The Buy American provisions of the Inflation Reduction Act and Bipartisan Infrastructure Law have been the topic of much speculation and more than a little controversy. Now the Biden Administration has issued a set of rules for determining which foreign entities of concern (FEOC) are not eligible for EV-related tax credits and other subsidies.
The definition used by the Treasury Department will be used to determine which projects will be eligible for a share of the $6 billion in battery manufacturing grants authorized under the BIL, and which vehicles qualify for a full or partial share of the IRA’s $7,500 tax credit for EV purchases. Beginning in 2025, eligibility will be restricted if the battery contains either components or critical minerals from an FEOC.
“We’re talking about companies under the control or jurisdiction of the government of a ‘covered nation,’ which in this instance means North Korea, China, Russia or Iran,” Deputy Energy Secretary David Turk told reporters.
From the layman’s perspective, we might say that things have progressed from being as clear as mud to being as clear as tea. To determine if any particular project or vehicle is eligible for subsidies, companies may need to wade through the DOE’s proposed guidance and request for public comment, the IRS’s Revenue Procedure 2023-38, and perhaps the Treasury Department’s Notice of Proposed Rulemaking.
What’s certain is that, once the rules take effect, eligibility for subsidies will be restricted for anything sourced from China.
When it comes to the Section 30D credits for EV purchases, the IRS says: “Vehicles placed in service beginning in 2024 must not have batteries containing battery components manufactured or assembled by a FEOC. In addition, vehicles placed in service beginning in 2025 must have not batteries containing applicable critical minerals extracted, processed, or recycled by a FEOC.”
Industry experts expect the news to turbocharge the trend towards establishing domestic sources of critical materials.
“The proposed guidance will provide clarity and certainty to the US automakers, battery manufacturers and producers of critical minerals. It will encourage these industries to invest in diversified and resilient critical mineral and battery supply chains,” White House Renewable Energy Adviser John Podesta said. “And it’ll support good-paying U.S. jobs…paving the way for an electric transportation future that’s built here in America.”