
of the vehicles (see also the discussion of
“comparable vehicle” in section III.D of
this Explanation of Provisions). Applica-
tion of an RPE (see section III.C of this
Explanation of Provisions) adjusts the
manufacturer’s cost of a powertrain to
reflect the taxpayer’s cost with respect
to that powertrain. See section III of this
Explanation of Provisions for a discussion
of the ways in which a taxpayer might
ascertain manufacturer’s costs.
The Treasury Department and the
IRS, in consultation with the DOE, are
proposing an incremental cost equation
based on the incremental cost of the pow-
ertrain because the powertrain is a large
fraction of the incremental cost between
a clean vehicle and a comparable vehicle
and because there is robust data available
to verify the difference in costs between
vehicles. This incremental cost equation
is consistent with current modeling done
by the DOE regarding the costs of clean
vehicles compared to ICE vehicles. As
modeling techniques, data capabilities,
and vehicle design evolve, the Treasury
Department and the IRS will continue to
study this approach.
To implement this approach in the con-
text of the range of propulsion technolo-
gies and configurations contemplated by
the statute (that is, BEVs, FCEVs, PHEVs,
and PHFCEVs), the Treasury Department
and the IRS, in consultation with the
DOE, developed specific equations and
associated definitions for BEVs, FCEVs,
PHEVs, and PHFCEVs that would be
provided in proposed §1.45W-2(c)(2)
through (5) and (d). These equations
would be powertrain-specific versions of
the general equation described in proposed
§1.45W-2(b) and would specify the cost of
the components that, with respect to each
type of powertrain, comprise the power-
train cost. For example, the cost of a BEV
powertrain would, under the rule provided
in §1.45W-2(c)(2), be equal to the sum of
the costs of the electric traction drive sys-
tem, the battery, and the electrical acces-
sories, each a term defined in §1.45W-
2(d)(1) through (3). These equations and
rules provided in proposed §1.45W-2(c)
(2) through (5), which address the cost of
BEV, PHEV, FCEV, and PHFCEV power-
trains and the cost of ICE powertrains of
comparable vehicles, are consistent with
the incremental cost provisions of section
45W(b)(2) and (3). The Treasury Depart-
ment and the IRS welcome comments on
these proposed incremental cost equa-
tions and rules. In particular, comments
are requested on whether other vehicle
equipment or aspects of a vehicle’s design
should be included in the incremental cost
equations. Any recommended additions,
however, must be supportable by robust,
verifiable quantitative data.
C. Retail Price Equivalent and Safe
Harbor
Because section 45W(b)(2) defines
incremental cost in terms of purchase
price rather than manufacturer’s cost, an
RPE is necessary to adjust a manufactur-
er’s cost of a qualified commercial clean
vehicle powertrain and an ICE powertrain
to reflect a taxpayer’s purchase price of
such powertrains. RPEs vary from vehi-
cle to vehicle, manufacturer to manufac-
turer, and across different segments of
the market (that is, a reasonable RPE for
a lightweight vehicle may differ from a
reasonable RPE for medium or a heavy-
duty vehicle). Consistent with this under-
standing, proposed §1.45W-2(b)(1) would
allow taxpayers to calculate the incremen-
tal cost of a qualified commercial clean
vehicle using the RPE applicable to such
vehicle.
Proposed §1.45W-2(b)(3)(i) would
provide that a qualified commercial clean
vehicle’s RPE is determined by calculat-
ing the ratio of the manufacturer’s sug-
gested retail price (MSRP) of such vehicle
to the manufacturer’s cost to manufacture
such vehicle. Proposed §1.45W-2(b)(3)
(i) through (iii) would further provide that
the MSRP represents the sum of the retail
price and the retail delivered price sug-
gested by the manufacturer for each acces-
sory or item of optional equipment which
is not included within the retail price as
reported on the label that is affixed to the
windshield or side window of the vehicle,
as described in 15 U.S.C. 1232. Because
RPE represents the ratio of the MSRP of
the vehicle to the manufacturer’s cost, it is

Bulletin No. 2025–6 733 February 3, 2025
understood, for purposes of the incremen-
tal cost determination required by section
45W and proposed §1.45W-2(b)(3), to
represent that ratio with respect to every
component of the vehicle, including those
that comprise the vehicle’s powertrain.
The Treasury Department and the IRS
understand that providing the precise RPE
for a vehicle may involve the effective
disclosure of proprietary information. For
this reason, the Treasury Department and
the IRS, in consultation with the DOE,
intend to provide RPE safe harbors for
different segments of the vehicle market
in the near term. Taxpayers are advised to
check www.irs.gov for updates. See sec-
tion VI.C of the Background section of
this preamble.
D. Comparable Vehicle
Section 45W(b)(3) provides that, for
purposes of determining incremental cost,
the term “comparable vehicle” means,
with respect to any qualified commercial
clean vehicle, any vehicle that is pow-
ered solely by a gasoline or diesel ICE
and that is comparable in size and use to
such vehicle. To clarify the meaning of
“size and use,” proposed §1.45W-2(b)
(4) would provide that a vehicle powered
solely by a gasoline or diesel ICE is com-
parable in size and use to a qualified com-
mercial clean vehicle if the vehicles have
substantially similar GVWRs, number of
doors, towing capacity, passenger capac-
ity, cargo capacity, mounted equipment,
drivetrain type, overall width, height and
ground clearance, trim level, and so on.
The Treasury Department and the IRS
intend this list to be representative of the
types of criteria under which the compara-
bility of two vehicles would be assessed.
This list also distinguishes such criteria
from the mere performance characteristics
of powertrains (which, if used as a sole
basis for comparison, could result in a
negative incremental cost and therefore a
section 45W credit of $0). In other words,
a solely gasoline- or diesel-powered ICE
vehicle is not necessarily comparable to a
qualified commercial clean vehicle simply
because the performance characteristics
of the powertrains are identical. Rather, a
comparable vehicle must be in the same
class and share other characteristics, as
appropriate to the vehicle, such as number
of doors, cargo capacity, drivetrain type,
and trim level. See the example provided
in §1.45W-2(b)(4)(iv).
Proposed §1.45W-2(b)(4)(ii) would
provide that, in the specific circumstance
where the qualified manufacturer of a
qualified commercial clean vehicle man-
ufactures a solely gasoline- or diesel-pow-
ered ICE version (excluding prototype or
other non-production versions) of such
qualified commercial clean vehicle, mean-
ing a vehicle of the same model and model
year, and with features substantially sim-
ilar to those of the qualified commercial
clean vehicle (such as those noted in the
prior paragraph), such vehicle is the only
comparable vehicle for purposes of the
incremental cost determination under
section 45W(b)(1)(B) and (2). In circum-
stances in which a qualified manufacturer
of a qualified commercial clean vehicle
does not manufacture a solely gasoline- or
diesel-powered ICE version of such qual-
ified commercial clean vehicle that is of
the same model and model year, and with
features substantially similar to those of
the qualified commercial clean vehicle,
the comparable vehicle for purposes of
the incremental cost determination under
section 45W(b)(1)(B) and (2) would be
determined by the taxpayer (or manufac-
turer) based on the criteria identified in the
prior paragraph.
E. Negative Incremental Cost Treated as
Zero.
Proposed §1.45W-2(c)(8) would treat
an incremental cost calculation that results
in a negative figure (meaning the qualified
manufacturer’s cost of the qualified com-
mercial clean vehicle’s powertrain is less
than the manufacturer’s cost of the ICE
powertrain of a comparable vehicle) as
zero. Because zero would in every case be
the lesser of the allowable basis percent-
age, as provided in section 45W(b)(1), no
credit would be allowed with respect to
such vehicle. This rule is consistent with
the “lesser of” comparison required by
section 45W(b)(1) and the general pur-
pose of section 45W to incentivize the
purchase of vehicles with certain clean
propulsion technologies instead of ICE
alternatives. The fact that a taxpayer’s
calculation of incremental cost under the
general rule is zero for a particular qual-
ified commercial clean vehicle would not
preclude that taxpayer from using a safe
harbor described in proposed §1.45W-
2(c)(11) to determine incremental cost in
order to claim the section 45W credit with
respect to that vehicle.
F. Incremental Cost if No Comparable
Vehicle Exists.
If the particular characteristics of a
qualified commercial clean vehicle lead a
taxpayer to conclude that no comparable
vehicle exists and, as a result, no incre-
mental cost is calculable for that vehicle,
proposed §1.45W-2(c)(9) would provide
that the incremental cost of such vehi-
cle is zero. However, consistent with the
proposed rule described in the preceding
paragraph, the fact that the incremental
cost under the general rule is zero for a
particular qualified commercial clean
vehicle does not preclude that taxpayer
from using a safe harbor described in
proposed §1.45W-2(c)(11) to determine
incremental cost in order to claim the
section 45W credit with respect to that
vehicle. This proposed rule would apply
only to situations in which no ICE vehicle
alternative is produced by any manufac-
turer, for example, because the intended
operating environment precludes the use
of ICE vehicles. At this time, the Trea-
sury Department and the IRS, in consul-
tation with the DOE, have not identified
any qualified commercial clean vehicles
for which no comparable vehicle exists.
For these reasons, proposed §1.45W-2(c)
(9) is expected to be relevant only in rare
instances. The Treasury Department and
the IRS note that proposed §1.45W-2(c)
(9) aligns with one purpose of section
45W—to incentivize the adoption of elec-
tric, hybrid, and fuel cell vehicles instead
of ICE alternatives.
G. Power Takeoffs
Some vehicles eligible for the sec-
tion 45W credit may use power takeoffs
to transmit power to drive machinery or
equipment other than the vehicle itself.
In the case of a BEV or hybrid vehicle,
the use of power takeoffs might necessi-
tate additional batteries; in the case of an
FCEV, the use of power takeoffs might
necessitate additional fuel cells or addi-

February 3, 2025 734 Bulletin No. 2025–6
tional hydrogen storage. This situation,
however, appears indistinguishable from a
situation in which a BEV or hybrid vehi-
cle might be equipped with additional
batteries for other reasons (for example,
extended range), or a situation in which
an FCEV might be equipped with addi-
tional fuel cells for other reasons. Even
if this were not the case, determining, at
the time the taxpayer claims the credit,
the relative extent to which the batteries
in any given qualified commercial clean
vehicle might be employed to power the
vehicle and the ancillary machinery would
present significant challenges. As a result,
proposed §1.45W-2(c)(7) would provide
that the incremental cost calculation for a
qualified commercial clean vehicle with a
power takeoff would be carried out in the
same manner as the incremental cost cal-
culation for a qualified commercial clean
vehicle without a power takeoff. Specifi-
cally, an appropriate comparable vehicle
would be selected (likely a vehicle with
the same type of takeoff-powered machin-
ery or equipment or machinery) and the
manufacturer’s cost of the ICE powertrain
would be subtracted from the qualified
manufacturer’s cost of the BEV, FCEV,
PHEV, or PHFCEV powertrain (inclusive
of any additional batteries, fuel cells, or
hydrogen storage).
H. Auxiliary Power Units
Some vehicles eligible for the section
45W credit may use auxiliary power units
(APUs) to drive machinery or equipment
that is mounted or installed on the vehi-
cle; such APUs are not necessarily elec-
tric, hybrid, or fuel cell based. Proposed
§1.45W-2(c)(6) would clarify that the
incremental cost of qualified commercial
clean vehicles outfitted with APUs is cal-
culated exclusive of the installed APUs.
For example, the comparable vehicle for
a BEV outfitted with an APU to drive an
aerial lift may be an ICE truck outfitted
with an APU to drive an aerial lift (see dis-
cussion of comparable vehicles in section
III.D of this Explanation of Provisions),
but the manufacturer’s cost of the APU
is disregarded in the incremental cost
equation for both the BEV and the ICE
vehicles. Similarly, to calculate the incre-
mental cost of a FCEV with an installed
APU that powers the refrigeration unit,
the appropriate comparable vehicle may
be an ICE refrigerator truck, but the man-
ufacturer’s cost of the APU is disregarded
for both vehicles.
I. Reliance on Qualified Manufacturer’s
Incremental Cost Calculation and Safe
Harbor
Information regarding a qualified
manufacturer’s cost for the components
of a qualified commercial clean vehicle
powertrain may not be readily available
to taxpayers. If a qualified manufacturer
discloses this information to a taxpayer
to facilitate the taxpayer’s calculation of
incremental cost, or if the qualified man-
ufacturer discloses its incremental cost
calculation for a qualified commercial
clean vehicle it manufactures as provided
in section 45W and these regulations,
proposed §1.45W-2(c)(10) would per-
mit taxpayers to rely on such disclosure.
Taxpayers would, however, be required
to retain the disclosure documentation
in their records as long as the period of
limitations for the taxable period in which
the credit was claimed remains open. A
qualified manufacturer that discloses its
incremental cost calculation for a qual-
ified commercial clean vehicle it manu-
factures must base such incremental cost
calculation on actual cost data for both the
qualified commercial clean vehicle and
the comparable vehicle. Similarly, a tax-
payer that calculates incremental cost by
using cost data for the qualified commer-
cial clean vehicle provided by the quali-
fied manufacturer must use actual cost
data for the comparable vehicle for such
calculation. See the definition of “quali-
fied manufacturer” provided in proposed
§1.45W-1(b)(10) and discussed in section
II.J of this Explanation of Provisions for
the potential consequences of qualified
manufacturer fraud, intentional disregard,
and gross negligence with respect to the
requirements of section 45W, the section
45W regulations, and any guidance issued
under section 45W.
Alternatively, taxpayers may rely on
the incremental cost safe harbors pub-
lished in Notice 2023-9 and Notice 2024-
5, and any succeeding guidance published
in the Internal Revenue Bulletin, as appli-
cable, for the taxable year in which a
credit is claimed. These incremental cost
safe harbors are based on the incremental
cost analysis conducted by the DOE, as
described in periodic reports published by
the DOE.
J. Powertrain Subcomponents
The Treasury Department and the IRS,
in consultation with the DOE, developed
proposed §1.45W-2(d)(1) through (9) to
provide definitions and clarify the typical
subcomponents of a BEV, FCEV, PHEV,
PHFCEV, and ICE powertrain for pur-
poses of determining a qualified commer-
cial clean vehicle’s incremental cost under
section 45W(b)(2) and (3) and §1.45W-
2(c). Recognizing that different vehicles
may implement different technologies,
system configurations, and design deci-
sions, the subcomponents listed in the
definitions in §1.45W-2(d)(1) through (9)
are not intended to prescribe required sub-
components or to be an exhaustive list of
those that may be appropriate to consider
for purposes of determining the incremen-
tal cost of a given vehicle. For example,
the qualified manufacturer’s cost of a
BEV powertrain must reflect the qualified
manufacturer’s cost of the electric traction
drive system, battery, transmission, and
electrical accessories, but each of those
components are comprised of subcompo-
nents that may vary among vehicles.
K. Incremental Cost of Qualified
Commercial Clean Vehicle Previously
Placed in Service by Another Person
Proposed §1.45W-2(f)(1) would pro-
vide that the incremental cost of a quali-
fied commercial clean vehicle previously
placed in service by another person is
calculated by multiplying the incremental
cost of such vehicle when new by a resid-
ual value factor determined by the age
of the vehicle. Proposed §1.45W-2(f)(2)
would provide that the age of such a vehi-
cle is determined by subtracting the model
year of the vehicle from the calendar year
in which the taxpayer places the vehicle
in service as a qualified commercial clean
vehicle. Because model years are, in some
cases, released ahead of calendar years,
and because it is possible for a single
vehicle to be sold more than once within
a twelve-month period, an age of zero (or
a negative number in the case of a vehicle

Bulletin No. 2025–6 735 February 3, 2025
placed in service twice before the calendar
year corresponding to its model year) does
not result in an incremental cost of a used
qualified commercial clean vehicle equal
to that of the vehicle when new.
The residual value factor table in pro-
posed §1.45W-2(f)(3) reflects an analy-
sis conducted by the DOE with respect to
the decline in the value of vehicles with
ICE powertrains over time. The analysis
for light-duty vehicles (Class 1-3 Passen-
ger Car and Light Truck) utilized MSRP
and “True Market Value” estimates from
Edmunds to calculate residual values
across specific makes and models, pow-
ertrains, vehicle age, and size classes for
vehicles with model years from 2010 to
2021. For medium to heavy duty vehicles
(Class 4-8), residual values were calculated
from used vehicle listing data from Com-
mercial Truck Trader and TruckPaper.com,
validated against data from Price Digests
for vehicles with model years from 2000 to
2020. As a mature propulsion technology,
ICE vehicles exhibit a relatively stable pat-
tern of declining value compared to their
clean vehicle counterparts, meaning, in
part, that ICE vehicles tend to retain more
value over time than clean vehicles. Anal-
ysis of the declining value patterns of ICE
vehicles compared to their clean counter-
parts, however, suggests that the residual
values of clean vehicles are coming into
alignment with those of ICE vehicles. As
a result, the ICE vehicle depreciation pat-
tern represents a good approximation of
the likely depreciation pattern for clean
vehicles as clean vehicle technologies con-
tinue to mature. The residual value factor is
applied to the incremental cost of the qual-
ified commercial clean vehicle when new,
regardless of whether that incremental cost
is determined by the taxpayer, supplied to
the taxpayer by the qualified manufacturer,
or provided by safe harbor guidance pub-
lished in the Internal Revenue Bulletin for
the tax year in which such vehicle is origi-
nally placed in service.
IV. Qualified Commercial Clean Vehicle
Proposed §1.45W-3 would provide
rules related to a vehicle’s qualification as
a qualified commercial clean vehicle.
A. Vehicles Acquired for Use or Lease
and Not for Resale
Section 45W(c)(1) provides, in part,
that a qualified commercial clean vehi-
cle must be acquired for use or lease by
the taxpayer and not for resale. Proposed
§1.45W-3(b)(1), would provide that,
except in cases involving tax-exempt enti-
ties identified in section 45W(d)(2), a tax-
payer acquires a vehicle for use or lease if
the taxpayer acquires it for use or lease in
a trade or business of the taxpayer. Thus,
for example, if a taxpayer that is engaged
in the business of leasing vehicles to cus-
tomers acquires a commercial clean vehi-
cle for the purpose of leasing the vehicle
to customers as part of that business, this
requirement would be satisfied.
2
For fur-
ther consideration of vehicles purchased
by a vehicle leasing business qualifying
for a section 45W credit, see the recapture
rules explained in V.E of this Explanation
of Provisions.
Proposed §1.45W-3(b)(1) is consis-
tent with the requirement under section
45W(c)(4) that the vehicle be of a charac-
ter subject to the allowance for deprecia-
tion, which, under section 167(a), extends
only to property used in a trade or busi-
ness or held for the production of income.
The proposed rule is also consistent with
the trade or business purposes expressed
in section 45W(c)(1), the statutory identi-
fication of the section 45W credit as being
for “commercial” clean vehicles, and the
allowance of the credit as a section 38
general business credit.
If the lease of a qualified commercial
clean vehicle would not be respected as
a lease for Federal income tax purposes,
proposed §1.45W-3(b)(2) would treat the
lessor as having acquired the vehicle for
resale and disallow the credit to such les-
sor with respect to the purportedly leased
vehicle. Whether the lessee may claim
the section 45W credit with respect to
the vehicle would depend on whether the
requirements of section 45W and the sec-
tion 45W regulations are met with respect
to the vehicle. This rule, which recognizes
that a sale may, in some cases, be mischar-
acterized as a lease for Federal income tax
purposes, aligns with section 45W(c)(1)
to limit “use and lease” to the scenarios in
which the section 45W credit is allowable
to a taxpayer.
B. On-Road Vehicles
Section 45W(c)(2)(A) provides that a
qualified commercial clean vehicle may
be a vehicle “that meets the requirements
of subparagraph (D) of section 30D(d)(1)
and is manufactured primarily for use on
public streets, roads, and highways (not
including a vehicle operated exclusively
on a rail or rails).” Regarding the former
requirement, section 30D(d)(1)(D) states
that the vehicle must be “treated as a
motor vehicle for purposes of title II of the
[CAA],” a determination that implicitly
incorporates the EPA’s application of the
relevant CAA provisions, as well as any
applicable regulations or guidance there-
under. The latter requirement, “manufac-
tured primarily for use on public streets,
roads, and highways,” occurs with suffi-
cient frequency in the Internal Revenue
Code, the U.S. Code more broadly, and
various regulations and guidance issued
thereunder to warrant deference to exist-
ing understandings of the phrase across
Federal statutes.
Section 45W(c)(2)(B) provides, in the
alternative, that a qualified commercial
clean vehicle may be a vehicle “that is
mobile machinery, as defined in section
4053(8) (including vehicles that are not
designed to perform a function of trans-
porting a load over the public highways).”
The definition of mobile machinery pro-
vided in section 4053(8) presents signif-
icant challenges for taxpayers and the
IRS in the context of section 45W. For a
discussion of the complexities of section
4053(8) in the context of section 45W
generally, and the implications of those
complexities for the credit-eligibility of
off-road vehicles in particular, see section
VII of this Explanation of Provisions.
Section 4053(8) is an exemption to
certain Federal excise taxes imposed on
highway vehicles (see sections 4051(a),
4071(a), and 4481(a)), a concept defined
in §48.4061(a)-1(d) of the Manufacturers
and Retailers Excise Tax Regulations as
“any self-propelled vehicle, or any trailer
2
Whether an activity is treated as a trade or business depends on the facts and circumstances of the activity. Courts have considered factors such as the profit motive of the taxpayer and the
regularity and continuity of the activity. Commissioner v. Groetzinger, 480 U.S. 23 (1987).

