# Prop. Treas. Reg. § 1.45W-2: Amount of section 45W credit; incremental cost. Proposed regulation, not in force. REG-118269-23, 90 FR 3506, published 2025-01-14 . Interprets 26 U.S.C. § 45W. Par. 4. Sections 1.45W-0 through 1.45W-5 are added to read as follows: (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 diesel 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 commercial clean vehicle is determined using the incremental cost calculations and equations in paragraph (c) of this section to determine the amount equal to the excess of— (i) The product of the qualified manufacturer's cost of components necessary for the BEV powertrain, FCEV powertrain, PHEV powertrain, or PHFCEV powertrain used in the vehicle and the retail price equivalent (RPE) of such vehicle; minus (ii) The product of the manufacturer's cost of components necessary for the powertrain of a comparable vehicle powered 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 limited to, the costs of materials and labor. (3) Retail price equivalent —(i) In general. The RPE is the ratio of the manufacturer'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 paragraph (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 delivered 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 equipment physically attached to such vehicle at the time of its delivery to the dealer that is not included within the price of such vehicle 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 taxpayer 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 powertrain 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 general. A comparable vehicle is any vehicle 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 vehicle 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 similar to those of the qualified commercial clean vehicle, such solely gasoline- or diesel-powered vehicle is the only comparable 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 substantially similar features, such as GVWR, number of doors, towing capacity, passenger 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 passenger 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-horsepower 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), numbers 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 compared to 2), passenger capacities (5 compared to 2), and trim levels (mid-range compared to high-end), are not comparable. Therefore, ICE Car 1 is a comparable vehicle for purposes of calculating the incremental cost of BEV X, but ICE Car 2 is not. (c) Incremental cost equations and calculations. The incremental cost equations and calculations set forth in this paragraph (c) apply to determine the incremental cost of a qualified commercial clean vehicle 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 the sum of the cost of the engine, the ICE transmission, and the mechanical accessories. (2) Battery electric vehicles. In the case of a BEV, the incremental cost of the BEV is the product of the manufacturer's cost of the BEV 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 BEV powertrain 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 manufacturer's cost of the PHEV 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 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 follows: 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 manufacturer's cost of the FCEV 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 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 equation 3 to this paragraph (c)(4), includes the FCEV transmission), the battery, and the electrical accessories. Expressed formulaically, 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 purposes 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 exclusive of auxiliary power units. The incremental 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 inclusive of additional batteries, fuel cells, or hydrogen storage. The incremental cost of a qualified commercial clean vehicle is determined by adding to the cost of the BEV, FCEV, PHEV, or PHFCEV powertrain the cost of additional batteries installed on such vehicle, regardless of whether such additional batteries are required by a power takeoff, as well as additional fuel cells or additional hydrogen 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 calculation 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 comparable 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 manufacturer cannot identify a comparable vehicle with respect to a particular qualified commercial clean vehicle, then the incremental cost of such qualified commercial clean vehicle is zero. This paragraph (c)(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 determination. If a qualified manufacturer provides a taxpayer with written documentation 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 incremental cost documentation in the taxpayer's records for as long as the period of limitations for the taxable period in which the credit was claimed is open, the taxpayer may rely on such incremental cost for purposes of calculating the amount of the section 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 Secretary 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 service during a specified period. Any taxpayer 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 section 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) provides definitions related to the incremental 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 component that converts direct current (DC) from the battery into alternating current (AC) to power the electric motor, providing precise control over motor operations. (iv) BEV, FCEV, PHEV, and PHFCEV transmission. For the definition of transmission 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, thermal management systems, and a vacuum pump. (ii) Battery enclosures. Battery enclosures 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 conditioning 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 connections. High voltage cables and connections means components that include all high voltage cables, connections to electric drive units, cables from the onboard charger, DC-DC converter, air compressors, 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 operation 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 vacuum assistance, contributing to overall system functionality. (4) Engine and engine components —(i) Engin e. 