n-06-78.pdf

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Part III – Administration, Procedural, and Miscellaneous

Phase-out of Credit for New Qualified Hybrid Motor Vehicles and New Advanced
Lean Burn Technology Motor Vehicles

Notice 2006-78

SECTION 1. PURPOSE
This notice announces the credit phase-out schedule for advanced lean
burn technology motor vehicles and hybrid passenger automobiles and light
trucks manufactured by Toyota Motor Corporation.
SECTION 2. BACKGROUND
Section 30B(a)(2) of the Internal Revenue Code provides for a credit
determined under § 30B(c) for certain new advanced lean burn technology motor
vehicles. Section 30B(a)(3) provides for a credit determined under § 30B(d) for
certain new qualified hybrid motor vehicles. Both the new advanced lean burn
technology motor vehicle credit and the new qualified hybrid motor vehicle credit
begin to phase out for a manufacturer's passenger automobiles and light trucks
in the second calendar quarter after the calendar quarter in which at least 60,000
of the manufacturer's passenger automobiles and light trucks that qualify for
either credit have been sold for use or lease in the United States (determined on

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a cumulative basis for sales after December 31, 2005). Taxpayers purchasing
the manufacturer’s vehicles during the first two calendar quarters of the phase-
out period may claim only 50 percent of the otherwise allowable credit.
Taxpayers purchasing the manufacturer’s vehicles during the third and fourth
quarters of the phase-out period may claim only 25 percent of the otherwise
allowable credit. No credit is available for vehicles purchased after the last day
of the fourth quarter of the phase-out period.
Notice 2006-9, 2006-6 I.R.B. 413, provides procedures for a
vehicle manufacturer (or, in the case of a foreign vehicle
manufacturer, its domestic distributor) to certify to the Internal
Revenue Service (Service) both (1) that a particular make, model,
and model year of vehicle qualifies for either the new advanced lean
burn technology motor vehicle credit or the new qualified hybrid
motor vehicle credit and (2) the amount of the credit allowable with
respect to that vehicle.
Section 5.05 of Notice 2006-9 requires a manufacturer (or, in the case of a
foreign vehicle manufacturer, its domestic distributor) that has received from the
Service an acknowledgement of its certification for a particular make, model, and
model year of vehicle to submit to the Service a report of the number of qualified
vehicles sold by the manufacturer (or, in the case of a foreign vehicle
manufacturer, its domestic distributor) to retail dealers during the calendar
quarter. A qualified vehicle is defined for this purpose as any passenger

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automobile or light truck that is a new advanced lean burn technology motor
vehicle or a new qualified hybrid motor vehicle.
In accordance with the section 5.05 of Notice 2006-9, Toyota Motor Sales,
U.S.A., Inc. has submitted quarterly reports that indicate that its cumulative sales
of qualified vehicles to retail dealers reached the 60,000-vehicle limit during the
calendar quarter ending June 30, 2006. Accordingly, the credit for all new
advanced lean burn technology motor vehicles or new qualified hybrid passenger
automobiles or light trucks manufactured by Toyota Motor Corporation will begin
to phase out on October 1, 2006.
SECTION 3. SCOPE OF NOTICE
This notice applies to any make, model, or model year of new advanced
lean burn technology motor vehicle or new qualified hybrid passenger automobile
or light truck that is--
(1) manufactured by Toyota Motor Corporation; and
(2) purchased for use or lease in the United States on or after October 1,
2006.
SECTION 4. Credit Amount
.01 In general. If a new advanced lean burn technology motor vehicle or
new qualified hybrid passenger automobile or light truck manufactured by Toyota
Motor Corporation is purchased for use or lease after September 30, 2006, the
allowable credit is as follows:

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(1) For vehicles purchased for use or lease on or after October 1, 2006, and
on or before March 31, 2007, the credit is 50 percent of the otherwise allowable
amount determined under § 30B(c) or (d) (whichever is applicable);
(2) For vehicles purchased for use or lease on or after April 1, 2007, and
on or before September 30, 2007, the credit is 25 percent of the otherwise
allowable amount determined under § 30B(c) or (d) (whichever is applicable);
and
(3) For vehicles purchased for use or lease on or after October 1, 2007, no
credit is allowable.
.02 Certified Vehicles
. The following tables set forth the credit available on or
after October 1, 2006, for hybrid motor vehicles for which Toyota Motor Sales,
U.S.A., Inc. received an acknowledgement of its certification from the Service on
or before September 19, 2006:
Table 1
October 1, 2006 – March 31, 2007
Model Year Model Credit Amount
2005 Prius $1,575
2006 Prius $1,575
2006 Highlander 4WD Hybrid $1,300
2006 Highlander 2WD Hybrid $1,300

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2006 Lexus RX400h 2WD $1,100
2006 Lexus RX400h 4WD $1,100
2007 Camry Hybrid $1,300
2007 Lexus GS 450h $775

Table 2
April 1, 2007 – September 30, 2007
Model Year Model Credit Amount
2005 Prius $787.50
2006 Prius $787.50
2006 Highlander 4WD Hybrid $650
2006 Highlander 2WD Hybrid $650
2006 Lexus RX400h 2WD $550
2006 Lexus RX400h 4WD $550
2007 Camry Hybrid $650
2007 Lexus GS 450h $387.50

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Table 3
On or after October 1, 2007
Model Year Model Credit Amount
2005 Prius $0.00
2006 Prius $0.00
2006 Highlander 4WD Hybrid $0.00
2006 Highlander 2WD Hybrid $0.00
2006 Lexus RX400h 2WD $0.00
2006 Lexus RX400h 4WD $0.00
2007 Camry Hybrid $0.00
2007 Lexus GS 450h $0.00

The principal author of this notice is Nicole R. Cimino of the Office of
Associate Chief Counsel (Passthroughs and Special Industries). For further
information regarding this notice contact Ms. Cimino at (202) 622-3120 (not a toll-
free call).