February 3, 2025 736 Bulletin No. 2025–6
or semitrailer, designed to perform a func-
tion of transporting a load over public
highways, whether or not also designed to
perform other functions.” In other words,
mobile machinery as defined in 4053(8),
in the context of existing Federal excise
taxes, is meaningful only as a subset of
highway vehicles. As a result, most, if
not all, vehicles traditionally considered
“mobile machinery” (including those
exempt from the aforementioned Federal
excise taxes) would be eligible for the sec-
tion 45W credit under section 45W(c)(2)
(A).
A vehicle may satisfy the requirements
of both section 45W(c)(2)(A) and (B). For
example, a digger derrick truck exempt
from the tax imposed by section 4051 by
reason of section 4053(8) would qualify
for the credit under section 45W(c)(2)
(B). Furthermore, because it is a “high-
way vehicle” under §48.4061(a)-1(d),
the digger derrick would almost certainly
also qualify under section 45W(c)(2)(A),
meaning that it would be treated as a motor
vehicle for purposes of title II of the CAA
and be considered manufactured primar-
ily for use on the public streets, roads, and
highways. In such instances, the taxpayer
may choose the prong of section 45W(c)
(2) under which the vehicle will qualify,
which may be relevant for recordkeeping
and other purposes.
C. Electric Motor and Battery
Requirements
Section 45W(c)(3)(A) provides
requirements with respect to the electric
motor and battery of certain qualified
commercial clean vehicles. In part, sec-
tion 45W(c)(3)(A) requires that a qualified
commercial clean vehicle be propelled to
a significant extent by an electric motor
that draws electricity from a battery that
meets certain specifications depending
on the GVWR of the vehicle. Proposed
§1.45W-3(d)(1) would repeat the sub-
stance of section 45W(c)(3)(A). Proposed
§1.45W-3(d)(2) would clarify that a bat-
tery is capable of being recharged from an
external source of electricity if such source
of electricity is not an integral part of the
vehicle. Proposed §1.45W-3(d)(2) would
also provide the example of a regenerative
braking system as an integral part of the
vehicle and, thus, not an external source of
electricity. This rule would render certain
hybrid vehicles ineligible for the section
45W credit, a result consistent with the
requirement that the vehicle be propelled
to a significant extent by an electric motor
which draws electricity from a battery and
the requirement for an external source of
electricity.
V. Special Rules
Section 45W(d) provides three special
rules. First, section 45W(d)(1) provides,
by cross reference to section 30D(f), that
rules similar to the rules under section
30D(f)(1) through (9) apply for purposes
of the section 45W credit. Second, section
45W(d)(2) provides that a qualified com-
mercial clean vehicle placed in service by
a tax-exempt entity described in section
168(h)(2)(A)(i), (ii), or (iv) is not required
to be of a character subject to the allow-
ance for depreciation if it is not subject to
a lease. Third, section 45W(d)(3) provides
that any vehicle for which a credit was
allowed under section 30D is not allowed
a section 45W credit.
Proposed §1.45W-4 would provide
special rules relating to the credit eligi-
bility of a vehicle resulting from certain
transactions and uses, the interaction of
the section 45W credit with other credits,
and recapture of the section 45W credit.
These rules are described in Part V.A.
through E. of this Explanation of Provi-
sions.
A. No Double Benefit Rule
Section 30D(f)(8), as incorporated by
section 45W(d)(1), provides that a sec-
tion 45W credit is allowed only once with
respect to a vehicle, as determined based
upon the vehicle identification number
of such vehicle. Section 45W(d)(3) pro-
vides that no credit is allowed under sec-
tion 45W with respect to any vehicle for
which a credit was allowed under section
30D. To consolidate these two rules, pro-
posed §1.45W-4(a)(1) would provide that
no credit will be allowed under section
45W(a) with respect to any vehicle for
which a section 45W credit or a section
30D credit was previously allowed for
such vehicle.
Section 45W(d)(1), which incorporates
section 30D(f)(2), provides a general no
double benefit rule with respect to any
deduction or other credit allowable under
chapter 1 for a vehicle for which a credit
was allowed under section 45W. Proposed
§1.45W-4(a)(2) would repeat the sub-
stance of section 30D(f)(2). This proposed
rule is consistent with the no double bene-
fit rule provided in §1.25E-2(b)(1).
B. Vehicles Previously Placed in Service
Section 45W does not explicitly pro-
hibit vehicles previously placed in ser-
vice from being eligible for a section
45W credit.
3
Vehicles previously placed
in service present challenges with regard
to the statutory no double benefit rules in
that taxpayers seeking to claim the sec-
tion 45W credit for such vehicles may not
have access to information about whether
a deduction or credit was previously
allowed, or to what extent, and the IRS
would be prohibited from providing such
information because disclosure of infor-
mation related to another taxpayer’s claim
for a tax credit for a particular vehicle is
confidential return information and is pro-
tected from disclosure under section 6103
of the Code. Nonetheless, the normal
rules requiring taxpayers to establish their
entitlement to a credit or other tax benefit
apply. Accordingly, a taxpayer claiming a
45W credit for a vehicle previously placed
in service must maintain evidence in their
books and records sufficient to establish
that no credit under section 30D or sec-
tion 45W has been allowed previously
with respect to the vehicle, and in the case
of any prior credit allowed under section
25E, the amount of such prior credit, and
must provide such information to the IRS
upon request. See §1.6001-1; Roberts v.
3
In the Description of Energy Tax Changes Made by Public Law 117-169, the Joint Committee on Taxation describes section 45W as “creat[ing] a credit for qualified commercial clean
vehicles originally placed in service by a taxpayer,” and in footnote 111 adds: “A technical correction may be necessary to reflect this intent.” JCT, Description of Energy Tax Changes Made
by Public Law 117-169, p. 58 (Apr. 19, 2023).

Bulletin No. 2025–6 737 February 3, 2025
Comm’r, 62 T.C. 834, 836 (T.C. 1974);
Isaacs v. Comm’r, 109 T.C.M. (CCH)
1624 (T.C. 2015). Such evidence may
include signed attestations from all previ-
ous owners that a credit was not claimed
with respect to such vehicle.
The proposed regulations would also
amend §1.25E-2 by adding a new para-
graph (b)(3), which would clarify that a
vehicle for which a credit was allowed
under section 45W may qualify for a sec-
tion 25E credit in a subsequent year with
no reduction in the amount of allowable
section 25E credit. This rule would be
consistent with §1.25E-2(b)(2), which
provides a similar rule regarding the inter-
action between the section 25E credit and
the section 30D credit.
C. Credit Ineligibility Resulting From
Certain Transactions and Uses
Proposed §1.45W-4(b)(2) would pro-
vide that if a sale of a qualified commer-
cial clean vehicle is cancelled before the
taxpayer places the vehicle in service,
then (i) the taxpayer may not claim the
section 45W credit with respect to such
vehicle; (ii) the vehicle may still be eligi-
ble for the section 45W credit; and (iii) a
subsequent buyer will not be required to
apply the residual value rules of §1.45W-
2(f)(3) to determine the incremental cost
of the vehicle.
Proposed §1.45W-4(b)(3) would pro-
vide that if a taxpayer returns a qualified
commercial clean vehicle to the seller
within 30 days of placing such vehicle
in service, then (i) the taxpayer may not
claim the section 45W credit with respect
to such vehicle; (ii) the vehicle may still
be eligible for the section 45W credit;
and (iii) a subsequent buyer must apply
the residual value rules of §1.45W-2(f)(3)
to determine the incremental cost of the
vehicle.
In the case of a resale of a qualified
commercial clean vehicle, proposed
§1.45W-4(b)(4) would provide that if a
taxpayer resells such vehicle within 30
days of placing the vehicle in service,
then (i) the taxpayer is treated as hav-
ing acquired such vehicle with the intent
to resell; (ii) the taxpayer may not claim
the section 45W credit with respect to the
vehicle; (iii) the vehicle may still be eligi-
ble for the section 45W credit; and (iv) a
subsequent buyer must apply the residual
value rules of §1.45W-2(f)(3) to deter-
mine the incremental cost of the vehicle.
D. Business Use of Qualified Commercial
Clean Vehicle Required
Section 45W(c)(4) requires a qualified
commercial clean vehicle to be of a char-
acter subject to the allowance for depre-
ciation. Nothing in section 45W indi-
cates that a partial section 45W credit is
allowable with respect to a vehicle that is
used only partially for business use and is
therefore only partially depreciable. Sec-
tion 30D, a related clean vehicle credit
that was amended by the IRA, explicitly
includes an allocation rule to treat such
credit as either a business or personal
credit based upon business or personal
use. See section 30D(c)(1). Section 30C,
also enacted as part of the IRA, has a sim-
ilar allocation rule. See section 30C(d)(1).
The absence of such an allocation rule in
section 45W, which was enacted as part of
the same legislation, suggests that Con-
gress did not intend for the section 45W
credit to reflect less than 100 percent busi-
ness use.
Proposed §1.45W-4(b)(5) would pro-
vide that if a taxpayer’s trade or business
use of a qualified commercial clean vehi-
cle is less than 100 percent of the tax-
payer’s total use of that vehicle (with the
exception of incidental personal use, such
as a stop for lunch on the way between two
job sites) for the taxable year such vehicle
is placed in service, including because the
vehicle is sold or otherwise disposed of,
then the vehicle is ineligible for the section
45W credit. This rule would also apply
to a qualified commercial clean vehicle
placed in service by a tax-exempt entity,
except that 100 percent trade or business
use means the tax-exempt entity’s use that
is related to an exempt purpose or an unre-
lated trade or business purpose.
E. Recapture
Section 30D(f)(5), which is incorpo-
rated in section 45W(d)(1), authorizes the
Secretary to provide for recapturing the
benefit of any section 45W credit allow-
able with respect to any property which
ceases to be property eligible for such
credit. Proposed §1.45W-4(c)(2)(i) would
provide that if a taxpayer ceases to use the
vehicle for 100 percent trade or business
use during the 18-month period beginning
on the date the vehicle is placed in service,
including because the vehicle is sold or
otherwise disposed of, then (i) the taxpayer
may not claim the section 45W credit with
respect to the vehicle, and if the taxpayer
has already claimed the credit, the credit is
recaptured; (ii) the vehicle may still be eli-
gible for the section 45W credit; and (iii) a
subsequent buyer must apply the residual
value rules of §1.45W-2(f)(3) to deter-
mine the incremental cost of the vehicle.
In determining the 18-month period as the
appropriate length of time for which the
vehicle must be used in a trade or busi-
ness for purposes of recapturing the ben-
efit of any section 45W credit allowable,
the Treasury Department and the IRS took
into consideration commercial vehicle
leasing practices and sought to accommo-
date such practices.
Proposed §1.45W-4(c)(2)(ii) would
provide that, for a vehicle placed in ser-
vice by a tax-exempt entity, the 100 per-
cent trade or business use rule (excepting
incidental personal use) in §1.45W-4(b)
(5) applies, which means use for an
exempt purpose or unrelated trade or busi-
ness purpose.
F. Elective Payment Election
1. Section 6417
Section 6417, enacted by the IRA,
provides a benefit to applicable entities
(defined in section 6417(d)(1)(A) and
§1.6417-1(c)), which include certain
tax-exempt and government entities that
are described in section 50(b)(3) or (4).
Section 6417 allows an applicable entity
to make an election to be treated as mak-
ing a payment of tax in the amount of cer-
tain applicable credits, including the sec-
tion 45W credit, which results in a refund
equal to the amount of the applicable
credits if such entity has no other tax lia-
bility. Section 6417(d)(2)(A) requires an
entity making an election to determine an
applicable credit without regard to section
50(b)(3) or (4)(A)(i), effectively turning
those sections off for purposes of calculat-
ing an applicable credit.
These proposed regulations would
make a clarification to proposed §1.6417-

February 3, 2025 738 Bulletin No. 2025–6
6(b)(1)
4
to align with these proposed sec-
tion 45W regulations. Proposed §1.6417-
6(b)(1) in these proposed regulations
would add a reference to section 45W(d)
(1) (which incorporates the rules of sec-
tion 30D(f)(1) related to basis reduction
and section 30D(f)(5) and the related pro-
posed §1.45W-4(c) pertaining to recap-
ture) to the list of examples of provisions
of the Code that apply. Accordingly, pro-
posed §1.6417-6(b)(1) would state that if
“another provision of the Code contains
a rule that operates without reference to
section 50 to reduce the basis of prop-
erty with respect to which an applicable
credit is determined and/or recapture any
amount of an applicable credit (such as
sections 30C, 45Q(f)(4), 45W(d)(1), and
48(a)(10)), then the rules of that provision
of the Code and the regulations issued
under that provision of the Code apply,
except that any applicable credit continues
to be determined without regard to section
50(b)(3) and (4)(A)(i) and by treating
any property with respect to which such
applicable credit is determined as used in
a trade or business of the applicable entity,
consistent with section 6417(d)(2) and
§1.6417-2(c).”
2. Leases
Section 45W(d)(2) provides that the
section 45W(c)(4) rule regarding depreci-
ation does not apply to any vehicle that is
not subject to a lease and that is placed in
service by a tax-exempt entity described
in section 168(h)(2)(A)(i), (ii), or (iv).
Proposed §1.45W-4(d)(3) would pro-
vide that for purposes of section 45W(d)
(2), a vehicle is “subject to a lease” if it is
leased within 30 days of being placed in
service by a tax-exempt entity. For exam-
ple, a school district purchases and places
in service a fleet of electric school buses
that otherwise qualify for the section 45W
credit. The school district then leases the
fleet to a school transportation contractor
31 days after the school district placed the
fleet in service. The fleet of electric school
buses is not subject to a lease within the
meaning of section 45W(d)(2) and pro-
posed §1.45W-4(d)(3) because the buses
were leased more than 30 days after being
placed in service by the school district. As
a result, the fleet of electric school buses
may be eligible for the section 45W credit.
This definition of “subject to a lease”
aligns with the statutory language that
tax-exempt entities may be eligible for the
section 45W credit if the qualified com-
mercial clean vehicle at issue meets the
relevant criteria near the time of being
placed in service, which is when vehicle
eligibility is measured.
VI. Reporting Requirements
Proposed §1.45W-5 would provide
reporting requirements for purposes of the
section 45W credit.
A. Requirement To File Return
Section 45W(e) provides that no sec-
tion 45W credit can be determined with
respect to any vehicle unless the taxpayer
includes the vehicle identification number
of such vehicle on the return of tax for
the taxable year. Proposed §1.45W-5(a)
would provide that no section 45W credit
is allowed unless the taxpayer claiming
such credit files a Federal income tax
return or information return, as appropri-
ate, for the taxable year in which the qual-
ified commercial clean vehicle is placed in
service. The taxpayer must attach to such
return a completed Form 8936, Clean
Vehicle Credits, or successor form, that
includes all information required by the
form and instructions. The taxpayer must
also attach a completed Schedule A (Form
8936), Clean Vehicle Credit Amount, or
successor form or schedule, that includes
all information required by the schedule
and instructions, such as the vehicle iden-
tification number of the qualified commer-
cial clean vehicle.
B. Credit May Generally Be Claimed on
Only One Tax Return
Proposed §1.45W-5(b)(1) would pro-
vide a general rule, subject to the excep-
tions discussed later in this Explanation
of Provisions, that the amount of the sec-
tion 45W credit attributable to a qualified
commercial clean vehicle may be claimed
on only one Federal income tax return,
including on a joint return in which one of
the spouses or the spouse’s wholly-owned
business entity is listed on the title as the
sole owner of the vehicle. In the event
a qualified commercial clean vehicle is
placed in service by multiple taxpay-
ers that do not file a joint tax return (for
example, in the case of married individ-
uals filing separate returns), no allocation
or proration of the section 45W credit will
be available, and only one of the taxpay-
ers placing the qualified commercial clean
vehicle in service will be eligible for the
entirety of the allowable section 45W
credit.
Proposed §1.45W-5(b)(2) would pro-
vide a rule for grantor trusts. Specifically,
proposed §1.45W-5(b)(2) would pro-
vide that for qualified commercial clean
vehicles placed in service by a trust, to
the extent the grantor or another person
is treated as owning all or part of a trust
under sections 671 through 679 of the
Code, the section 45W credit will be allo-
cated to such grantor or other person in
accordance with §1.671-3(a)(1).
Proposed §1.45W-5(b)(3) would pro-
vide an exception for qualified commercial
clean vehicles placed in service by certain
passthrough entities, namely a partnership
or S corporation. In such cases, the section
45W credit will be allocated among the
partners of the partnership under §1.704-
1(b)(4)(ii) or among the shareholders of
the S corporation under sections 1366(a)
and 1377(a) of the Code and claimed on
the tax returns of the ultimate partners or
of the S corporation shareholders.
C. Taxpayer Reliance on Manufacturer
Certifications and Periodic Written
Reports to IRS
Proposed §1.45W-5(c) would allow
taxpayers to rely on certain certifications
and information provided by a manufac-
turer. Under this proposed rule, a taxpayer
that acquires a qualified commercial clean
vehicle and places it in service would be
able to rely on the information and certi-
4
Revisions to §1.6417-6(b)(1) were previously proposed in the notice of proposed rulemaking (REG-118269-23), published in the Federal Register (89 FR 76759, September 19, 2024), which
sets forth rules regarding the Section 30C Alternative Fuel Vehicle Refueling Property Credit. These proposed regulations include identical proposed language to §1.6417-6(b)(1) other than
the addition of a reference to section 45W(d)(1).

