Treasury Department Adopts EPA Fuel Economy Labeling Standard for Clean Vehicle MSRP Classification

1 min read

The Department of the Treasury has decided to use a consumer-facing fuel economy labeling standard from the Environmental Protection Agency in qualifying clean vehicles for tax benefits as well as manufacturer suggested retail price limitations.

The agency said Friday that it amended its vehicle classification standard in order for consumers to understand and easily access the categories on EPA’s

A notice of intent was issued by the Treasury Department on Dec. 29, in anticipation of the clean vehicle tax credit to be implemented at the start of 2023. 

The initial proposal was based on EPA’s Corporate Average Fuel Economy rule, which sets an MSRP cap of $55,000 or $80,000, depending on the automobile type. Treasury and the Internal Revenue Service also issued guidance setting up to $40,000 in tax credits for clean vehicles as part of the Inflation Reduction Act.

The EPA’s consumer-facing standard is meant to ensure equal treatment for crossover cars with similar features. It also expands coverage to include cars that did not previously qualify under the CAFE rule.

The credit applies to vehicles purchased and activated since Jan. 1, provided that they meet the EPA standard and other clean vehicle tax subsidy requirements. Cars that qualified in the previous version of the standard are still eligible.

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