IRS & Treasury Issue Proposed Regulations On Specified Passenger Vehicle Loan Interest Reporting: What Credit Unions Need To Know
On Jan. 2, 2026, the IRS and Treasury released proposed regulations (REG-113515-25) implementing new information reporting requirements for recipients of interest on specified passenger vehicle loans (SPVLs). These rules, together with Notice 2025-57, 2025-45 I.R.B. 692, introduce significant new compliance obligations for credit unions acting as lenders. This article summarizes the key determinations credit unions must make, outlines the new information reporting requirements, and highlights transitional relief for 2025.
Why These Rules Matter For Credit Unions
The 2025 Tax Act (also known informally as the One Big Beautiful Bill Act) introduced a new deduction for qualified passenger vehicle loan interest (QPVLI) for individual taxpayers. To ensure proper administration and compliance, Congress enacted Internal Revenue Code Section 6050AA, requiring lenders, including credit unions, to report interest received on qualifying loans. The proposed regulations and IRS guidance clarify how these rules apply, what information must be reported, and the steps credit unions must take to comply.
Key Determinations Required By Credit Unions As Lenders
Before reporting, credit unions must determine whether a loan and the interest received qualify under the new rules. The following summarizes the required determinations:
1. Does The Loan Qualify As A Specified Passenger Vehicle Loan (SPVL)?
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- Origination Date: The loan must be incurred after Dec. 31, 2024.
- Purpose: The loan proceeds must be used to purchase an “Applicable Passenger Vehicle” (APV).
- Security: The loan must be secured by a first lien on the vehicle.
- Borrower: The borrower must be an individual (not a corporation or other excluded entity).
- Exclusions: Loans for negative equity rollovers, accompanying trailers or boats, or non-qualifying vehicles are excluded.
2. Does The Vehicle Qualify As An Applicable Passenger Vehicle (APV)?
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- Type: Must be a new passenger vehicle (as defined by the IRS).
- Weight: Must not exceed the gross vehicle weight rating (GVWR) threshold.
- Assembly: Must be assembled in North America.
- Use: The vehicle’s original use must begin with the taxpayer, and it must be used primarily for personal (not business) purposes.
3. What Amounts Are Included In The SPVL?
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- Included: Principal used to purchase the vehicle, plus amounts customarily financed (e.g., sales tax, warranties, service plans), and refinancings of loans that did qualify
- Excluded: Negative equity from trade-ins, add-ons not customarily financed, and amounts not directly related to the vehicle purchase.
Information Reporting Obligations For Credit Unions
Once a loan is determined to be a qualifying SPVL, credit unions must comply with new information reporting requirements under IRC Section 6050AA and the proposed regulations.
1. When & What To Report
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- Threshold: Report if $600 or more in interest is received on an SPVL in a calendar year (lower amounts may be reported at the lender’s discretion).
- Due Dates:
- Borrower Statement: Must be furnished to the borrower by Jan. 31 of the following year.
- IRS Filing: Information return must be filed with the IRS by Feb. 28 (paper) or March 31 (electronic). The IRS filing requirement is not applicable for 2025. Only a statement to the borrower must be provided. Reporting to the IRS begins with the 2026 tax year.
- Form: For 2025, a substitute statement may be used as Form 1098-VLI is not yet finalized.
2. Required Information
The information return and borrower statement must include:
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- Name and address of the borrower
- Name, address, and EIN/TIN of the credit union (lender)
- Total interest received on the SPVL during the year
- Loan origination date
- Outstanding principal at year-end
- Vehicle details: year, make, model, and VIN
- Date the SPVL was acquired by the lender
- Any backup withholding
3. Borrower Identification & TIN Collection
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- Initial Collection: Credit unions must obtain the borrower’s SSN/TIN at loan origination (typically during the application process).
- Annual Follow-Up: If the SSN/TIN is not provided, the credit union must request it at least once per year, either through regular mailings or a separate request.
- Non-U.S. Borrowers: If the borrower is not a U.S. person, the credit union must collect Form W-8 or other documentary evidence of foreign status.
4. Electronic Filing Requirements
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- Threshold: Credit unions filing 10 or more returns must file electronically; those with fewer than 10 may file on paper.
- IRS Deadlines: February 28 (paper) or March 31 (electronic).
Transitional Relief For 2025
Notice 2025-57 provides important transition relief for the first year of reporting:
- Good-Faith Compliance: If a credit union makes a good-faith effort to comply with the 2025 reporting requirements as described in the notice, penalties for failure to file correct information returns or furnish correct payee statements will not apply.
- Scope: This relief applies only to interest received on SPVLs in calendar year 2025.
Practical Considerations & Industry Observations
- System Updates: Credit unions should review and update loan origination and servicing systems to capture all required data elements for reporting.
- Staff Training: Ensure lending and compliance staff are trained on the new requirements, especially regarding borrower identification and TIN collection.
- Communication: Proactively communicate with borrowers about the new reporting requirements and the need to provide accurate TINs and vehicle information.
- Recordkeeping: Maintain thorough documentation of all requests for borrower information and steps taken to comply with the regulations.
Next Steps
The proposed regulations and related IRS guidance represent a significant change in information reporting for credit unions making passenger vehicle loans. By understanding the new determinations required, updating systems and processes, and taking advantage of transitional relief for 2025, credit unions can ensure compliance and support their members in claiming the new QPVLI deduction. For further details or to discuss implementation strategies, contact your GBQ Partners advisor. Alternatively, click here to learn more about our Credit Union Solutions.
By Mark Silvaggio, JD, CPA, Director, Tax & Advisory
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