Bulletin No. 2025–6 739 February 3, 2025
fications contained in the qualified man-
ufacturer’s written reports to the IRS.
The procedures for such periodic written
reports are established in guidance pub-
lished in the Internal Revenue Bulletin.
To the extent a taxpayer relies on certifi-
cations or attestations from the qualified
manufacturer, the qualified commercial
clean vehicle the taxpayer acquires will be
deemed to meet the requirements of sec-
tions 30D(d)(1)(C) and 45W(c)(1).
VII. Off-Road Mobile Machinery
Section 45W(c)(2) provides, in part,
that the term “qualified commercial clean
vehicle” includes “mobile machinery,
as defined in section 4053(8) (including
vehicles that are not designed to perform
a function of transporting a load over the
public highways).” Section 4053(8), in
turn, defines mobile machinery as any
vehicle which consists of a chassis (A)
to which there has been permanently
mounted (by welding, bolting, riveting,
or other means) machinery or equipment
to perform a construction, manufactur-
ing, processing, farming, mining, drill-
ing, timbering, or similar operation if the
operation of the machinery or equipment
is unrelated to transportation on or off the
public highways, (B) which has been spe-
cially designed to serve only as a mobile
carriage and mount (and a power source,
if applicable) for the particular machinery
or equipment involved, whether or not
such machinery or equipment is in oper-
ation, and (C) which, by reason of such
special design, could not, without substan-
tial structural modification, be used as a
component of a vehicle designed to per-
form a function of transporting any load
other than that particular machinery or
equipment or similar machinery or equip-
ment requiring such a specially designed
chassis.
Section 4053(8) is an exemption from
the tax imposed by section 4051(a) and
has been employed as an exemption from
the taxes imposed by sections 4071(a) and
4481(a), all of which contribute to the
Highway Trust Fund. See section 9503(b)
of the Code. In that context, the section
4053(8) definition is relevant only to high-
way vehicles, defined in §48.4061(a)-1(d)
5

as “any self-propelled vehicle, or any
trailer or semitrailer, designed to perform a
function of transporting a load over public
highways, whether or not also designed to
perform other functions.” The parenthet-
ical in section 45W(c)(2)(B)—“including
vehicles that are not designed to perform
a function of transporting a load over the
public highways”—contradicts that defi-
nition and, therefore, arguably expands the
traditional category of “mobile machin-
ery” to include off-road vehicles. Such an
expanded category might, for purposes of
section 45W, include certain agricultural
vehicles, construction vehicles, forestry
vehicles, utility vehicles designed for
airport operations, and other types of off-
road vehicles.
However, section 4053(8) and several
provisions of section 45W present signifi-
cant challenges with respect to the admin-
istrability of a section 45W credit that
encompasses such off-road vehicles. Rec-
ognizing that, whenever possible, every
word and every provision of a statute
should be given effect, Washington Mar-
ket Co. v. Hoffman, 101 U.S. 112, 115-6
(1879), the Treasury Department and the
IRS continue to study, and request any
relevant comments on, the considerations
described in section VII.A through G of
this Explanation of Provisions.
A. Section 4053(8) as Applied to
Off-Road Vehicles
The definition of “mobile machinery”
provided in section 4053(8) is vehicle
specific and fact intensive. Vehicles with
chassis that include a pintle hook or that
have been modified to accommodate
a water tank do not qualify as mobile
machinery because such vehicles are not
specially designed to serve only (solely)
as the mobile carriage or mount for the
mounted equipment or machinery. Florida
Power & Light Co. v. U.S., 375 F.3d 1119
(Fed. Cir. 2004). For the same reason,
peanut drying trailers and boat trailers are
not mobile machinery. Rockwater, Inc. v.
U.S., No. 4:21-CV-00125-CDL, 2023 WL
2473452 (M.D. Ga. Jan. 3, 2023), aff’d
in part, reversed in part and remanded in
part, 2024 WL 4799277, (11th Cir. Nov.
16, 2024); Hostar Marine Transp. Sys-
tems, Inc. v. U.S., No. 06-10834-DPW,
2008 WL 4615464 (D. Mass. Oct. 16,
2008), aff’d, 592 F.3d 202 (1st Cir. 2010).
In addition, highway tractors fitted with
winches, compressors, or blowers are not
mobile machinery because such equip-
ment, used to load or unload cargo, is not
“unrelated to transportation on or off the
public highways.” Schlumberger Tech-
nology Corp. and Subsidiaries v. U.S., 55
Fed. Cl. 203 (2003).
When applied to off-road vehicles, a
category to which section 4053(8) was not
traditionally relevant, the text of section
4053(8) presents significant challenges
for taxpayers and the IRS. Particular vehi-
cles would, on a vehicle-by-vehicle basis,
be rendered ineligible for the section 45W
credit for reasons irrelevant to the pur-
pose of the credit, such as the presence of
a pintle hook or the fact that the vehicle
can carry a load other than its mounted
machinery or equipment. Consider-
ation of these types of vehicle features,
although critical to ensuring the correct
taxation of highway vehicles for purposes
of the Highway Trust Fund, would lead to
arbitrary results in the context of a credit
intended to incentivize the use of clean
vehicle propulsion technologies—for
example, the eligibility of one vehicle for
the section 45W credit and the ineligibil-
ity of an identical vehicle, except for the
addition of a pintle hook.
To mitigate these challenges, the Trea-
sury Department and the IRS are consider-
ing an approach that would deem off-road
vehicles (that is, “vehicles not designed
to perform a function of carrying a load
over the public highways”) to satisfy the
requirements of section 4053(8)(B) and
(C). Such an approach would acknowl-
edge that section 4053(8)(B) and (C)
assess a vehicle’s potential to cause wear
and tear on the public highways. While
this is critical in determining whether a
vehicle qualifies for an exemption from
taxes that fund the Highway Trust Fund,
it has no relevance to off-road vehicles.
Therefore, this approach would apply the
core definition of “mobile machinery”
provided in section 4053(8)(A) and, con-
5
The section 4061 manufacturers excise tax on certain highway vehicles was repealed and replaced with the section 4051 retail excise tax on similar vehicles. See Highway Revenue Act of
1982 (Pub. L. 97-424), effective April 1, 1983. The §48.4061(a)-1(d) definition of “highway vehicle” is incorporated into the current section 4051 regime by §145.4051-1(a)(2).

February 3, 2025 740 Bulletin No. 2025–6
sistent with the cross reference provided
in section 45W(c)(2)(B), do so in pre-
cisely the same way as section 4053(8)(A)
is applied in the context of Federal excise
taxes.
While this approach would render
vehicle-by-vehicle analysis unnecessary
in many cases and might eliminate certain
types of inconsistent results with respect
to vehicle eligibility for the section 45W
credit, categorical bars on eligibility for
certain types of vehicles would remain.
For example, off-road dump trucks would
be ineligible for the credit because their
permanently mounted machinery or
equipment, that is, the hydraulics that lift
the dump body, is not “unrelated to trans-
portation” (the dump structure itself is a
vehicle body rather than machinery or
equipment; see Notice 2017-5, 2017-6
IRB 779). Agricultural tractors would be
ineligible to the extent they lack perma-
nently mounted machinery or equipment.
Forklifts could be ineligible because their
permanently mounted equipment, which
can be used to load and unload goods
and transport goods from one location
to another, is related to transportation.
And mowers would be ineligible because
their permanently mounted machinery
or equipment does not perform an oper-
ation similar to those enumerated in sec-
tion 4053(8)(A). The Treasury Depart-
ment and the IRS request comments on
other approaches that might be adopted in
applying section 4053(8) to off-road vehi-
cles in a manner consistent with both the
purpose and text of section 45W and the
statutory requirements of section 4053(8),
including established case law interpret-
ing section 4053(8).
B. Off-Road Vehicles Lack NHTSA-
Required VINs
1. In General
Section 45W(e) provides that no credit
can be determined under section 45W(a)
with respect to any vehicle unless the tax-
payer includes the vehicle identification
number of such vehicle on the return of
tax for the taxable year. See also section
45W(d)(1), which requires, among other
things, the application of rules similar
to those provided in section 30D(f)(8)
(“In the case of any vehicle, the credit
described in [section 30D](a) shall only
be allowed once with respect to such
vehicle, as determined based upon the
vehicle identification number of such
vehicle [....]”); section 30D(f)(9) (“No
credit shall be allowed under this section
with respect to any vehicle unless the tax-
payer includes the vehicle identification
number of such vehicle on the return of
tax for the taxable year.”); and, the defini-
tion of “qualified manufacturer” provided
by section 30D(d)(3), incorporated by
section 45W(c)(1) by cross-reference to
“the requirements of section 30D(1)(C),”
which, by definition, requires a qualified
manufacturer to enter into a written agree-
ment with the Secretary under which such
manufacturer agrees to make periodic
written reports to the Secretary providing,
among other things, vehicle identification
numbers “related to each vehicle manu-
factured by such manufacturer as the Sec-
retary may require.”
Neither section 45W nor any other sec-
tion of the Code provides a definition of
“vehicle identification number” or “VIN.”
See sections 25E, 30D, 45W, 170(f)(12),
and 6213(g)(2)(T) through (V). A “vehicle
identification number,” as a term of art and
in common speech, refers specifically to
the series of Arabic numbers and Roman
letters (defined in 49 CFR 565.13(a)) that
the manufacturer assigns to every motor
vehicle in the United States, including
imported vehicles, subject to the author-
ity of the National Highway Traffic Safety
Administration (NHTSA), an operating
administration that is part of the DOT.
See 49 CFR 565.10 through 565.14. For
this purpose, motor vehicles are vehicles
“driven or drawn by mechanical power
and manufactured primarily for use on
public streets, roads, and highways.” 49
U.S.C. 30101–30102. As a result, man-
ufacturers of off-road vehicles are not
required by NHTSA to assign VINs to
such vehicles.
To give effect to the parenthetical
in section 45W(c)(2)(B) that includes
off-road vehicles, therefore, requires a
more general understanding of the term
“vehicle identification number” as used
in section 45W. Such an understanding
might encompass other numbering sys-
tems, provided that those systems would,
if integrated with the NHTSA-required
VIN system, allow qualified manufactur-
ers and the IRS to uniquely identify each
credit-eligible vehicle for purposes of
the qualified manufacturer requirements
of section 30D(d)(3) and the one-cred-
it-per-vehicle provision of section 30D(f)
(8)—for example, product identification
numbers (PINs) administered by the Soci-
ety of Automotive Engineers (SAE) or the
Association of Equipment Manufacturers
(AEM). Compliance with section 30D(d)
(3) and (f)(8)—and, thus, the eligibility of
any off-road vehicle for the section 45W
credit—would depend on the integration
of the various “vehicle identification num-
ber” systems in question, which would
determine eligibility based on either a
NHTSA-required VIN or a unique identi-
fier system for vehicles that do not have a
NHTSA-required VIN. The IRS must be
able to identify each section 45W cred-
it-eligible vehicle based solely on the
“vehicle identification number” assigned
to the vehicle, and the “vehicle identifi-
cation number” must be unique across all
numbering systems accepted by the IRS
for the purpose of administering section
45W. To integrate the unique identifier
system with the NHTSA-required VIN,
the unique identifier system should be a
17-digit alpha-numeric identifier.
2. Potential Integrated System for Vehicle
Identification Numbers
The Treasury Department and the IRS
are studying various potential options for
an integrated system of vehicle identifica-
tion numbers for purposes of section 45W.
Until guidance is published detailing any
such future system, vehicles without a
NHTSA-required VIN are unable to sat-
isfy the statutory VIN requirement in sec-
tion 45W(e) and are therefore ineligible
for the section 45W credit.
The various potential options under
consideration by the Treasury Department
and the IRS include the following struc-
tural elements:
i. If a qualified commercial clean vehi-
cle has a NHTSA-required VIN, the qual-
ified manufacturer of such vehicle would
need to report the NHTSA-required VIN
to the IRS for such vehicle to be eligible
for the section 45W credit. The taxpayer
claiming a section 45W credit for the qual-
ified commercial clean vehicle in such a
case would need to report the NHTSA-re-

Bulletin No. 2025–6 741 February 3, 2025
quired VIN on their tax return for the tax-
able year in which the section 45W credit
is claimed for such claim to be valid.
ii. If a qualified manufacturer assigns a
PIN to a qualified commercial clean vehi-
cle and that PIN is also a unique 17-digit
identifier consisting of a three-digit
World Manufacturer Code (WMC) and
14 alpha-numeric characters that follow,
the qualified manufacturer would need to
provide the PIN to the taxpayer no later
than 15 days from the time the identity
of the taxpayer purchasing the vehicle is
known, or 15 days from when the taxpayer
requests a PIN from the qualified manu-
facturer, whichever is later. The qualified
manufacturer could choose to satisfy this
requirement by labeling the PIN on the
vehicle, including adding the PIN to the
item of specified property by affixing a
label to the vehicle or by etching the PIN
on the vehicle. Alternatively, a qualified
manufacturer could choose to affix a label
containing the PIN to the vehicle’s docu-
mentation or purchase records. The qual-
ified manufacturer would need to report
the PIN and the identity of the taxpayer
purchasing the vehicle to the IRS no later
than 15 days from the time that the iden-
tity of the taxpayer purchasing the vehicle
is known for the vehicle to be considered
eligible. A taxpayer claiming a section
45W credit in such a case would need to
report the PIN on their tax return or infor-
mation return for the taxable year in which
the section 45W credit is claimed for such
claim to be valid.
iii. If a qualified commercial clean
vehicle does not have a VIN or a PIN
issued by a qualified manufacturer, the
qualified manufacturer could apply to
receive a valid three-digit unique qualified
manufacturer identifier (QMID). Upon the
issuance of a QMID, the qualified manu-
facturer would assign unique 17-digit
PINs to the qualified commercial clean
vehicles it manufactures. Each 17-digit
PIN would begin with the QMID followed
by 14 alpha-numeric digits that the quali-
fied manufacturer assigns to each vehicle.
The qualified manufacturer would need to
provide the PIN to the taxpayer no later
than 15 days from the time the identity
of the taxpayer purchasing the vehicle is
known, or 15 days from when the taxpayer
requests a PIN from the qualified manu-
facturer, whichever is later. The qualified
manufacturer could choose to satisfy this
requirement by labeling the PIN on the
vehicles, including adding the PIN to the
item of specified property by affixing a
label to the vehicle or by etching the PIN
on the vehicle. Alternatively, a qualified
manufacturer could choose to affix a label
containing the PIN to the vehicle’s docu-
mentation or purchase records. The qual-
ified manufacturer would need to report
the PIN and the identity of the taxpayer
purchasing the vehicle to the IRS no later
than 15 days from the time that the iden-
tity of the taxpayer purchasing the vehicle
is known for the vehicle to be considered
eligible. A taxpayer claiming a section
45W credit in such a case would need to
report the PIN on the taxpayer’s tax return
or information return for the taxable year
in which the section 45W credit is claimed
for such claim to be valid.
iv. A qualified manufacturer would not
be able to set prerequisites for a taxpayer
receiving a PIN that are not required to ver-
ify the purchase of the qualified commer-
cial clean vehicle, such as requiring tax-
payers to sign up for promotional emails,
texts, or other communications from the
qualified manufacturer, its related entities,
or partners. However, qualified manufac-
turers could choose to provide PINs to
taxpayers through the mail, online, email,
or other means of electronic delivery.
Qualified manufacturers could choose to
provide PINs in conjunction with a formal
registration for a warranty, provided that
the taxpayer could easily obtain the PIN
without completing the formal warranty
registration.
v. For qualified commercial clean
vehicles previously placed in service by
another person or entity, a subsequent
taxpayer could be required to contact the
qualified manufacturer to obtain a PIN.
vi. Qualified manufacturers that man-
ufacture vehicles without a NHTSA-re-
quired VIN would need to enter into new
qualified manufacturer agreements.
3. Vehicles Without a NHTSA-Required
VIN Are Not Currently Eligible for the
Credit
Eligibility of any off-road vehicle for
the section 45W credit is dependent on the
issuance of final regulations establishing
an integrated vehicle identification num-
ber system that accommodates off-road
mobile machinery or other vehicles with-
out a NHTSA-required VIN that is suffi-
cient to satisfy the statutory vehicle identi-
fication number requirement. This means
that off-road mobile machinery without a
NHTSA-required VIN is not eligible for
the section 45W credit.
4. Request for Comments
The Treasury Department and the IRS
request comments on the potential inte-
grated vehicle identification number sys-
tem described in section VII.B2 of this
Explanation of Provisions. Specifically,
the Treasury Department and the IRS
request comments on the following ques-
tions:
i. What challenges, if any, would man-
ufacturers have in implementing and com-
plying with the integrated vehicle identifi-
cation number system described in section
VII.B2 of this Explanation of Provisions?
What would be the costs and timeline for
manufacturers to implement and comply
with the proposed system? Are there cases
in which manufacturers or other stake-
holders, such as retailers, would decline
to employ the system because compliance
would be overly burdensome? Comment-
ers are encouraged to specifically identify
types and amounts of costs that manufac-
turers would incur in implementing and
complying with the proposed system, as
well as specific aspects of the proposal
that would require set amounts of time to
develop and implement.
ii. Should the Treasury Department
and the IRS leverage existing systems,
e.g. SAE or AEM, that assign WMCs that
could be used as the first three digits of
the PIN? Are there perceived problems
with these systems? Do these systems
ensure there is no overlap with any VINs
assigned under NHTSA’s rules? Are there
other PIN tracking systems in place that
the IRS could leverage?
iii. If the Treasury Department and
the IRS were to implement the integrated
vehicle identification number system
described in section VII.B2 of this Expla-
nation of Provisions, what changes or
exceptions, if any, should be made?
iv. What modifications, if any, could be
made to the integrated vehicle identifica-
tion number system described in section

