rp-02-42.pdf

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# Part III

## Administrative, Procedural, and Miscellaneous

26 CFR 601.105: Examination of returns and claims for refund, credit, or abatement;
determination of correct tax liability.
(Also Part I, 30, 50, 179, 179A.)

Rev. Proc. 2002-42

### SECTION 1. PURPOSE

This revenue procedure sets forth a process that allows taxpayers who purchase
certain clean-fuel vehicle property to rely on a manufacturer s certification of the
incremental cost of the property for purposes of the clean-fuel vehicle property
deduction provided in 179A of the Internal Revenue Code. This revenue procedure
applies to motor vehicles (other than buses, and trucks and vans with a gross vehicle
weight rating greater than 10,000 pounds) that are propelled by both a gasoline internal
combustion engine and an electric motor that is recharged as the motor vehicles
operate (hybrid vehicles) and that otherwise meet the requirements of 179A.
SECTION 2. BACKGROUND

.01 In general. Section 179A allows a deduction for certain costs of qualified clean-
fuel vehicle property for the tax year in which the property is placed in service. In the
case of hybrid vehicles, only the incremental cost of permitting the use of the clean-
burning fuel (electricity) can be taken into account when determining the allowable
deduction under 179A.

The Internal Revenue Service has received numerous inquiries from taxpayers
concerning the determination of the incremental cost for specific hybrid vehicles for

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purposes of 179A. This revenue procedure sets forth a process allowing a taxpayer
who purchases a hybrid vehicle to rely on the original equipment manufacturer s (or, in
the case of a foreign original equipment manufacturer, its domestic distributor s)
certification of the incremental cost of the property for purposes of 179A.

.02 Qualifying Motor Vehicles. This revenue procedure applies only to motor vehicles
that meet the requirements of 179A. In order to be eligible for the deduction under
179A, a motor vehicle must: (1) be acquired for use by the taxpayer and not for
resale and have its original use commence with the taxpayer; (2) meet the applicable
federal and state emissions standards with respect to each fuel by which the vehicle is
propelled; (3) be manufactured primarily for use on public streets, roads, and highways;
(4) have at least four wheels; and (5) not operate exclusively on a rail or rails. Section
179A and this revenue procedure do not apply to motor vehicles that are primarily
powered by electricity and qualify for the credit provided in 30 or to motor vehicles that
are used predominantly outside the United States.

.03 Deduction Amount Limitations. Under 179A, except in the case of any truck or
van with a gross vehicle weight rating greater than 10,000 pounds or any bus with a
seating capacity of at least 20 adults (not including the driver), the maximum cost that
may be taken into account when determining the deduction is $2,000 for motor vehicles
placed in service on or before December 31, 2003. The $2,000 maximum is reduced
by 25 percent for motor vehicles placed in service in calendar year 2004, 50 percent for
motor vehicles placed in service in calendar year 2005, and 75 percent for motor
vehicles placed in service in calendar year 2006. No deduction is allowed for motor

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vehicles placed in service after December 31, 2006. No deduction is allowed with
respect to the portion of the cost of any property taken into account under 179.
SECTION 3. PROCEDURE

.01 Original Equipment Manufacturer s Certification. An original equipment
manufacturer (or in the case of a foreign original equipment manufacturer, its domestic
distributor) may prepare a certification concerning the incremental cost of permitting the
use of electricity to propel its vehicles. The certification should contain the following
information:

(1) the name and address of the certifying entity;

(2) the make, model, year, and any other appropriate identifiers of the motor
vehicle; and

(3) a statement disclosing the total per-vehicle cost to acquire and install the motor
vehicle s electric motor and related generating, storage, and delivery equipment. If the
total cost exceeds $2,000, the statement may so indicate without disclosing the specific
amount of the cost.

The certification should be signed by an officer of the original equipment
manufacturer (or, in the case of a foreign original equipment manufacturer, an officer of
its domestic distributor). This original signed certification must be sent to the Internal
Revenue Service, Industry Director, Large and Mid-Size Business, Heavy
Manufacturing and Transportation, Metro Park Office Complex - LMSB, 111 Wood
Avenue, South, Iselin, New Jersey 08830.

.02 Internal Revenue Service s Acknowledgment. The Internal Revenue Service will

review the original signed certification and issue an acknowledgment letter to the

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original equipment manufacturer (or, in the case of a foreign original equipment
manufacturer, its domestic distributor). This acknowledgment letter will state whether
purchasers may rely on the certification.

.03 Purchaser s Reliance. Copies of the certification and acknowledgment may be
made available to purchasers. Except as otherwise provided in the acknowledgment, a
purchaser of a hybrid vehicle may rely on the certification concerning the incremental
cost of permitting the use of electricity to propel the vehicle.

### SECTION 4. DRAFTING INFORMATION

The principal author of this revenue procedure is Jolene J. Shiraishi of the Office of
the Associate Chief Counsel (Passthroughs & Special Industries). For further
information regarding this revenue procedure contact Ms. Shiraishi at (202) 622-3120
(not a toll free call).