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 electronics, exhaust gas regulator and breather systems, fuel systems, induction air charging and fuel induction systems, power distribution and sensing for after-treatment, primary exhaust and after-treatment modules, and a valve train. (ii) Air intake and cooling systems. Air intake and cooling systems means components that ensure adequate airflow for combustion and regulate engine temperature 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, crankshaft, and cylinder block, which form the fundamental structure of the engine, facilitating 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 performance 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 components, ensuring proper fuel delivery and reducing emissions. (viii) Induction air charging and fuel induction systems. Induction air charging and fuel induction systems means components that regulate the intake of air and fuel into the combustion chambers, ensuring efficient mixing and combustion. (ix) Power distribution and sensing for after-treatment. Power distribution and sensing for after-treatment means sensors and distribution mechanisms that manage the after-treatment process, ensuring effective emission control. (x) Primary exhaust and after-treatment modules. Primary exhaust and after-treatment modules means components 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 combining 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, recirculation blowers, or humidifiers. (6) Hydrogen storage. Hydrogen storage 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 regulation). (8) Mechanical accessories —(i) In general. Mechanical accessories are accessories that support, but do not independently facilitate, the function of essential 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 conditioning system, ensuring effective climate control within the vehicle. (iii) Mechanical steering pump. Mechanical steering pump means a component 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 overheating. (9) Transmission —(i) BEVs, FCEVs, PHEVs and PHFCEVs. For BEVs, FCEVs, PHEVs, and PHFCEVs, transmission 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 single- or multi-speed, single- or multi-reduction 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 transmission and one electric vehicle transmission); (B) One transmission with some components of both ICE and EV transmissions; 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 limited 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 converter. Internal clutch and torque converter 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 components that prevent overheating of the transmission components, ensuring reliable performance under various operating conditions. (e) Examples— (1) Example 1: Incremental cost calculation for a qualified commercial clean vehicle— (i) Facts. Manufacturer is the qualified manufacturer 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 powertrain components are: electric traction drive system ($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 powertrain components are: engine ($5,757.00), transmission ($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 Taxpayer'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 Manufacturer's cost of the comparable vehicle ICE powertrain 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 section, 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 transmission ($1,744.00), and the mechanical accessories ($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 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 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 is the lesser of 30 percent of Taxpayer'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 taxpayer'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 commercial 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 incremental 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. Manufacturer 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 powertrain, is substantially similar to the BEV Bus. Manufacturer's costs of the BEV Bus powertrain components 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. Manufacturer's costs of the ICE Bus powertrain components 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 possession 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 calculation, 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 Manufacturer's cost of the comparable vehicle ICE powertrain 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 section, 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 transmission ($4,730.00), and the mechanical accessories ($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 powertrain ($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 incremental cost of the qualified commercial clean vehicle as calculated under paragraphs (b) and (c) of this section (that is, the incremental cost of such vehicle 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 vehicle previously placed in service by another person or entity. The age of a qualified commercial clean vehicle previously placed in service by another person 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 purposes 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 factor described in paragraph (f)(1) of this section applicable to relevant vehicle classes, based on GVWR, is as provided in the following tables: **Table 1 to Paragraph ( f )(3)** | Vehicle class and description | GVWR (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 6 | 19,500-26,000 | | Class 7-8 Box/Other | 26,000-60,000 | | Class 8 Day Cab/Sleeper | >33,000 | **Table 2 to Paragraph ( f )(3)** | Vehicle class/vehicle age | Class 1 passenger car (%) | Class 1 or 2-3 light truck (%) | Class 4-5 (%) | Class 6 box (%) | Class 7-8 box/other (%) | Class 8 day cab/sleeper (%) | | --- | --- | --- | --- | --- | --- | --- | | 0 years | 70 | 75 | 95 | 90 | 95 | 85 | | 1 year | 60 | 70 | 85 | 80 | 85 | 75 | | 2 years | 55 | 60 | 80 | 70 | 80 | 60 | | 3 years | 50 | 55 | 75 | 60 | 70 | 55 | | 4 years | 40 | 45 | 70 | 55 | 65 | 45 | | 5 years | 40 | 40 | 65 | 45 | 60 | 40 | | 6 years | 35 | 35 | 60 | 40 | 55 | 35 | | 7 years | 30 | 35 | 55 | 35 | 50 | 30 | | 8 years | 25 | 30 | 50 | 35 | 45 | 25 | | 9 years | 25 | 25 | 45 | 30 | 45 | 25 | | 10 years | 20 | 25 | 45 | 25 | 40 | 20 | | 11 years | 20 | 20 | 40 | 25 | 35 | 20 | | 12 years | 15 | 20 | 40 | 20 | 35 | 15 | | 13 years | 15 | 15 | 35 | 20 | 30 | 15 | | 14 or more years | 10 | 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 qualified 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. Neither 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 factor 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. Therefore, 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 ].