February 3, 2025 742 Bulletin No. 2025–6
VII.2 of this Explanation of Provisions
to accommodate limitations while still
adhering to the unique identifier require-
ment?
v. How would qualified manufacturers
furnish PINs to taxpayers (e.g., with the
vehicle, through an online website, etc.)
in a manner that ensures the taxpayer has
easy access to the PIN when filing their tax
return or information return? How would
off-road vehicle manufacturers obtain
and provide information on the identity
of those purchasing qualified commercial
clean vehicles to assist the IRS in ensuring
compliance? What labelling requirements
should apply in assigning PINs?
C. Manufacturers That Exclusively
Manufacture Off-Road Clean Vehicles
Are Not Qualified Manufacturers
Section 45W(c)(1) provides, in part,
that a qualified commercial clean vehi-
cle must meet the requirements of sec-
tion 30D(d)(1)(C). Section 30D(d)(1)(C),
in turn, provides that a vehicle must be
made by a qualified manufacturer. Sec-
tion 30D(d)(3), incorporated by section
45W(c)(1)’s cross reference to section
30D(d)(1)(C), defines “qualified manufac-
turer,” in part, as any manufacturer within
the meaning of the regulations prescribed
by the Administrator of the EPA for pur-
poses of the administration of title II of the
CAA (42 U.S.C. 7521–7590).
Section 216(1) of the CAA, generally
referenced in regulations under title II
of the CAA (see, for example, 40 CFR
86.082–2(b), 85.1902(f), and 1037.801),
defines “manufacturer”, in relevant part,
as “any person engaged in the manu-
facturing or assembling of new motor
vehicles, new motor vehicle engines,
new nonroad vehicles or new nonroad
engines, or importing such vehicles or
engines for resale....” Section 216(2) of
the CAA defines “motor vehicle” as any
self-propelled vehicle designed for trans-
porting persons or property on a street
or highway. Section 216(11) of the CAA
defines “nonroad vehicle” as a vehicle
that is powered by a nonroad engine and
that is not a motor vehicle or a vehicle
used solely for competition. Section
216(10) of the CAA in turn defines “non-
road engine” as an ICE (including the
fuel system) that is not used in a motor
vehicle or a vehicle used solely for com-
petition.
Under these definitions, “manufac-
turer” includes a maker of an off-road
vehicle with a “conventional” ICE, a
maker of an off-road vehicle with a hybrid
engine (to the extent that such vehicle
includes an ICE), or a maker of motor
vehicles. It does not include a maker of
only off-road vehicles with an exclusively
electric motor or fuel cell system. Conse-
quently, makers of such off-road vehicles
that do not also make any motor vehicles
or off-road vehicles with ICEs or hybrid
engines cannot be “qualified manufactur-
ers” for purposes of section 45W, and their
vehicles are, consequently, ineligible for
the credit. This result, which might allow
a section 45W credit for an off-road vehi-
cle equipped with a hybrid powertrain but
in some cases disallow a credit for a func-
tionally identical vehicle equipped with
an electric powertrain, may disadvantage
manufacturers who make only products
that appear well aligned with the purposes
of the credit.
D. Some Off-Road Vehicles May Not
Display Their Gross Vehicle Weight
Ratings
Section 45W(b)(4) provides a limita-
tion for the credit based on the vehicle’s
GVWR, such that the amount of the sec-
tion 45W credit does not exceed $7,500 in
the case of a vehicle that has a GVWR of
less than 14,000 pounds, and $40,000 for
other vehicles. Similarly, section 45W(c)
(3)(A) bases battery capacity requirements
applicable to certain vehicles by reference
to GVWR: a battery that has a capacity of
not less than 15 kilowatt hours (or, in the
case of a vehicle that has a GVWR of less
than 14,000 pounds, 7 kilowatt hours).
GVWR is not defined in the Internal
Revenue Code or any regulations thereun-
der. However, the DOT and the EPA have
defined the term for purposes of regulat-
ing motor vehicle safety and emissions.
DOT regulations define the term “gross
vehicle weight rating” as the value spec-
ified by the manufacturer as the loaded
weight of a single vehicle. See 49 CFR
383.5 and 571.3(b). Similarly, EPA reg-
ulations define the term “gross vehicle
weight rating” as the value specified by
the manufacturer as the maximum design
loaded weight of a single vehicle. See 40
CFR 86.082-2.
Motor vehicles are required by DOT
regulations to be affixed with labels
including the GVWR of the vehicle (see
49 CFR parts 567 and 568). The only
vehicles to which those standards apply
are motor vehicles, which are defined in
49 U.S.C. 30102 as “vehicle[s] driven or
drawn by mechanical power and manufac-
tured primarily for use on public streets,
roads, and highways [....]” Off-road vehi-
cles may not have a GVWR affixed. It
may, therefore, be difficult for taxpayers to
determine and substantiate the appropriate
credit limitation under section 45W(b)(4).
E. Off-Road Vehicles Employing Fuel
Cells May Be Ineligible
Section 45W(c)(3)(B) provides that
a qualified commercial clean vehicle
includes “a motor vehicle which satisfies
the requirements under subparagraphs
(A) and (B) of section 30B(b)(3) if the
vehicle satisfies the other requirements
of section 45W(c).” Section 30B(b)(3)
defines a “new qualified fuel cell motor
vehicle” for purposes of section 30B as a
motor vehicle, and provides among other
requirements that it be a motor vehicle
(A) that is propelled by power derived
from 1 or more cells that convert chemical
energy directly into electricity by com-
bining oxygen with hydrogen fuel that is
stored on board the vehicle in any form
and may or may not require reformation
prior to use, and (B) that, in the case of
a passenger automobile or light truck, has
received on or after the date of the enact-
ment of this section a certificate that such
vehicle meets or exceeds the Bin 5 Tier II
emission level established in regulations
prescribed by the Administrator of the
EPA under section 202(i) of the CAA for
that make and model year vehicle. Section
30B(b)(3)(A) and (B) apply, in the context
of section 30B, only to “motor vehicles,”
a term defined in section 30B(h)(1) to
mean “any vehicle which is manufactured
primarily for use on public streets, roads,
and highways (not including a vehicle
operated exclusively on a rail or rails) and
which has at least 4 wheels.” If this defi-
nition of “motor vehicle” applies to sec-
tion 45W(c)(3)(B)—a meaning suggested
by that subparagraph’s use of the term

Bulletin No. 2025–6 743 February 3, 2025
“motor vehicle” (which appears nowhere
else in section 45W)—then off-road vehi-
cles powered by otherwise eligible fuel-
cell technology would be ineligible for the
section 45W credit.
F. DOT Vehicle Safety Provisions
Section 45W(d)(1) requires, among
other things, the application of a rule sim-
ilar to section 30D(f)(7). Section 30D(f)
(7) provides, in part, that a vehicle is not
considered eligible for a credit unless such
vehicle is in compliance with the motor
vehicle safety provisions of 49 U.S.C.
30101 through 30169. As described in
section VII.B of this Explanation of
Provisions, the grant of authority under
those provisions of law do not extend to
off-road vehicles. See 49 U.S.C. 30101
through 30102. It is unlikely that any off-
road vehicle might be, as a factual mat-
ter, compliant with safety provisions that,
legally, do not apply to it.
However, given the broad scope of
vehicles that potentially fall under the cat-
egory of off-road vehicles for purposes of
section 45W, and the scope of the safety
provisions provided in 49 U.S.C. 30101
through 30169, identifying similar safety
provisions and the criteria by which such
similarity might be judged appear to pres-
ent significant challenges.
G. Math Error Authority
Section 6213(g)(2)(V) provides that
the term “mathematical or clerical error”
means an omission of a correct vehi-
cle identification number required to
be included on a return under section
45W(e). As noted in section VII.B of
this Explanation of Provisions, treating
off-road mobile machinery (as described
in the parenthetical in section 45W(c)(2)
(B)) as eligible for the 45W credit would
require a broad interpretation of the term
“vehicle identification number” as that
term is used in section 45W(e) and the
provisions of section 30D that are incor-
porated into section 45W through section
45W(d)(1). If the Treasury Department
and the IRS were to develop an integrated
vehicle identification number system that
could accommodate a broad, general defi-
nition of the term “vehicle identification
number” to encompass off-road mobile
machinery in the section 45W context, the
Treasury Department and the IRS would
propose a conforming amendment to
§301.6213-2. Such an amendment would
provide clarity to taxpayers by providing a
cross-reference to this broad, general defi-
nition of the term “vehicle identification
number.”
H. Other Considerations
The proposed regulations may
introduce challenges to allowing sec-
tion 45W credits for off-road vehicles
beyond those flowing from the statutory
language, particularly in the calculation
of incremental cost of off-road vehicles.
Determining the residual value of off-
road vehicles that have been previously
placed in service by another person or
entity, the appropriate considerations for
identifying a comparable vehicle, and
the appropriate RPE or RPEs for pur-
poses of a safe harbor, all present con-
siderable difficulties given the range of
vehicles that may fall into the off-road
vehicle category.
I. Request for Comments
The Treasury Department and the IRS
are, in consultation with the DOE, con-
tinuing to study these and related ques-
tions. The Treasury Department and the
IRS request comments on each of the
considerations described in section VII.A
through H of this Explanation of Provi-
sions related to the eligibility of off-road
mobile machinery for the section 45W
credit.
Proposed Applicability Dates
Proposed §§1.45W-1 through 1.45W-5
are proposed to apply to taxable years
ending after [date of publication of the
final regulations in the Federal Register].
Proposed §1.25E-2(b)(3) is proposed to
apply to taxable years ending after [date
of publication of the final regulations in
the Federal Register]. Proposed §1.30D-
2(b)(28)(ii) is proposed to apply to taxable
years ending after [date of publication of
the final regulations in the Federal Reg-
ister]. The second and third sentences of
proposed §1.6417-6(b)(1) are proposed to
apply to property placed in service in tax-
able years ending after [date of publica-
tion of the final regulations in the Federal
Register].
Special Analyses
I. Regulatory Planning and Review
Pursuant to the Memorandum of
Agreement, Review of Treasury Regula-
tions under Executive Order 12866 (June
9, 2023), tax regulatory actions issued by
the IRS are not subject to the requirements
of section 6 of Executive Order 12866, as
amended. Therefore, a regulatory impact
assessment is not required.
II. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520) (PRA) generally
requires that a Federal agency obtain the
approval of the Office of Management
and Budget (OMB) before collecting
information from the public, whether such
collection of information is mandatory,
voluntary, or required to obtain or retain
a benefit. An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control number
assigned by the Office of Management
and Budget.
OMB Control Number 1545–2137
covers Form 8936 and Form 8936-A
regarding clean vehicle credits, including
the requirement to include on the taxpay-
er’s return for the taxable year the vehicle
identification number of the vehicle for
which the section 45W credit is claimed.
Rev. Proc. 2022-42 and Rev. Proc. 2023-
38 describe the procedural requirements
for qualified manufacturers to make peri-
odic written reports to the IRS to provide
information related to each vehicle manu-
factured by such manufacturer that is eligi-
ble for the section 45W credit as required
in section 30D(d)(3). The collections of
information contained in Rev. Proc. 2022-
42 and Rev. Proc. 2023-38 are described
in those documents and were submitted
to the Office of Management and Bud-
get in accordance with the PRA under
control number 1545-2137. The notice of
proposed rulemaking is not changing or
creating these already approved collection
requirements.

February 3, 2025 744 Bulletin No. 2025–6
In accordance with §1.6001-1, a tax-
payer claiming a credit under section 45W
must keep permanent books of account or
records sufficient to establish the amount
of any such credit required to be shown
by such taxpayer in any return of tax or
information. For PRA purposes, general
tax records are already approved by OMB
under 1545-0074 for individuals, 1545-
0123 for business entities, and under 1545-
0092 for trust and estate filers. The notice
of proposed rulemaking is not changing or
creating these already approved collection
requirements.
The collections of information in the
proposed regulations creates reporting,
third-party disclosure and recordkeeping
requirements that are necessary to ensure
that specified property meets the require-
ments for the qualified commercial clean
vehicle credit under section 45W. These
collections of information generally
would be used by the IRS for tax compli-
ance purposes and by taxpayers to ensure
the vehicle qualifies for the credit.
The reporting requirements include
a provision requiring manufacturers to
register with the IRS to become qualified
manufacturers, as detailed in §1.45W-
5(c). The third-party disclosure require-
ment includes the requirement that man-
ufacturers provide taxpayers with a PIN
number that identifies the specified prop-
erty as qualified under section 45W. The
likely respondents are businesses and
other for-profit entities. The burden for
these requirements is as follows:
Estimated number of respondents:
4,500.
Estimated frequency of responses: 1.
Estimated average annual burden per
response: 0.25 hours.
Estimated total reporting burden: 1,125
hours.
The proposed regulations include a
third-party disclosure and associated
recordkeeping requirements for qualified
manufacturers to provide taxpayers with
the incremental cost value, which may
include detailed cost information for the
powertrains, and for taxpayers to keep
records of these disclosures, as detailed in
§1.45W-2(c)(10).
The likely respondents are businesses
and other for-profit and tax-exempt enti-
ties. The burden for these requirements is
as follows:
Estimated number of respondents: 500.
Estimated frequency of responses: 1.
Estimated average annual burden per
response: 1.0 hours.
Estimated total reporting burden: 500
hours.
The collections of information con-
tained in this notice of proposed rulemak-
ing have been submitted to the Office of
Management and Budget for review in
accordance with the Paperwork Reduc-
tion Act under OMB Control Number
1545-2137. Commenters are strongly
encouraged to submit public comments
electronically. Written comments and rec-
ommendations for the proposed informa-
tion collection should be sent to https://
www.reginfo.gov/public/do/PRAMain,
with copies to the IRS. Find this particular
information collection by selecting “Cur-
rently under Review—Open for Public
Comments,” and then by using the search
function. Submit electronic submissions
for the proposed information collection
to the IRS via email at pra.comments@
irs.gov (indicate REG-123525-23 on the
Subject line). Comments on the collection
of information must be received by March
17, 2025.
III. Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) (RFA) imposes certain
requirements with respect to Federal rules
that are subject to the notice and comment
requirements of section 553(b) of the
Administrative Procedure Act (5 U.S.C.
551 et seq.) and that are likely to have a
significant economic impact on a substan-
tial number of small entities. Unless an
agency determines that a proposal will not
have a significant economic impact on a
substantial number of small entities, sec-
tion 603 of the RFA requires the agency
to present an initial regulatory flexibility
analysis (IRFA) of the proposed rule. The
Treasury Department and the IRS have
not determined whether the proposed rule,
when finalized, will have a significant
economic impact on a substantial num-
ber of small entities. This determination
requires further study. However, because
there is a possibility of a significant eco-
nomic impact on a substantial number of
small entities, these proposed regulations
include an IRFA. The Treasury Depart-
ment and the IRS invite comments on both
the number of entities affected by these
proposed regulations and the economic
impact of these proposed regulations on
small entities.
Small business entities that claim the
section 45W credit must satisfy reporting
requirements. They will continue to file
Form 8936, Clean Vehicle Credits (or suc-
cessor form as the Secretary prescribes),
as was the case for the section 45W credit
prior to the publication of these proposed
regulations. The estimated burden for
business taxpayers filing Form 8936 is
approved under OMB control number
1545-2137 and 1545-0123.
Although the Treasury Department and
IRS estimate that small business entities
will claim the credit under section 45W in
a given year, the proposed regulations will
not have a significant economic impact on
such entities because the proposed regu-
lations do not impose any additional bur-
den on taxpayers outside of what is pro-
vided by the statute. For example, section
30D(f)(5), which is incorporated into the
section 45W regime by section 45W(d)
(1), requires the Secretary to prescribe
regulations that provide for the recapture
of the credit with respect to any property
which ceases to be property eligible for
such credit. These proposed rules merely
provide the framework for the statutorily
required recapture.
The Treasury Department and IRS have
determined that the continued requirement
to file a Form 8936 (or successor form as
the Secretary prescribes) is unlikely to
involve significant administrative costs
beyond what was previously required.
A. Need for and Objectives of the Rule
The proposed regulations would pro-
vide the eligibility rules and key defini-
tions applicable to the section 45W credit
to allow taxpayers to know whether the
clean vehicle they intend to purchase is
eligible for the section 45W credit. In
addition, the proposed regulations would
provide rules regarding the recapture
authority under section 45W(d)(1), so that
taxpayers and the IRS would have clear
rules regarding when a clean vehicle may
cease to be eligible property for purposes
of the section 45W credit. Further, the
proposed regulations would provide rules

