For taking the clean vehicle credits on a personal income tax returns, an understanding of when a vehicle is considered "placed in service" is paramount—or even how often it may be placed in the service in this case. This concept dictates the timing and eligibility of the credit, as highlighted in the recent United States Tax Court decision, Moon v. Commissioner.

The current Internal Revenue Code (I.R.C.) § 30D(a) states: "There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each new clean vehicle placed in service by the taxpayer during the taxable year".

While this language refers to "new clean vehicle" due to legislative updates, the foundational phrase, "placed in service by the taxpayer during the taxable year," was central to the Tax Court’s interpretation in Moon v. Commissioner, even though the case concerned the predecessor "new qualified plug-in electric drive motor vehicle" credit for earlier tax years. The court was tasked with determining whether this credit could be claimed annually for a vehicle in continuous use or if it was a one-time benefit tied to the initial placement in service.

Facts of the Case

In 2013, Artena and Kenneth Moon, the petitioners, purchased a new Chevrolet Volt, described as a plug-in electric drive motor vehicle manufactured primarily for use on public streets, roads, and highways. From 2013 through 2019, the Moons claimed the maximum $7,500 Section 30D credit annually in relation to this vehicle.

The Commissioner of Internal Revenue (Respondent) subsequently disallowed the Section 30D credit claimed by the Moons on their 2019 federal income tax return, asserting a deficiency of $7,500 and proposing an accuracy-related penalty. The Moons, residing in California, filed a Petition with the Tax Court, disputing the disallowance and contending their entitlement to the credit for the 2019 tax year. The Commissioner later conceded the accuracy-related penalty.

Taxpayers’ Request for Relief

The core of the Moons’ argument was that they were entitled to the I.R.C. § 30D credit for 2019, implicitly suggesting that the credit could be claimed for each year the vehicle was "placed in service" by being used.

Court’s Analysis of the Law

The Tax Court began its analysis by noting that I.R.C. § 30D provides a one-time credit against tax of up to $7,500 for new qualified plug-in electric drive motor vehicles "placed in service by the taxpayer during the taxable year". A critical point for the court was that Section 30D itself does not define the phrase "placed in service".

To interpret this crucial phrase, the court looked to established definitions within regulations related to other sections of the Code. Specifically, it referenced Treasury Regulation § 1.48-1(a) concerning the Section 38 general business credit, which is allowed only for the taxable year in which the taxpayer first places Section 38 property in service. According to Treasury Regulation § 1.46-3(d)(1), Section 38 property is considered "placed in service" at the earlier of two points: when "the period for depreciation with respect to such property begins" or when the property "is placed in a condition or state of readiness and availability for a specifically assigned function".

The court further bolstered its interpretation by citing prior judicial precedent regarding the "placed in service" concept for the Section 38 general business credit:

In Consumers Power Co. v. Commissioner, 89 T.C. 710, 724 (1987), the court held that a hydroelectric power plant was placed in service only after passing all required inspections and regularly generating power.
Noell v. Commissioner, 66 T.C. 718, 729 (1976), determined an airport runway was placed in service when it was fully paved and available for regular service.
Similarly, Madison Newspapers, Inc. v. Commissioner, 47 T.C. 630, 637 (1967), found a printing press placed in service once installed and regularly publishing newspapers.

These precedents collectively establish that property is "placed in service" when it reaches a condition where it can be regularly used for its specifically assigned function. The court explicitly affirmed that the Section 30D credit is a one-time credit.

Application of the Law to the Facts

Applying this established legal framework, the Tax Court found that upon the purchase of their Chevrolet Volt in 2013, the Moons’ vehicle was "ready, available, and used consistently with its specifically assigned function". Consequently, the court concluded that the Moons’ Chevrolet Volt was placed in service in 2013.

Given that the I.R.C. § 30D credit is a one-time benefit, it was allowable only for the taxable year in which the vehicle was first placed in service. Since the Moons had already claimed the maximum $7,500 credit on their tax returns for the years 2013 through 2018, they had exhausted their entitlement to the credit for that specific vehicle.

Conclusion

The Tax Court ultimately held that the Moons were not entitled to the I.R.C. § 30D credit relating to 2019. A decision was entered for the Commissioner regarding the deficiency, and for the petitioners regarding the accuracy-related penalty (which had been conceded by the Commissioner).

This case serves as a reminder that the clean vehicle credit under I.R.C. § 30D, like its predecessor, is a one-time credit tied to the initial placement in service of the vehicle. Subsequent use in later tax years does not re-qualify the taxpayer for additional credits, reinforcing the importance of proper timing and understanding of the "placed in service" definition in tax planning for clean vehicle acquisitions. It is also notable that current I.R.C. § 30D(f)(8) now explicitly states, "In the case of any vehicle, the credit described in subsection (a) shall only be allowed once with respect to such vehicle", codifying the principle affirmed in Moon v. Commissioner.

Prepared with assistance from NotebookLM.