Bulletin No. 2025–6 745 February 3, 2025
for determining the amount of the section
45W credit, including the determination
of incremental cost for qualified commer-
cial clean vehicles.
The proposed rules are expected to
encourage taxpayers to purchase and place
in service qualified commercial clean
vehicles, thereby increasing the number
of clean vehicles on the roads. Thus, the
Treasury Department and the IRS intend
and expect that the proposed rules will
deliver benefits across the economy and
environment that will beneficially impact
various industries, including clean vehicle
manufacturers and dealers.
B. Affected Small Entities
The Small Business Administration
estimates in its 2023 Small Business Pro-
file that 99.9 percent of United States busi-
nesses meet its definition of a small busi-
ness. The applicability of these proposed
regulations does not depend on the size of
the business, as defined by the Small Busi-
ness Administration. As described more
fully in the preamble to this proposed reg-
ulation and in this IRFA, these rules may
affect a variety of different businesses
across several different industries, but will
primarily affect commercial purchasers
of qualified commercial clean vehicles
and qualified manufacturers of qualified
commercial clean vehicles. The Trea-
sury Department and the IRS currently
estimate the number of manufacturers of
on-road qualified commercial clean vehi-
cles to be approximately 77, and the num-
ber of manufacturers of off-road mobile
machinery to be approximately 4,500.
For off-road mobile machinery man-
ufacturer estimates, the Treasury Depart-
ment and IRS reviewed tax return filings
for relevant industry codes for prior tax-
able years and made assumptions regard-
ing the likelihood of such taxpayers man-
ufacturing electric or hydrogen-powered
off-road mobile machinery. For taxpayers
that are not likely to meet the definition of
small business entity, the Treasury Depart-
ment and the IRS assumed that 100 per-
cent would manufacture off-road mobile
machinery that may qualify for the credit
under section 45W. For taxpayers likely
to meet the definition of small business
entity, the Treasury Department and the
IRS assumed that varying percentages of
such taxpayers, based on the size of their
operations, would manufacture off-road
mobile machinery that may qualify for the
credit under section 45W.
Of the estimated 77 manufacturers of
on-road qualified commercial clean vehi-
cles, the Treasury Department and the IRS
have determined that none of them are
small businesses entities. Of the estimated
4,500 manufacturers of off-road mobile
machinery, the Treasury Department
and the IRS estimate that more than half
would likely be considered a small busi-
ness entity.
The Treasury Department and the IRS
expect to receive more information on the
impact on small businesses through com-
ments on this proposed rule and again if
the integrated system for vehicle identi-
fication numbers for purposes of section
45W is established.
1. Impact of the Rules
The recordkeeping and reporting
requirements would increase for qual-
ified manufacturers of off-road mobile
machinery seeking to become qualified
manufacturers in the event of the estab-
lishment of an integrated system for vehi-
cle identification numbers. Although the
Treasury Department and the IRS do not
have sufficient data to precisely determine
the likely extent of the increased costs of
compliance, the estimated burden of com-
plying with the recordkeeping and report-
ing requirements are described in the PRA
section of the preamble. Based on the total
number of estimated manufacturers of off-
road mobile machinery (4500) and an esti-
mated registration time of 0.25 hours per
registration, the Treasury Department and
IRS estimate that off-road mobile machin-
ery manufacturers will spend a total of
1,125 hours registering as qualified man-
ufacturers.
2. Alternatives Considered
The Treasury Department and the IRS
considered various alternatives in promul-
gating these proposed regulations. Signif-
icant alternatives and issues considered
include: (1) the application of NHTSA
rules toward administering vehicle iden-
tification numbers; (2) the appropriate
length of time for which a vehicle must be
used in a trade or business as it relates to
the recapture rules provided in proposed
§1.45W-4(c); and (3) how best to imple-
ment the no double benefit rules and incre-
mental cost calculation to the eligibility of
used vehicles for the section 45W credit.
Regarding the application of NHTSA’s
rules administering vehicle identifica-
tion numbers compared to an integrated
vehicle identification system, the Trea-
sury Department and the IRS considered
the appropriate scope of the definition of
“vehicle identification number” and how
that definition should be consistent with
or diverge from the inclusion of and ref-
erence to off-road mobile machinery in
the statutory text of section 45W(c)(2)(B).
The Treasury Department and the IRS
considered interpreting the “VIN number”
requirement in section 45W(e) to mean a
NHTSA-required VIN, consistent with the
established definition of “vehicle identifi-
cation number” in DOT regulations. See
49 CFR 565.10 through 565.14. However,
the only vehicles regulated by NHTSA
are motor vehicles, which are vehicles
manufactured primarily for use on pub-
lic streets, roads, and highways. See 49
U.S.C. 30102(7). Thus, off-road vehi-
cles do not have NHTSA-required VINs.
Therefore, this interpretation would effec-
tively exclude all off-road mobile machin-
ery, which Congress may have intended to
include, as reflected in the parenthetical of
section 45W(c)(2)(B).
The Treasury Department and the IRS
considered alternatives to the recapture
rules provided in proposed §1.45W-4(c).
Given that some taxpayers may consider
using vehicles for partial business and
partial personal use, the Treasury Depart-
ment and the IRS determined it was nec-
essary to provide rules regarding when
the value of the section 45W credit can
be recaptured when the vehicle is used
less than 100 percent for trade or business
use, other than incidental personal use.
The Treasury Department and the IRS
also considered the appropriate length of
time for which the vehicle must be used
in a trade or business. Longer and shorter
periods of time were considered. Based on
knowledge of commercial vehicle leas-
ing practices (fleet leasing), the Treasury
Department and the IRS determined that
it was appropriate to require a qualified
commercial clean vehicle to be used for

February 3, 2025 746 Bulletin No. 2025–6
100 percent trade or business use for 18
months after it is placed in service.
The Treasury Department and the IRS
considered issues raised by the applicabil-
ity of the section 45W credit to used vehi-
cles, since the statute does not contain an
original use requirement. In particular, the
Treasury Department and the IRS consid-
ered how best to implement the statutory
no double benefit rules. Section 45W(d)
(3) provides that no credit is allowed with
respect to any vehicle for which a credit
was allowed under section 30D. Section
45W(d)(1), in turn, incorporates section
30D(f)(8), which provides in relevant part
that in the case of any vehicle, the credit
shall only be allowed once with respect to
such vehicle, as determined based upon
the vehicle identification number of such
vehicle. Section 45W(d)(1) also incorpo-
rates the no double benefit rule in section
30D(f)(2). Subsequent buyers of quali-
fied commercial clean vehicles generally
would not know if a prior tax credit for
clean vehicles had been claimed with
respect to a particular used vehicle. In
addition, the IRS generally is legally pro-
hibited from disclosing such confidential
tax information. Given these constraints
and to ensure compliance with the no dou-
ble benefit rules, a taxpayer claiming such
credit must establish that they are entitled
to the credit by keeping evidence in their
books and records, which may be pro-
vided to the IRS upon request, sufficient to
establish that no deduction or other credit
was previously allowed on such vehicle.
3. Duplicative, Overlapping, or
Conflicting Federal Rules
The proposed regulations would not
duplicate, overlap, or conflict with any
relevant Federal rules. As discussed in the
Explanation of Provisions, the proposed
regulations would merely provide require-
ments, procedures, and definitions related
to the section 45W credit. The Treasury
Department and the IRS invite input from
interested members of the public about
identifying and avoiding overlapping,
duplicative, or conflicting requirements.
C. Section 7805(f)
Pursuant to section 7805(f), this notice
of proposed rulemaking has been submit-
ted to the Chief Counsel for the Office of
Advocacy of the Small Business Admin-
istration for comment on their impact on
small business.
IV. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates
Reform Act of 1995 requires that agen-
cies assess anticipated costs and benefits
and take certain other actions before issu-
ing a final rule that includes any Federal
mandate that may result in expenditures
in any one year by a State, local, or Tribal
government, in the aggregate, or by the
private sector, of $100 million (updated
annually for inflation). These proposed
regulations do not include any Federal
mandate that may result in expenditures
by State, local, or Tribal governments,
or by the private sector in excess of that
threshold.
V. Executive Order 13132: Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either imposes substantial, direct
compliance costs on State and local gov-
ernments, and is not required by statute,
or preempts State law, unless the agency
meets the consultation and funding
requirements of section 6 of the Execu-
tive order. This proposed rule does not
have federalism implications and does
not impose substantial direct compliance
costs on State and local governments or
preempt State law within the meaning of
the Executive order.
Comments and Public Hearing
Before these proposed amendments to
the regulations are adopted as final regula-
tions, consideration will be given to com-
ments regarding the notice of proposed
rulemaking that are submitted timely to
the IRS as prescribed in the preamble
under the ADDRESSES section. The
Treasury Department and the IRS request
comments on all aspects of the proposed
regulations. All comments will be made
available at https://www.regulations.gov.
Once submitted to the Federal eRulemak-
ing Portal, comments cannot be edited or
withdrawn.
A public hearing with respect to this
notice of proposed rulemaking has been
scheduled for April 28, 2025, beginning
at 10 a.m. EST in the Auditorium at the
Internal Revenue Building, 1111 Con-
stitution Avenue, NW, Washington, DC.
Due to building security procedures, vis-
itors must enter at the Constitution Ave-
nue entrance. In addition, all visitors must
present photo identification to enter the
building. Because of access restrictions,
visitors will not be admitted beyond the
immediate entrance area more than 30
minutes before the hearing starts. Partic-
ipants may alternatively attend the public
hearing by telephone.
The rules of 26 CFR 601.601(a)(3)
apply to the public hearing. Persons who
wish to present oral comments at the pub-
lic hearing must submit an outline of the
topics to be discussed and the time to be
devoted to each topic by March 17, 2025.
A period of 10 minutes will be allotted
to each person for making comments. An
agenda showing the scheduling of the
speakers will be prepared after the dead-
line for receiving outlines has passed.
Copies of the agenda will be available
free of charge at the public hearing. If no
outline of the topics to be discussed at
the public hearing is received by March
17, 2025, the public hearing will be can-
celled. If the public hearing is cancelled,
a notice of cancellation of the public
hearing will be published in the Federal
Register.
Individuals who want to testify in
person at the public hearing must send
an email to publichearings@irs.gov to
have your name added to the building
access list. The subject line of the email
must contain the regulation number REG-
123525-23 and the language TESTIFY In
Person. For example, the subject line may
say: Request to TESTIFY In Person at
Hearing for REG-123525-23.
Individuals who want to testify by
telephone at the public hearing must
send an email to publichearings@irs.
gov to receive the telephone number and
access code for the public hearing. The
subject line of the email must contain the
regulation number REG-123525-23 and
the language TESTIFY Telephonically.
For example, the subject line may say:
Request to TESTIFY Telephonically at
Hearing for REG-123525-23.

Bulletin No. 2025–6 747 February 3, 2025
Individuals who want to attend the pub-
lic hearing in person without testifying must
also send an email to publichearings@irs.
gov to have your name added to the build-
ing access list. The subject line of the email
must contain the regulation number REG-
123525-23 and the language ATTEND
In Person. For example, the subject line
may say: Request to ATTEND Hearing In
Person for REG-123525-23. Requests to
attend the public hearing must be received
by 5 p.m. EST on April 24, 2025.
Individuals who want to attend the pub-
lic hearing by telephone without testifying
must also send an email to publichear-
ings@irs.gov to receive the telephone num-
ber and access code for the public hearing.
The subject line of the email must contain
the regulation number REG-123525-23 and
the language ATTEND Hearing Telephoni-
cally. For example, the subject line may say:
Request to ATTEND Hearing Telephon-
ically for REG-123525-23. Requests to
attend the public hearing must be received
by 5 p.m. EST on April 24, 2025.
Public hearings will be made accessi-
ble to people with disabilities. To request
special assistance during a public hearing
please contact the Publications and Regu-
lations Section of the Office of Associate
Chief Counsel (Procedure and Admin-
istration) by sending an email to publi-
chearings@irs.gov (preferred) or by tele-
phone at (202) 317-6901 (not a toll-free
number) and must be received by at least
April 23, 2025.
Statement of Availability of IRS
Documents
Revenue procedures, revenue rulings,
notices, and other guidance cited in this
preamble is published in the Internal Rev-
enue Bulletin and is available from the
Superintendent of Documents, U.S. Gov-
ernment Publishing Office, Washington,
DC, 20402, or by visiting the IRS website
at https://www.irs.gov.
Drafting Information
The principal authors of these pro-
posed regulations are James Williford, Iris
Chung, David Villagrana, and Rika Vald-
man of the Office of the Associate Chief
Counsel (Passthroughs and Special Indus-
tries). However, other personnel from the
Treasury Department, the DOE, and the
IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, the Treasury Department
and the IRS propose to amend 26 CFR
part 1 as follows:
PART 1 — INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries in
numerical order for §§1.45W-1 through
1.45W-5 to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Section 1.45W-1 also issued under 26
U.S.C. 45W(f) and 30D(d)(3).
Section 1.45W-2 also issued under 26
U.S.C. 45W(f).
Section 1.45W-3 also issued under 26
U.S.C. 45W(f).
Section 1.45W-4 also issued under 26
U.S.C. 45W(f) and 30D(f)(5).
Section 1.45W-5 also issued under 26
U.S.C. 45W(f).
* * * * *
Par. 2. Section 1.25E-2 is amended by:
1. Adding paragraph (b)(3); and
2. Revising paragraph (i).
The addition and revision read as fol-
lows:
§1.25E-2 Special rules.
* * * * *
(b) * * *
(3) Interaction between section 25E
and section 45W credits. A credit that has
been allowed under section 45W of the
Code with respect to a vehicle in a tax-
able year before the taxable year in which
a section 25E credit is allowable for that
vehicle does not reduce the amount allow-
able under section 25E.
* * * * *
(i) Applicability dates—(1) In general.
Except as provided in paragraph (i)(2) of
this section, this section applies to previ-
ously-owned clean vehicles placed in ser-
vice after December 31, 2022, in taxable
years ending after October 10, 2023.
(2) Paragraph (b)(3) of this section.
Paragraph (b)(3) of this section applies to
taxable years ending after [date of publi-
cation of the final regulations in the Fed-
eral Register].
Par. 3. Section 1.30D-2 is amended by
revising paragraphs (b)(28)(ii) and (d) to
read as follows:
§1.30D-2 Definitions for purposes of
section 30D.
* * * * *
(b) * * *
(28) * * *
(ii) Modification of a new motor vehi-
cle. If a manufacturer modifies a new
motor vehicle (as defined in 42 U.S.C.
7550(3)) that does not satisfy the require-
ments of section 30D(d)(1)(F) or (6) so
that the new motor vehicle, after modi-
fication, does satisfy such requirements,
then such manufacturer may satisfy the
requirements of section 30D(d)(3) if the
modification occurred prior to the new
motor vehicle being placed in service.
* * * * *
(d) Applicability dates—(1) In general.
Except as provided in paragraph (d)(2) of
this section, this section applies to taxable
years ending after December 4, 2023.
(2) Paragraph (b)(28)(ii) of this sec-
tion. Paragraph (b)(28)(ii) of this section
applies to taxable years ending after [date
of publication of the final regulations in
the Federal Register].
Par. 4. Sections 1.45W-0 through
1.45W-5 are added to read as follows:
Sec.
* * * * *
1.45W-0 Table of contents.
1.45W-1 Credit for qualified commer-
cial clean vehicles; definitions.
1.45W-2 Amount of section 45W
credit; incremental cost.
1.45W-3 Qualified commercial clean
vehicle.
1.45W-4 Special rules.
1.45W-5 Reporting requirements.
* * * * *
§1.45W-0 Table of contents.
This section lists the captions contained
in §§1.45W-1 through 1.45W-5.

February 3, 2025 748 Bulletin No. 2025–6
§1.45W-1 Credit for qualified
commercial clean vehicles; definitions.
(a) In general.
(b) Definitions.
(1) Battery.
(2) Battery electric vehicle or BEV.
(3) Fuel cell electric vehicle of FCEV.
(4) Gross Vehicle Weight Rating or
GVWR.
(5) Manufacturer.
(6) Placed in service.
(7) Plug-in hybrid electric vehicle or
PHEV.
(8) Plug-in hybrid fuel cell electric
vehicle or PHFCEV.
(9) Qualified commercial clean vehi-
cle.
(10) Qualified manufacturer.
(11) Secretary.
(12) Section 45W regulations.
(13) Statutory references.
(i) Chapter 1.
(ii) Code.
(iii) Subtitle A.
(c) Applicability date.
§1.45W-2 Amount of section 45W
credit; incremental cost.
(a) Per vehicle amount.
(b) Incremental cost.
(1) In general.
(2) Manufacturer’s cost.
(3) Retail price equivalent.
(i) In general.
(ii) Retail price.
(iii) Retail delivered price.
(iv) Safe harbor.
(4) Comparable vehicle.
(i) In general.
(ii) Gasoline- or diesel-powered vehi-
cle by same manufacturer.
(iii) Vehicle comparable in size and use.
(iv) Example.
(A) Facts.
(B) Analysis.
(c) Incremental cost equations and cal-
culations.
(1) ICE powertrain cost.
(2) Battery electric vehicles.
(3) Plug-in hybrid electric vehicles.
(4) Fuel cell electric vehicles.
(5) Plug-in hybrid fuel cell electric
vehicles.
(6) Incremental cost determined exclu-
sive of auxiliary power units.
(7) Incremental cost determine inclu-
sive of additional batteries, fuel cells, or
hydrogen storage.
(8) Negative incremental cost treated
as zero.
(9) Incremental cost if no comparable
vehicle exists.
(10) Taxpayer reliance on qualified
manufacturer’s incremental cost determi-
nation.
(11) Safe harbor.
(d) Definitions.
(1) Battery.
(2) Electric traction drive system and
components.
(3) Electrical accessories.
(4) Engine and engine components.
(5) Fuel cell.
(6) Hydrogen storage.
(7) Hydrogen storage cost.
(8) Mechanical accessories.
(9) Transmission.
(e) Examples.
(1) Example 1.
(i) Facts.
(ii) Analysis.
(2) Example 2.
(i) Facts.
(ii) Analysis.
(3) Example 3.
(i) Facts.
(ii) Analysis.
(f) Incremental cost of qualified com-
mercial clean vehicle previously placed in
service by another person or entity.
(1) In general.
(2) Age of a qualified commercial clean
vehicle previously placed in service by
another person or entity.
(3) Residual value factor.
(4) Example.
(i) Facts.
(ii) Analysis.
(g) Applicability date.
§1.45W-3 Qualified commercial clean
vehicle.
(a) In general.
(b) Acquired for use or lease and not
for resale by the taxpayer.
(1) In general.
(2) Recharacterization of lease.
(c) Type of vehicle.
(1) In general.
(2) On-road vehicle.
(3) Mobile machinery.
(d) Electric motor and battery require-
ments.
(1) In general.
(2) Battery capable of being recharged
from an external source of electricity.
(e) Applicability date.
§1.45W-4 Special rules.
(a) No double benefit.
(1) Previous allowance of section 45W
or 30D credit.
(2) Allowance of other deduction or
credit.
(b) Credit ineligibility resulting from
certain transactions and uses.
(1) In general.
(2) Cancelled sale.
(3) Vehicle return.
(4) Resale.
(5) Less than 100 percent trade or busi-
ness use in taxable year vehicle is placed
in service.
(c) Recapture.
(1) In general.
(2) Recapture in the case of less than 10
percent trade or business use.
(i) In general.
(ii) Applicability to vehicles placed in
service by a tax-exempt entity.
(d) Elective payment elections.
(e) Leases.
(f) Applicability date.
§1.45W-5 Reporting requirements.
(a) Requirement to file return.
(b) Credit may generally be claimed on
only one tax return.
(1) In general.
(2) Grantor trusts.
(3) Partnerships and S corporations.
(c) Taxpayer reliance on manufacturer
certifications and periodic written reports
to the IRS.
(d) Applicability date.
§1.45W-1 Credit for qualified
commercial clean vehicles; definitions.
(a) In general. The section 45W reg-
ulations (defined in paragraph (b)(12) of
this section) apply for purposes of deter-
mining the availability and amount of any
credit under section 45W of the Internal
Revenue Code (Code) with respect to a
qualified commercial clean vehicle placed

Bulletin No. 2025–6 749 February 3, 2025
in service by a taxpayer during such tax-
payer’s taxable year (section 45W credit).
Paragraph (b) of this section provides defi-
nitions of terms for purposes of applying
section 45W and the section 45W regula-
tions. Section 1.45W-2 provides rules for
determining the per-vehicle credit amount
under section 45W(b). Section 1.45W-3
provides rules related to the definition
of qualified commercial clean vehicle
under section 45W(c). Section 1.45W-4
provides special rules related to section
45W(d). Section 1.45W-5 provides report-
ing requirements for purposes of section
45W.
(b) Definitions. The following defini-
tions apply for purposes of section 45W
and the section 45W regulations. For defi-
nitions specific to incremental cost calcu-
lations, see §1.45W-2(d).
(1) Battery. Battery means a collection
of one or more battery modules, each of
which has two or more battery cells, elec-
trically configured in series or parallel, to
create voltage or current. The term battery
does not include items such as thermal
management systems or other parts of a
battery cell or module that do not directly
contribute to the electrochemical storage
of energy within the battery, such as bat-
tery cell cases, cans, or pouches.
(2) Battery electric vehicle or BEV.
Battery electric vehicle or BEV means a
vehicle propelled solely by an electric
motor that draws electricity from batteries
capable of being recharged from an exter-
nal source of electricity.
(3) Fuel cell electric vehicle or FCEV.
Fuel cell electric vehicle or FCEV means
a vehicle—
(i) That is propelled by power derived
from one or more cells that convert chemi-
cal energy directly into electricity by com-
bining oxygen with hydrogen fuel that is
stored on board the vehicle in any form
and may or may not require reformation
prior to use; and
(ii) That, in the case of a light-duty
vehicle (that is, a passenger automobile
or light truck), has received on or after
August 8, 2005 (the date of the enactment
of section 30B of the Code), a certificate
indicating that such vehicle meets or
exceeds the Bin 5 Tier II emission level
established in regulations in 40 CFR chap-
ter I prescribed by the Administrator of the
Environmental Protection Agency (EPA)
under section 202(i) of the Clean Air Act
(CAA) (42 U.S.C. 7521(i)) for that make
and model year vehicle.
(4) Gross vehicle weight rating or
GVWR. Gross vehicle weight rating or
GVWR has the meaning provided in 40
CFR 86.082-2 and 49 CFR 571.3(b).
(5) Manufacturer—(i) In general. Man-
ufacturer means any manufacturer within
the meaning of the regulations in 40 CFR
chapter I prescribed by the Administrator
of the EPA for purposes of the adminis-
tration of title II of the CAA (42 U.S.C.
7521 et seq.) and as defined in 42 U.S.C.
7550(1). If multiple manufacturers are
involved in the production of a vehicle,
the requirements of section 30D(d)(3)
must be met by the manufacturer that sat-
isfies the reporting requirements of the
greenhouse gas emissions standards set by
the EPA under the CAA (42 U.S.C. 7521
et seq.) for the subject vehicle.
(ii) Modification of a new motor vehicle.
If a manufacturer modifies a new motor
vehicle (as defined in 42 U.S.C. 7550(3))
that does not satisfy the requirements of
section 45W(c)(3) so that the vehicle, after
modification, does satisfy such require-
ments, then such manufacturer may satisfy
the requirements of section 30D(d)(3) of
the Code and §1.30D-2(b)(28)(i) for pur-
poses of paragraph (b)(5)(i) of this section
if the modification occurs prior to the vehi-
cle being placed in service.
(6) Placed in service. A qualified com-
mercial clean vehicle is considered to be
placed in service on the date the taxpayer
takes possession of the vehicle.
(7) Plug-in hybrid electric vehicle or
PHEV. Plug-in hybrid electric vehicle or
PHEV means a vehicle that uses batteries
that can be recharged from an external
source of electricity to power an electric
motor that propels the vehicle to a signifi-
cant extent, and another fuel, such as gas-
oline or diesel, to power an internal com-
bustion engine or other propulsion source.
(8) Plug-in hybrid fuel cell electric
vehicle or PHFCEV. Plug-in hybrid fuel
cell electric vehicle or PHFCEV means
a vehicle that uses batteries that can be
recharged from an external source of
electricity to power an electric motor that
propels the vehicle to a significant extent
and a hydrogen fuel source that powers an
electric motor through the fuel cell sys-
tem.
(9) Qualified commercial clean vehicle.
Qualified commercial clean vehicle means
a vehicle that meets the requirements of
section 45W(c) and §1.45W-3(b) through
(d). Vehicles that may qualify as qualified
commercial clean vehicles include BEVs,
FCEVs, PHEVs, and PHFCEVs. A vehi-
cle does not meet the requirements of sec-
tion 45W(c) if—
(i) The qualified manufacturer fails to
provide a periodic written report for such
vehicle prior to the vehicle being placed
in service by the taxpayer claiming the
credit that reports the vehicle identifica-
tion number of such vehicle and certifies
compliance with the requirements of sec-
tion 45W(c);
(ii) The qualified manufacturer pro-
vides incorrect information with respect
to the periodic written report for such
vehicle; or
(iii) The qualified manufacturer fails
to update its periodic written report in the
event of a material change with respect to
such vehicle.
(10) Qualified manufacturer. Quali-
fied manufacturer means a manufacturer
that meets the requirements described in
section 30D(d)(3) at the time the manu-
facturer submits a periodic written report
to the Internal Revenue Service (IRS)
under a written agreement described in
section 30D(d)(3). The term qualified
manufacturer does not include any man-
ufacturer whose qualified manufacturer
status has been terminated by the IRS.
The IRS may terminate qualified manu-
facturer status for fraud, intentional dis-
regard, or gross negligence with respect
to any requirements of section 45W, the
section 45W regulations, or any guid-
ance under section 45W, including with
respect to the periodic written reports
described in section 30D(d)(3) and this
paragraph (b)(10). The IRS may also
terminate qualified manufacturer status
for fraud, intentional disregard, or gross
negligence with respect to any require-
ment of section 25E or 30D or any regu-
lations in this chapter or guidance there-
under.
(11) Secretary. Secretary has the mean-
ing provided in section 7701(a)(11)(B) of
the Code.
(12) Section 45W regulations. Section
45W regulations means this section and
§§1.45W-2 through 1.45W-5.

February 3, 2025 750 Bulletin No. 2025–6
(13) Statutory references—(i) Chapter
1. Chapter 1 means chapter 1 of the Code.
(ii) Code. Code means the Internal
Revenue Code.
(iii) Subtitle A. Subtitle A means subti-
tle A of the Code.
(c) Applicability date. This section
applies to qualified commercial clean
vehicles placed in service in taxable years
ending after [date of publication of the
final regulations in the Federal Register].
§1.45W-2 Amount of section 45W
credit; incremental cost.
(a) Per-vehicle credit amount. Subject
to the limitation in section 45W(b)(4) of
the Code, the per-vehicle credit amount
under section 45W(b)(1) with respect to
any qualified commercial clean vehicle
is the lesser of 15 percent of the basis of
such vehicle (or 30 percent in the case of a
vehicle not powered by a gasoline or die-
sel internal combustion engine (ICE)), or
the incremental cost of such vehicle.
(b) Incremental cost—(1) In general.
For purposes of section 45W(b)(2), the
incremental cost of any qualified commer-
cial clean vehicle is determined using the
incremental cost calculations and equa-
tions in paragraph (c) of this section to
determine the amount equal to the excess
of—
(i) The product of the qualified manu-
facturer’s cost of components necessary
for the BEV powertrain, FCEV power-
train, PHEV powertrain, or PHFCEV
powertrain used in the vehicle and the
retail price equivalent (RPE) of such vehi-
cle; minus
(ii) The product of the manufactur-
er’s cost of components necessary for the
powertrain of a comparable vehicle pow-
ered solely by a gasoline or diesel ICE and
the RPE of such comparable vehicle.
(2) Manufacturer’s cost. For purposes
of this section, a manufacturer’s cost
includes only its direct manufacturing
costs, which may include, but are not lim-
ited to, the costs of materials and labor.
(3) Retail price equivalent—(i) In gen-
eral. The RPE is the ratio of the manu-
facturer’s suggested retail price (MSRP)
of a vehicle to the manufacturer’s cost to
manufacture such vehicle. The MSRP is
the sum of the retail price and the retail
delivered price.
(ii) Retail price. For purposes of para-
graph (b)(3)(i) of this section, retail price
is the retail price of the vehicle suggested
by the manufacturer as described in 15
U.S.C. 1232(f)(1).
(iii) Retail delivered price. Retail deliv-
ered price, for purposes of paragraph (b)
(3)(i) of this section, is the retail delivered
price suggested by the manufacturer for
each accessory or item of optional equip-
ment physically attached to such vehicle at
the time of its delivery to the dealer that is
not included within the price of such vehi-
cle as stated pursuant to 15 U.S.C. 1232(f)
(1), as described in 15 U.S.C. 1232(f)(2).
(iv) Safe harbor. The Secretary may
publish guidance in the Internal Revenue
Bulletin (see §601.601 of this chapter) no
more frequently than annually that will
provide RPE safe harbors for different
segments of the vehicle market. Any tax-
payer that uses an RPE provided in safe
harbor guidance published in the Internal
Revenue Bulletin (see §601.601 of this
chapter) to determine the cost of a BEV,
PHEV, FCEV, PHFCEV, or ICE power-
train will be deemed to have satisfied the
requirements of this paragraph (b)(3),
provided all requirements specified in the
applicable RPE safe harbor guidance have
been met. No formal election is required
for a taxpayer to use a safe harbor RPE.
(4) Comparable vehicle—(i) In gen-
eral. A comparable vehicle is any vehi-
cle that is powered solely by a gasoline
or diesel ICE and is comparable in size
and use to the qualified commercial clean
vehicle. Except as provided in paragraph
(b)(4)(ii) of this section, the manufacturer
of the comparable vehicle need not be the
manufacturer of the qualified commercial
clean vehicle.
(ii) Gasoline- or diesel-powered vehi-
cle by same manufacturer. If the qualified
manufacturer of a qualified commercial
clean vehicle also manufactures a solely
gasoline- or diesel-powered ICE version
of such vehicle, meaning a vehicle of the
same model, produced in the same model
year, and with features substantially sim-
ilar to those of the qualified commercial
clean vehicle, such solely gasoline- or die-
sel-powered vehicle is the only compara-
ble vehicle with respect to such qualified
commercial clean vehicle.
(iii) Vehicle comparable in size and
use. A vehicle is comparable to a qualified
commercial clean vehicle in size and use
if, as relevant to the particular qualified
commercial clean vehicle, it has substan-
tially similar features, such as GVWR,
number of doors, towing capacity, pas-
senger capacity, cargo capacity, mounted
equipment, drivetrain type, overall width,
height and ground clearance, and trim
level.
(iv) Example: Comparable vehicle—
(A) Facts. A passenger car with a BEV
powertrain (BEV X) that is a qualified
commercial clean vehicle has a GVWR of
4,800 pounds, four doors, five-passenger
seating capacity, a mid-range trim level,
and a 250-horsepower powertrain. A pas-
senger car with an ICE powertrain (ICE
Car 1) has a GVWR of 4,500 pounds, four
doors, five-passenger seating capacity,
a mid-range trim level, and a 200-horse-
power powertrain. A second passenger
car with an ICE powertrain (ICE Car 2)
has a GVWR of 4,500 pounds, two doors,
two-passenger seating capacity, a high-
end trim level, and a 250-horsepower
powertrain.
(B) Analysis. ICE Car 1 is comparable
to BEV X because ICE Car 1 and BEV X
have substantially similar GVWRs (4,800
pounds compared to 4,500 pounds), num-
bers of doors (4), passenger capacity (5),
and trim levels (mid-range). The fact that
ICE Car 1 and BEV X have dissimilar
horsepower is not determinative because
whether two vehicles are comparable
vehicles under the rules of paragraph (b)
(4) of this section is not entirely dependent
on the performance characteristics of the
powertrains. ICE Car 2 and BEV X, which
have different numbers of doors (4 com-
pared to 2), passenger capacities (5 com-
pared to 2), and trim levels (mid-range
compared to high-end), are not compara-
ble. Therefore, ICE Car 1 is a compara-
ble vehicle for purposes of calculating the
incremental cost of BEV X, but ICE Car
2 is not.
(c) Incremental cost equations and cal-
culations. The incremental cost equations
and calculations set forth in this paragraph
(c) apply to determine the incremental
cost of a qualified commercial clean vehi-
cle for purposes of section 45W(b)(2) and
this section.
(1) ICE powertrain cost. For purposes
of the equations and calculations in this
paragraph (c), the ICE powertrain cost is

Bulletin No. 2025–6 751 February 3, 2025
the sum of the cost of the engine, the ICE
transmission, and the mechanical accesso-
ries.
(2) Battery electric vehicles. In the
case of a BEV, the incremental cost of
the BEV is the product of the manufac-
turer’s cost of the BEV powertrain and
the RPE of such vehicle, less the prod-
uct of the manufacturer’s cost of the
comparable vehicle ICE powertrain and
the RPE of such vehicle. The BEV pow-
ertrain cost is the sum of the cost of the
electric traction drive system (which, for
purposes of equation 1 to this paragraph
(c)(2), includes the BEV transmission),
the battery, and the electrical accessories.
Expressed formulaically, the rule is as
follows:
Equation 1 to Paragraph (c)(2)
Incremental cost of BEV = (BEV powertrain cost × RPE) – (ICE powertrain cost × RPE)
(3) Plug-in hybrid electric vehicles. In
the case of a PHEV, the incremental cost of
the PHEV is the product of the manufac-
turer’s cost of the PHEV powertrain and
the RPE of such vehicle, less the product
of the manufacturer’s cost of the compara-
ble vehicle ICE powertrain and the RPE of
such vehicle. The PHEV powertrain cost
is the sum of the cost of the engine, the
electric traction drive system (which, for
purposes of equation 2 to this paragraph
(c)(3), includes the PHEV transmission),
the battery, and the electrical accessories.
Expressed formulaically, the rule is as fol-
lows:
Equation 2 to Paragraph (c)(3)
Incremental cost of PHEV = (PHEV powertrain cost × RPE) - (ICE powertrain cost × RPE)
(4) Fuel cell electric vehicles. In the
case of a FCEV, the incremental cost of
the FCEV is the product of the manufac-
turer’s cost of the FCEV powertrain and
the RPE of such vehicle, less the product
of the manufacturer’s cost of the compara-
ble vehicle ICE powertrain and the RPE of
such vehicle. The FCEV powertrain cost is
the sum of the cost of the fuel cell system,
the hydrogen storage, the electric traction
drive system (which, for purposes of equa-
tion 3 to this paragraph (c)(4), includes the
FCEV transmission), the battery, and the
electrical accessories. Expressed formula-
ically, the rule is as follows:
Equation 3 to Paragraph (c)(4)
Incremental cost of FCEV = (FCEV powertrain cost × RPE) - (ICE powertrain cost × RPE)
(5) Plug-in hybrid fuel cell electric
vehicles. In the case of a PHFCEV, the
incremental cost of the PHFCEV is the
product of the manufacturer’s cost of
the PHFCEV powertrain and the RPE
of such vehicle, less the product of the
manufacturer’s cost of the comparable
vehicle ICE powertrain and the RPE of
such vehicle. The PHFCEV powertrain
cost is the sum of the cost of the fuel cell
system, the hydrogen storage, the electric
traction drive system (which, for pur-
poses of equation 4 to this paragraph (c)
(5), includes the PHFCEV transmission),
the battery, and the electrical accessories.
Expressed formulaically, the rule is as
follows:
Equation 4 to Paragraph (c)(5)
Incremental cost of PHFCEV = (PHFCEV powertrain cost × RPE) - (ICE powertrain cost × RPE)
(6) Incremental cost determined exclu-
sive of auxiliary power units. The incre-
mental cost of a qualified commercial
clean vehicle is determined without regard
to any auxiliary power unit installed on
such vehicle or on a comparable vehicle.
(7) Incremental cost determined inclu-
sive of additional batteries, fuel cells, or
hydrogen storage. The incremental cost
of a qualified commercial clean vehi-
cle is determined by adding to the cost
of the BEV, FCEV, PHEV, or PHFCEV
powertrain the cost of additional batter-
ies installed on such vehicle, regardless
of whether such additional batteries are
required by a power takeoff, as well as
additional fuel cells or additional hydro-
gen storage installed on such vehicle,
regardless of whether such additional fuel
cells are required by a power takeoff.
(8) Negative incremental cost treated
as zero. If the incremental cost calcula-
tion results in a negative number, meaning
that the cost of the BEV, FCEV, PHEV, or
PHFCEV powertrain used in the qualified
commercial clean vehicle is less than the
cost of the ICE powertrain of a compara-
ble vehicle, then the incremental cost of
the qualified commercial vehicle is zero.
This paragraph (c)(8) does not affect the
availability of the safe harbor described in
paragraph (c)(11) of this section.
(9) Incremental cost if no comparable
vehicle exists. If a taxpayer or manufac-
turer cannot identify a comparable vehi-
cle with respect to a particular qualified
commercial clean vehicle, then the incre-
mental cost of such qualified commercial
clean vehicle is zero. This paragraph (c)

February 3, 2025 752 Bulletin No. 2025–6
(9) does not affect the availability of the
safe harbor described in paragraph (c)(11)
of this section.
(10) Taxpayer reliance on qualified
manufacturer’s incremental cost determi-
nation. If a qualified manufacturer pro-
vides a taxpayer with written documenta-
tion of the incremental cost of a qualified
commercial clean vehicle that identifies
the comparable vehicle such manufacturer
used for the incremental cost calculation
and the taxpayer keeps such incremen-
tal cost documentation in the taxpayer’s
records for as long as the period of lim-
itations for the taxable period in which the
credit was claimed is open, the taxpayer
may rely on such incremental cost for pur-
poses of calculating the amount of the sec-
tion 45W credit (defined in §1.45W-1(a))
with respect to such vehicle. See §1.45W-
1(b)(9) for consequences of qualified
manufacturer fraud, intentional disregard,
or gross negligence with respect to any
requirements of section 45W, the section
45W regulations (defined in §1.45W-1(b)
(12)), or any guidance issued by the Sec-
retary under section 45W.
(11) Safe harbor. The Secretary may
publish guidance in the Internal Revenue
Bulletin (see §601.601 of this chapter) no
more frequently than annually that will
provide incremental cost safe harbors for
different types and classes of qualified
commercial clean vehicles placed in ser-
vice during a specified period. Any tax-
payer that uses an incremental cost safe
harbor provided in guidance published
in the Internal Revenue Bulletin (see
§601.601 of this chapter) will be deemed
to have satisfied the requirements of sec-
tion 45W(b)(1)(B) and (2) and paragraphs
(b) and (c) of this section, provided all
requirements specified in the applicable
safe harbor guidance have been met. No
formal election is required for a taxpayer
to use an incremental cost safe harbor.
(d) Definitions. This paragraph (d) pro-
vides definitions related to the incremen-
tal cost rules in section 45W(b)(1)(B) and
paragraphs (b) and (c) of this section.
(1) Battery. Battery has the meaning
provided in §1.45W-1(b)(1).
(2) Electric traction drive system and
components—(i) Electric traction drive
system. Electric traction drive system
means a system used to provide vehicle
propulsion in BEVs, FCEVs, PHEVs,
and PHFCEVs by delivering torque to
the wheels and axle of the vehicle, and
includes, but is not limited to, an electric
motor, an inverter, and a transmission.
(ii) Electric motor. Electric motor
means the component that includes the
stator, rotor, shaft, housing, bearings, and
lubrication elements. Multiple electric
motors may be used in a vehicle.
(iii) Inverter. Inverter means a com-
ponent that converts direct current (DC)
from the battery into alternating current
(AC) to power the electric motor, provid-
ing precise control over motor operations.
(iv) BEV, FCEV, PHEV, and PHFCEV
transmission. For the definition of trans-
mission for BEVs, FCEVs, PHEVs, and
PHFCEVs, see paragraph (d)(9)(i) of this
section.
(3) Electrical accessories—(i) In
general. Electrical accessories means
accessories that support, but do not
independently facilitate, the function of
essential vehicle systems, and include,
but are not limited to, battery enclosures,
a compressor, an electric steering pump,
high voltage cables and connections, ther-
mal management systems, and a vacuum
pump.
(ii) Battery enclosures. Battery enclo-
sures means components that consist of
battery cases, cans or pouches, or casings
or packaging used to enclose and protect
battery cells and modules into a pack.
(iii) Compressor. Compressor means
a component that powers the air condi-
tioning system, ensuring effective climate
control within the vehicle.
(iv) Electric steering pump. Electric
steering pump means a component that
provides hydraulic assistance for the
steering mechanism, enhancing ease of
steering and vehicle maneuverability.
(v) High voltage cables and connec-
tions. High voltage cables and connec-
tions means components that include all
high voltage cables, connections to elec-
tric drive units, cables from the onboard
charger, DC-DC converter, air compres-
sors, and the charging cable from the
charging port to the onboard charger.
(vi) Thermal management systems.
Thermal management systems means
components that manage heating and
cooling loads to ensure the efficient oper-
ation of the battery and electric traction
drive system.
(vii) Vacuum pump. Vacuum pump
means a component that is essential for
various vehicle systems that require vac-
uum assistance, contributing to overall
system functionality.
(4) Engine and engine components—
(i) Engine. The engine generates power
by burning fuel with air inside the engine.
The engine includes, but is not limited to,
air intake and cooling systems, assembly
accessories, core engine components,
engine management sensors and electron-
ics, exhaust gas regulator and breather sys-
tems, fuel systems, induction air charging
and fuel induction systems, power dis-
tribution and sensing for after-treatment,
primary exhaust and after-treatment mod-
ules, and a valve train.
(ii) Air intake and cooling systems. Air
intake and cooling systems means com-
ponents that ensure adequate airflow for
combustion and regulate engine tempera-
ture through the use of pumps, pipes, and
cooling fans.
(iii) Assembly accessories. Assembly
accessories means auxiliary components
that are necessary for the assembly and
integration of the powertrain system.
(iv) Core engine components. Core
engine components means components that
include the engine cylinder head, crank-
shaft, and cylinder block, which form the
fundamental structure of the engine, facil-
itating combustion and power generation.
(v) Engine management sensors and
electronics. Engine management sensors
and electronics means control units and
sensors that monitor and adjust engine
parameters to maximize engine perfor-
mance and minimize emissions.
(vi) Exhaust gas regulator and
breather systems. Exhaust gas regulator
and breather systems means components
that control the release of exhaust gases
and maintain proper ventilation of the
engine crankcase.
(vii) Fuel system. Fuel system means
components that encompass fuel storage,
distribution, and evaporative control com-
ponents, ensuring proper fuel delivery and
reducing emissions.
(viii) Induction air charging and fuel
induction systems. Induction air charging
and fuel induction systems means com-
ponents that regulate the intake of air and
fuel into the combustion chambers, ensur-
ing efficient mixing and combustion.

Bulletin No. 2025–6 753 February 3, 2025
(ix) Power distribution and sensing for
after-treatment. Power distribution and
sensing for after-treatment means sensors
and distribution mechanisms that man-
age the after-treatment process, ensuring
effective emission control.
(x) Primary exhaust and after-treat-
ment modules. Primary exhaust and
after-treatment modules means compo-
nents that handle the initial expulsion of
exhaust gases and subsequent treatment to
meet emission standards.
(xi) Valve train. Valve train means
a component that manages the timing
and operation of the engine’s intake and
exhaust valves, optimizing airflow and
exhaust processes.
(5) Fuel cell. Fuel cell means one or
more cells in a stack that convert chemical
energy directly into electricity by combin-
ing oxygen with hydrogen fuel that is stored
on board the vehicle in any form and may
or may not require reformation prior to use.
The fuel cell system includes the stack as
well as auxiliary components that include
but are not limited to pumps, sensors, heat
exchangers, gaskets, compressors, recircu-
lation blowers, or humidifiers.
(6) Hydrogen storage. Hydrogen stor-
age means storage of hydrogen on board
the vehicle in high-pressure tanks as a gas
or liquid.
(7) Hydrogen storage cost. Hydrogen
storage cost includes the cost of the tank
and the components that manage the flow
of hydrogen from the tank to the fuel cell
system (that is, hydrogen supply and reg-
ulation).
(8) Mechanical accessories—(i) In
general. Mechanical accessories are
accessories that support, but do not inde-
pendently facilitate, the function of essen-
tial vehicle systems, and include, but are
not limited to, a compressor, a mechanical
steering pump, and a water pump.
(ii) Compressor. Compressor means
a component that powers the air condi-
tioning system, ensuring effective climate
control within the vehicle.
(iii) Mechanical steering pump.
Mechanical steering pump means a com-
ponent that provides hydraulic assistance
to the steering mechanism, reducing the
effort required by the driver to turn the
steering wheel.
(iv) Water pump. Water pump means
a component that circulates coolant
throughout the engine to maintain optimal
operating temperatures and prevent over-
heating.
(9) Transmission—(i) BEVs, FCEVs,
PHEVs and PHFCEVs. For BEVs,
FCEVs, PHEVs, and PHFCEVs, transmis-
sion means a mechanical device that uses
a gear set—two or more gears working
together—to change the speed or direction
of rotation in a machine. For BEVs and
FCEVs (electric vehicles), transmission
means a component that consists of a sin-
gle- or multi-speed, single- or multi-reduc-
tion gearbox that transfers power from the
electric machine to the wheels. For PHEVs
and PHFCEVs (plug-in hybrid vehicles),
transmission components will depend on
the vehicle driveline and orientation of the
hybrid system (i.e., parallel or series) and
may include, but are not limited to:
(A) Two transmissions (one ICE trans-
mission and one electric vehicle transmis-
sion);
(B) One transmission with some com-
ponents of both ICE and EV transmis-
sions; and
(C) One electric vehicle transmission
only.
(ii) ICE vehicles—(A) In general.
For ICE vehicles, transmission means
a mechanical device that uses a gear
set (that is, two or more gears working
together) to change the speed or direction
of rotation in a machine. For ICE vehicles,
a transmission may include, but is not lim-
ited to, a case, a drivetrain and geartrain,
an internal clutch and torque converter, a
lubrication system, a mechanical controls
and electronic distribution system, a park-
brake mechanism, and a transmission
cooling system.
(B) Case, drivetrain, and geartrain.
Case, drivetrain, and geartrain means
the mechanical components within the
transmission that transfer power from the
engine to the wheels, including gears and
shafts.
(C) Internal clutch and torque con-
verter. Internal clutch and torque con-
verter means components that facilitate
smooth power transfer and gear changes,
enhancing drivability.
(D) Lubrication system. Lubrication
system means components that ensure all
moving parts within the transmission are
adequately lubricated, reducing friction
and wear.
(E) Mechanical controls and electronic
distribution system. Mechanical controls
and electronic distribution system means
components that manage the operation of
the transmission, including gear selection
and shifting through both mechanical and
electronic means.
(F) Park-brake mechanism. Park-
brake mechanism means a component
that ensures the vehicle remains stationary
when parked.
(G) Transmission cooling system.
Transmission cooling system means com-
ponents that prevent overheating of the
transmission components, ensuring reli-
able performance under various operating
conditions.
(e) Examples—(1) Example 1: Incremental cost
calculation for a qualified commercial clean vehi-
cle—(i) Facts. Manufacturer is the qualified manu-
facturer of a model year 2024 battery electric sport
utility vehicle (BEV SUV). The BEV SUV is a
qualified commercial clean vehicle with a GVWR of
4,600 pounds. Manufacturer is also the manufacturer
of a gasoline-powered ICE SUV (ICE SUV) that,
except for the powertrain, is identical to the BEV
SUV. Manufacturer’s costs of the BEV SUV pow-
ertrain components are: electric traction drive sys-
tem ($1,881.00), battery ($12,060.00), and electrical
accessories ($1,437.00). The RPE of the BEV SUV
is 1.49. Manufacturer’s costs of the ICE SUV pow-
ertrain components are: engine ($5,757.00), trans-
mission ($1,744.00), and mechanical accessories
($415.00). The RPE of the ICE SUV is 1.52. In 2025,
Taxpayer purchases the BEV SUV for $50,000 and
places the vehicle in service. At the time of Taxpay-
er’s purchase, Manufacturer provides Taxpayer with
a written disclosure of Manufacturer’s incremental
cost calculation, which Manufacturer calculated as
described in paragraphs (b) and (c) of this section.
(ii) Analysis—(A) Calculation of incremental
cost. Under paragraph (b)(1) of this section, the
incremental cost of the BEV SUV is the product of
Manufacturer’s cost of the BEV SUV powertrain and
the RPE of such vehicle, less the product of Manu-
facturer’s cost of the comparable vehicle ICE power-
train and the RPE of such vehicle.
(1) Step 1. Under paragraph (c)(2) of this section,
the BEV SUV powertrain cost is the sum of the cost
of the electric traction drive system ($1,881.00), the
battery ($12,060.00), and the electrical accessories
($1,437.00), multiplied by the RPE of the vehicle
(1.49), or $22,913.22.
(2) Step 2. Under paragraph (b)(4) of this sec-
tion, the ICE SUV is the comparable vehicle with
respect to the BEV SUV. Under paragraph (c)(1) of
this section, the ICE SUV powertrain cost is the sum
of the cost of the engine ($5,757.00), the ICE trans-
mission ($1,744.00), and the mechanical accesso-
ries ($415.00), multiplied by the RPE of the vehicle
(1.52), or $12,032.32.
(3) Step 3. Under paragraph (c)(2) of this section,
the incremental cost of the BEV SUV is determined
by subtracting the cost of the ICE SUV powertrain in
step 2 ($12,032.32) from the cost of the BEV SUV

February 3, 2025 754 Bulletin No. 2025–6
powertrain in step 1 ($22,913.22), or $10,880.90
($22,913.22 - $12,032.32 = $10,880.90).
(B) Determination of credit amount. Under para-
graph (c)(10) of this section, Taxpayer may rely on
Manufacturer’s incremental cost calculation, which
is described in paragraphs (b) and (c) of this sec-
tion, for purposes of determining the amount of the
section 45W credit allowable for the BEV SUV.
Subject to the limitation in section 45W(b)(4), the
credit amount is the lesser of 30 percent of Taxpay-
er’s basis in the BEV SUV ($50,000.00 × 30% =
$15,000.00) or the incremental cost of the BEV SUV
($10,880.90). Under section 45W(b)(4), the taxpay-
er’s credit is limited to a maximum of $7,500.00
because the vehicle has a GVWR of less than 14,000
pounds. Therefore, the allowable section 45W credit
with respect to the BEV SUV is $7,500.00.
(2) Example 2: Section 45W credit equal to 30
percent of Taxpayer’s basis in a qualified commer-
cial clean vehicle—(i) Facts. The facts are the same
as in paragraph (e)(1) of this section (Example 1),
except that Taxpayer purchases the BEV SUV for
$21,600.00 and the incremental cost calculated by
Manufacturer and provided in writing to Taxpayer is
$7,000.00.
(ii) Analysis. Under paragraph (c)(10) of this
section, Taxpayer may rely on Manufacturer’s
incremental cost calculation, which is described in
paragraphs (b) and (c) of this section, for purposes
of determining the amount of the section 45W credit
allowable for the BEV SUV. Subject to the limitation
in section 45W(b)(4), the credit amount equals the
lesser of 30 percent of Taxpayer’s basis in the BEV
SUV ($21,600.00 × 30% = $6,480.00) or the incre-
mental cost of the BEV SUV ($7,000.00). Because
$6,480.00 is below the $7,500 limitation in section
45W(b)(4), the allowable section 45W credit with
respect to the BEV SUV is $6,840.00.
(3) Example 3: Incremental cost limit for a BEV
with a GVWR over 14,000 pounds—(i) Facts. Man-
ufacturer is the qualified manufacturer of a model
year 2025 battery electric bus (BEV Bus). The BEV
Bus has a GVWR of 14,500 pounds and is a qualified
commercial clean vehicle. Manufacturer is also the
manufacturer of an ICE Bus that, except for the pow-
ertrain, is substantially similar to the BEV Bus. Man-
ufacturer’s costs of the BEV Bus powertrain compo-
nents are: electric traction drive system ($4,586.00),
battery ($18,535.00), and electrical accessories
($2,150.00). The RPE of the BEV Bus is 1.49. Man-
ufacturer’s costs of the ICE Bus powertrain com-
ponents are: engine ($7,350.00), ICE transmission
($4,730.00), and mechanical accessories ($780.00).
The RPE of the ICE Bus is 1.52. In 2025, Taxpayer
purchases the BEV Bus for $105,500.00, takes pos-
session of the vehicle, and places it in service that
same year. At the time Taxpayer purchases the BEV
Bus, Manufacturer provides Taxpayer with a written
disclosure of Manufacturer’s incremental cost calcu-
lation, which Manufacturer calculated in the manner
described in paragraphs (b) and (c) of this section.
(ii) Analysis—(A) Calculation of incremental
cost. Under paragraph (c)(2) of this section, the
incremental cost of the BEV Bus is the product of
Manufacturer’s cost of the BEV Bus powertrain and
the RPE of such vehicle, less the product of Manu-
facturer’s cost of the comparable vehicle ICE power-
train and the RPE of such vehicle.
(1) Step 1. Under paragraph (c)(2) of this section,
the BEV Bus powertrain cost is the sum of the cost
of the electric traction drive system ($4,586.00), the
battery ($18,535.00), and the electrical accessories
($2,150.00) multiplied by the RPE of the vehicle
(1.49), or $37,653.79.
(2) Step 2. Under paragraph (b)(4) of this sec-
tion, the ICE Bus is the comparable vehicle with
respect to the BEV Bus. Under paragraph (c)(1) of
this section, the ICE Bus powertrain cost is the sum
of the cost of the engine ($7,350.00), the ICE trans-
mission ($4,730.00), and the mechanical accesso-
ries ($780.00) multiplied by the RPE of the vehicle
(1.52), or $19,547.20.
(3) Step 3. Under paragraph (c)(2) of this section,
the incremental cost of the BEV Bus is determined
by subtracting the cost of the ICE Bus powertrain
($19,547.20) from the cost of the BEV Bus pow-
ertrain ($37,653.79), or $18,106.59 ($37,653.79 -
$19,547.20 = $18,106.59).
(B) Determination of credit amount. Under
paragraph (c)(1) of this section, Taxpayer may rely
on Manufacturer’s incremental cost calculation,
which is described in paragraphs (b) and (c) of this
section. Subject to the limitation in section 45W(b)
(4), the credit amount is the lesser of 30 percent
of Taxpayer’s basis in the BEV Bus ($105,500 ×
30% = $31,650.00) or the incremental cost of the
BEV Bus ($18,106.59). Under section 45W(b)
(4), the section 45W credit is limited to $40,000
for the BEV Bus because it has a GVWR of more
than 14,000 pounds. Because $18,106.59 is below
the $40,000.00 limitation in section 45W(b)(4), the
allowable section 45W credit with respect to the
BEV Bus is $18,106.59.
(f) Incremental cost of qualified commercial
clean vehicle previously placed in service by
another person or entity—(1) In general. The
incremental cost of a qualified commercial clean
vehicle previously placed in service by another
person or entity is the product of the incremen-
tal cost of the qualified commercial clean vehicle
as calculated under paragraphs (b) and (c) of this
section (that is, the incremental cost of such vehi-
cle when new) and the residual value factor that
corresponds to the age of the qualified commercial
clean vehicle as determined under paragraph (f)(2)
of this section.
(2) Age of a qualified commercial clean vehi-
cle previously placed in service by another person
or entity. The age of a qualified commercial clean
vehicle previously placed in service by another per-
son or entity is determined by subtracting the model
year of the vehicle from the calendar year in which
the taxpayer places the vehicle in service. For pur-
poses of this paragraph (f)(2) and paragraph (f)(3)
of this section, a negative age (for example, a case in
which a model year vehicle is sold twice prior to the
calendar year that corresponds to that model year) is
treated as zero.
(3) Residual value factor. The residual value fac-
tor described in paragraph (f)(1) of this section appli-
cable to relevant vehicle classes, based on GVWR, is
as provided in the following tables:
Table 1 to Paragraph (f)(3)
Vehicle Class and DescriptionGVWR (lbs.)
Class 1 Passenger car<14,000
Class 1 or 2-3 Light Truck
(Van, Sport Utility Vehicle, Pickup Truck)
<14,000
Class 4-5 14,000-19,500
Class 619,500-26,000
Class 7-8 Box/Other 26,000-60,000
Class 8 Day Cab/Sleeper >33,000

Bulletin No. 2025–6 755 February 3, 2025
Table 2 to Paragraph (f)(3)
Vehicle Class /
Vehicle Age
Class 1 Passenger
Car
Class 1 or 2-3 Light
Truck
Class 4-5Class 6 BoxClass 7-8 Box/Other
Class 8 Day Cab/
Sleeper
0 years70%75%95%90%95%85%
1 year60%70%85%80%85%75%
2 years55%60%80%70%80%60%
3 years50%55%75%60%70%55%
4 years40%45%70%55%65%45%
5 years40%40%65%45%60%40%
6 years35%35%60%40%55%35%
7 years30%35%55%35%50%30%
8 years25%30%50%35%45%25%
9 years25%25%45%30%45%25%
10 years20%25%45%25%40%20%
11 years20%20%40%25%35%20%
12 years15%20%40%20%35%15%
13 years15%15%35%20%30%15%
14 or more years10%15%35%15%30%15%
(4) Example—(i) Facts. In December 2024, X
purchases and places in service a model year 2025
battery electric car (BEV car). The BEV car is a qual-
ified commercial clean vehicle and has a GVWR of
3,900 pounds and an incremental cost of $15,000. X
did not claim a section 45W credit with respect to the
BEV car. X sells the BEV car to Y in December 2025
for $40,000. Y is a fiscal year taxpayer whose taxable
year begins on October 1.
(ii) Analysis. Under paragraph (f)(2) of this section,
the BEV car is 0 years old because the model year of
the BEV car (2025) subtracted from the calendar year
Y placed the BEV car in service (2025) equals 0. Nei-
ther the calendar year in which X places the BEV car
in service nor Y’s fiscal year is relevant to determining
the age of the BEV car for purposes of paragraph (f)
(2) of this section. The applicable residual value fac-
tor under paragraph (f)(3) of this section is therefore
70%. The incremental cost of the BEV car is $10,500
($15,000 × 70%). Because the incremental cost of the
BEV car ($10,500) is less than 30% of Y’s basis in the
vehicle ($40,000 × 30% = $12,000), $10,500 is the
amount determined under section 45W(b)(1). Under
section 45W(b)(4), the allowable section 45W credit
for the BEV car is limited to $7,500 because the BEV
car has a GVWR of less than 14,000 pounds. There-
fore, Y’s allowable section 45W credit with respect to
the BEV car is $7,500.
(g) Applicability date. This section
applies to qualified commercial clean
vehicles placed in service in taxable years
ending after [date of publication of the
final regulations in the Federal Register].
§1.45W-3 Qualified commercial clean
vehicle.
(a) In general. To qualify as a qualified
commercial clean vehicle for purposes of
section 45W of the Code, a vehicle must
meet the requirements of section 45W(c)
and paragraphs (b) through (d) of this sec-
tion.
(b) Acquired for use or lease and not
for resale by the taxpayer—(1) In general.
Under section 45W(c)(1), a qualified com-
mercial clean vehicle must be acquired for
use or lease and not for resale by the tax-
payer. For purposes of section 45W(c)(1),
a taxpayer that is not a tax-exempt entity
described in section 168(h)(2)(A)(i), (ii),
or (iv) of the Code acquires a vehicle for
use or lease if the taxpayer acquires the
vehicle for use or lease in a trade or busi-
ness of the taxpayer.
(2) Recharacterization of lease. If a
lease of a qualified commercial clean vehi-
cle would be treated as a sale rather than
a lease for purposes of subtitle A, such
lease will not be respected for purposes
of section 45W(c)(1). In such case, the
lessor will be treated as having acquired
the vehicle for resale, and no credit will
be allowed to such lessor under section
45W with respect to the vehicle. To the
extent the lessor has claimed a section
45W credit (defined in §1.45W-1(a)) with
respect to such vehicle, the recapture rules
in §1.45W-4(c) apply.
(c) Type of vehicle—(1) In general.
Under section 45W(c)(2), a qualified
commercial clean vehicle must be either
an on-road vehicle, as described in section
45W(c)(2)(A) and paragraph (c)(2) of this
section, or mobile machinery, as described
in section 45W(c)(2)(B) and paragraph (c)
(3) of this section. Some vehicles, such as
a digger derrick truck, may qualify as both
an on-road vehicle and mobile machinery.
(2) On-road vehicle. An on-road vehi-
cle is a vehicle that meets the requirements
of section 30D(d)(1)(D) of the Code (that
is, the vehicle is treated as a motor vehi-
cle for purposes of title II of the Clean Air
Act), is manufactured primarily for use on
public streets, roads, and highways (not
including a vehicle operated exclusively
on a rail or rails).
(3) Mobile machinery. Mobile machin-
ery has the meaning provided in section
4053(8) of the Code.
(d) Electric motor and battery require-
ments—(1) In general. Under section
45W(c)(3), a qualified commercial clean
vehicle must be propelled to a significant
extent by an electric motor that draws elec-
tricity from a battery that has a capacity of
not less than 15 kilowatt hours (or, in the
case of a vehicle that has a gross vehicle
weight rating of less than 14,000 pounds,
7 kilowatt hours) and is capable of being
recharged from an external source of elec-
tricity, or is a motor vehicle that satisfies
the requirements under section 30B(b)(3)
(A) and (B).
(2) Battery capable of being recharged
from an external source of electricity. For

February 3, 2025 756 Bulletin No. 2025–6
purposes of section 45W(c)(3)(A), a bat-
tery is capable of being recharged from
an external source of electricity if such
source of electricity is not an integral part
of the vehicle. For example, a regenera-
tive braking system, in which the kinetic
energy generated by the motion of the
vehicle is used to recharge a battery, is not
an external source of electricity for pur-
poses of section 45W(c)(3)(A) and this
paragraph (d)(2).
(e) Applicability date. This section
applies to taxable years ending after [date
of publication of the final regulations in
the Federal Register].
§1.45W-4 Special rules.
(a) No double benefit—(1) Previ-
ous allowance of section 45W or 30D
credit. No credit is allowed under section
45W(a) of the Code (section 45W credit)
with respect to any vehicle for which
a section 45W credit or a section 30D
credit was previously allowed for such
vehicle.
(2) Allowance of other deduction or
credit. Under sections 45W(d)(1) and
30D(f)(2) of the Code, the amount of any
deduction or other credit allowable under
chapter 1 of the Code (chapter 1) for a
vehicle for which a section 45W credit is
allowable must be reduced by the amount
of the section 45W credit allowed for such
vehicle. See also §1.25E-2(b)(1).
(3) Recordkeeping for the qualified
commercial clean vehicle credit. In accor-
dance with §1.6001-1, a taxpayer claiming
a credit under section 45W must keep per-
manent books of account or records suffi-
cient to establish the amount of any such
credit required to be shown by such tax-
payer in any return of tax or information
return. Such records must be sufficient
to establish, for example, that the section
45W credit claimed is not disallowed by
paragraph (a)(1) of this section, subject to
reduction under §1.25E-2(b)(1), or, if any
such reduction is required, the amount of
such reduction.
(b) Credit ineligibility resulting from
certain transactions and uses—(1) In
general. This paragraph (b) provides rules
that apply to certain transactions involving
qualified commercial clean vehicles and
certain uses of such vehicles, including
cancelled sales, vehicle returns, resales,
or less than 100 percent use in a trade or
business.
(2) Cancelled sale. If a sale of a quali-
fied commercial clean vehicle is cancelled
before the taxpayer places the vehicle in
service, then—
(i) The taxpayer may not claim the sec-
tion 45W credit with respect to the vehi-
cle;
(ii) The vehicle may still be eligible for
the section 45W credit; and
(iii) A subsequent buyer of the vehicle
will not be required to apply the residual
value rules of §1.45W-2(f) to determine
the incremental cost of the vehicle.
(3) Vehicle return. If a taxpayer returns
a qualified commercial clean vehicle to
the seller within 30 days of placing such
vehicle in service, then—
(i) The taxpayer may not claim the sec-
tion 45W credit with respect to the vehi-
cle;
(ii) The vehicle may still be eligible for
the section 45W credit; and
(iii) A subsequent buyer of the vehi-
cle must apply the residual value rules of
§1.45W-2(f) to determine the incremental
cost of the vehicle.
(4) Resale. If a taxpayer resells a qual-
ified commercial clean vehicle within 30
days of placing the vehicle in service,
then—
(i) The taxpayer is treated as having
acquired such vehicle with the intent to
resell;
(ii) The taxpayer may not claim the
section 45W credit with respect to the
vehicle;
(iii) The vehicle may still be eligible
for the section 45W credit; and
(iv) A subsequent buyer of the vehi-
cle must apply the residual value rules of
§1.45W-2(f) to determine the incremental
cost of the vehicle.
(5) Less than 100 percent trade or busi-
ness use in taxable year vehicle is placed
in service. If a taxpayer’s trade or busi-
ness use of a qualified commercial clean
vehicle for the taxable year such vehicle
is placed in service by the taxpayer is less
than 100 percent of the taxpayer’s total
use of that vehicle for that taxable year
(other than incidental personal use, such
as a stop for lunch on the way between
two job sites), including because the vehi-
cle is sold or otherwise disposed of, the
vehicle is ineligible for the section 45W
credit. This rule also applies to a qualified
commercial clean vehicle placed in ser-
vice by a tax-exempt entity, except that
100 percent trade or business use means
the tax-exempt entity’s use that is related
to an exempt purpose or an unrelated trade
or business purpose.
(c) Recapture—(1) In general. This
paragraph (c) provides rules regarding the
recapture of the section 45W credit pursu-
ant to sections 45W(d)(1) and 30D(f)(5).
(2) Recapture in the case of less than
100 percent trade or business use—(i) In
general. Except as provided in paragraph
(c)(2)(ii) of this section, if a taxpayer
ceases to use a qualified commercial clean
vehicle for 100 percent trade or business
use (other than incidental personal use)
during the 18-month period beginning on
the date the vehicle is placed in service,
including because the vehicle is sold or
otherwise disposed of, then—
(A) The taxpayer may not claim
the section 45W credit with respect to
the vehicle. If the taxpayer has already
claimed the section 45W credit, the credit
is recaptured as a tax under chapter 1.
(B) The vehicle may still be eligible for
the section 45W credit; and
(C) A subsequent buyer must apply
the residual value rules of §1.45W-2(f)(3)
to determine the incremental cost of the
vehicle.
(ii) Applicability to vehicles placed in
service by a tax-exempt entity. For a qual-
ified commercial clean vehicle placed in
service by a tax-exempt entity, the 100
percent trade or business use rule in para-
graph (c)(2)(i) of this section applies,
except that, as provided in paragraph (b)
(5) of this section, 100 percent trade or
business use means the tax-exempt enti-
ty’s use that is related to an exempt pur-
pose or an unrelated trade or business
purpose.
(d) Elective payment elections. In the
case of an applicable entity, as described
in section 6417(d)(1) of the Code and
§1.6417-1(c) with respect to which an
applicable credit listed in section 6417(b)
is determined for a taxable year, section
6417(a) allows the applicable entity to
make an election to treat the applicable
entity as making a payment against the tax
imposed by subtitle A of the Code equal
to the amount of the applicable credit.
Section 6417(b)(6) and §1.6417-1(d)(6)

Bulletin No. 2025–6 757 February 3, 2025
include the section 45W credit as an appli-
cable credit, but only with respect to a sec-
tion 45W credit determined by reason of
section 45W(d)(2) by a tax-exempt entity
described in section 168(h)(2)(A)(i), (ii),
or (iv) that is also an applicable entity
listed in section 6417(d)(1) and §1.6417-
1(c).
(e) Leases. For purposes of section
45W(d)(2), a vehicle is subject to a lease if
it is leased within 30 days of being placed
in service by a tax-exempt entity.
(f) Applicability date. This section
applies to taxable years ending after [date
of publication of the final regulations in
the Federal Register].
§1.45W-5 Reporting requirements.
(a) Requirement to file return. No
section 45W credit (defined in §1.45W-
1(a)) can be determined unless the tax-
payer claiming such credit files a Federal
income tax return or information return,
as appropriate, for the taxable year in
which the qualified commercial clean
vehicle is placed in service. The taxpayer
must attach to such return a completed
Form 8936, Clean Vehicle Credits, or
successor form, that includes all infor-
mation required by the form and instruc-
tions. The taxpayer must also attach a
completed Schedule A (Form 8936),
Clean Vehicle Credit Amount, or succes-
sor form or schedule, that includes all
information required by the schedule and
instructions, including the vehicle identi-
fication number of the qualified commer-
cial clean vehicle.
(b) Credit may generally be claimed
on only one tax return—(1) In general.
Except as provided in paragraphs (b)(2)
and (3) of this section, the amount of the
section 45W credit attributable to a qual-
ified commercial clean vehicle may be
claimed on only one Federal income tax
return, including on a joint return in which
one of the spouses or the spouse’s whol-
ly-owned business entity is listed on the
title as the sole owner of the vehicle. In
the event a qualified commercial clean
vehicle is placed in service by multiple
taxpayers that do not file a joint tax return
(for example, in the case of married indi-
viduals filing separate returns), no alloca-
tion or proration of the section 45W credit
is available.
(2) Grantor trusts. In the case of a qual-
ified commercial clean vehicle placed in
service by a trust, to the extent the grantor
or another person is treated as owning
all or part of the trust under sections 671
through 679 of the Code, the section 45W
credit is allocated to such grantor or other
person in accordance with §1.671-3(a)(1).
(3) Partnerships and S corporations. In
the case of a qualified commercial clean
vehicle placed in service by a partnership
or S corporation, the section 45W credit is
allocated among the partners of the part-
nership under §1.704-1(b)(4)(ii) or among
the shareholders of the S corporation
under sections 1366(a) and 1377(a) of the
Code and claimed on the tax returns of the
ultimate partners or of the S corporation
shareholder(s).
(c) Taxpayer reliance on manufacturer
certifications and periodic written reports
to the IRS. A taxpayer that acquires a qual-
ified commercial clean vehicle and places
it in service may rely on the information
and certifications contained in the quali-
fied manufacturer’s written reports to the
IRS. The procedures for such periodic
written reports are established in guidance
published in the Internal Revenue Bulle-
tin (see §601.601 of this chapter). To the
extent a taxpayer relies on certifications or
attestations from the qualified manufac-
turer, the qualified commercial clean vehi-
cle the taxpayer acquires will be deemed
to meet the requirements of sections
30D(d)(1)(C) and 45W(c)(1) of the Code.
(d) Applicability date. This section
applies to taxable years ending after [date
of publication of the final regulations in
the Federal Register].
Par. 5. Section 1.6417-6 is amended
by:
1. Adding two sentences to the end of
paragraph (b)(1); and
2. Revising paragraph (e).
The addition and revision read as fol-
lows:
§1.6417-6 Special rules.
* * * * *
(b) * * *
(1) * * * For purposes of this paragraph
(b)(1), if an applicable credit is subject to
section 50, then section 50 applies with-
out regard to section 50(b)(3) and (b)(4)
(A)(i). If another provision of the Code
contains a basis reduction and/or recap-
ture provision outside of section 50 that
impacts the available credit (such as sec-
tions 30C(e), 45Q(f)(4), 45W(d)(1), and
48(a)(10)), then the rules of that provision
of the Code and the regulations in this
chapter issued under that provision of the
Code apply, except that any applicable
credit continues to be determined without
regard to section 50(b)(3) and (b)(4)(A)(i)
and by treating any property with respect
to which such credit is determined as used
in a trade or business of the applicable
entity, consistent with section 6417(d)(2)
and §1.6417-2(c).
* * * * *
(e) Applicability dates—(1) In general.
Except as provided in paragraph (e)(2) of
this section, this section applies to taxable
years ending on or after March 11, 2024.
For taxable years ending before March 11,
2024, taxpayers, however, may choose
to apply the rules of §§1.6417-1 through
1.6417-4 and this section, provided the
taxpayers apply the rules in their entirety
and in a consistent manner.
(2) Paragraph (b)(1) of this section.
The second and third sentences of para-
graph (b)(1) of this section apply to prop-
erty placed in service in taxable years end-
ing after [date of publication of the final
regulations in the Federal Register].
Douglas W. O’Donnell,
Deputy Commissioner.
(Filed by the Office of the Federal Register January
10, 2025, 8:45 a.m., and published in the issue of the
Federal Register for January 14, 2025, 90 FR 3506)

Bulletin No. 2025–6 i February 3, 2025
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus,
if an earlier ruling held that a principle
applied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is
being made clear because the language
has caused, or may cause, some confu-
sion. It is not used where a position in a
prior ruling is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations
to show that the previous published rul-
ings will not be applied pending some
future action such as the issuance of new
or amended regulations, the outcome of
cases in litigation, or the outcome of a
Service study.
Abbreviations
The following abbreviations in current
use and formerly used will appear in
material published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.
—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

February 3, 2025 ii Bulletin No. 2025–6
Numerical Finding List
1
Bulletin 2025–6
Announcements:
2025-2, 2025-2 I.R.B. 305
2025-3, 2025-2 I.R.B. 306
2025-4, 2025-2 I.R.B. 306
2025-1, 2025-3 I.R.B. 431
2025-5, 2025-3 I.R.B. 433
2025-6, 2025-5 I.R.B. 526
Notices:
2025-1, 2025-3 I.R.B. 415
2025-2, 2025-3 I.R.B. 418
2025-4, 2025-3 I.R.B. 419
2025-5, 2025-3 I.R.B. 426
2025-3, 2025-4 I.R.B. 488
2025-7, 2025-5 I.R.B. 524
2025-9, 2025-6 I.R.B. 681
2025-10, 2025-6 I.R.B. 682
2025-11, 2025-6 I.R.B. 704
2025-13, 2025-6 I.R.B. 710
Proposed Regulations:
REG-117213-24, 2025-3 I.R.B. 433
REG-134420-10, 2025-4 I.R.B. 513
REG-105479-18, 2025-5 I.R.B. 527
REG-116610-20, 2025-5 I.R.B. 638
REG-115560-23, 2025-6 I.R.B. 716
REG-123525-23, 2025-6 I.R.B. 726
Revenue Procedures:
2025-1, 2025-1 I.R.B. 1
2025-2, 2025-1 I.R.B. 118
2025-3, 2025-1 I.R.B. 142
2025-4, 2025-1 I.R.B. 158
2025-5, 2025-1 I.R.B. 260
2025-7, 2025-1 I.R.B. 301
2025-8, 2025-3 I.R.B. 427
2025-9, 2025-4 I.R.B. 491
2025-10, 2025-4 I.R.B. 492
2025-11, 2025-4 I.R.B. 501
2025-12, 2025-4 I.R.B. 512
2025-6, 2025-6 I.R.B. 713
Revenue Rulings:
2025-1, 2025-3 I.R.B. 307
2025-2, 2025-3 I.R.B. 309
2025-3, 2025-4 I.R.B. 443
Treasury Decisions:
10016, 2025-3 I.R.B. 313
10020, 2025-3 I.R.B. 408
10018, 2025-4 I.R.B. 446
Treasury Decisions:—Continued
10019, 2025-4 I.R.B. 482
10017, 2025-5 I.R.B. 517
10028, 2025-6 I.R.B. 660
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin
2024–52, dated December 23, 2024.

Bulletin No. 2025–6 iii February 3, 2025
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2025–6
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2024–27 through 2024–52 is in Internal Revenue Bulletin
2024–52, dated December 23, 2024.

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