Senator Joe Manchin, the chairman of the Senate Energy Committee, has threatened to take legal action against the Biden administration over the expected release of battery sourcing guidance for electric vehicle tax credits. He believes that the guidance may violate the intent of the climate legislation approved in August. Manchin accused the administration of flouting the original intent of the bill and demanded that President Biden “sit down with fiscally minded Republicans and Democrats to negotiate commonsense reforms to out-of-control fiscal policy.”
New Battery Sourcing Rules May Result in Fewer Vehicles Qualifying for Tax Credits
The new battery sourcing rules for electric vehicle tax credits are expected to result in fewer vehicles qualifying for full or partial credits. The rules are included in the $430 billion climate change, healthcare, and tax bill dubbed the Inflation Reduction Act passed by Democrats in August. The bill says that 50% of the value of battery components must be produced or assembled in North America for EV buyers to qualify for $3,750 of the credit, and 40% of critical minerals’ value must be sourced from the United States or a country with which it has a free trade agreement to qualify for another $3,750 credit.
Manchin Seeks to Transfer EV Supply Chain from China
Senator Manchin intends to transfer the EV supply chain from China and pay attention to how the Treasury will classify processing and manufacturing in determining eligibility for $7,500 EV tax credits. China currently dominates the global supply chain for EV batteries.
Biden Administration’s Interpretation May Not Align With Climate Change Law
Senator Manchin predicts that the Biden administration will not interpret new restrictions on electric vehicle tax credits aligning with the climate change law he wrote. He plans to fight for his interpretation of the law and is willing to sue the administration if necessary. Manchin believes that the Treasury Department’s forthcoming guidance on the tax credit’s changes will try to liberalize and blow the cap off the pricing, contrary to the intent of the law.
Biden Administration Delayed Restrictions on Electric Vehicle Tax Credits
The Democrats’ climate, tax, and healthcare bill eliminated a cap on how many electric vehicles could be eligible for consumer tax credits but also included new stipulations on which vehicles are eligible for the credit. These restrictions were expected to pose a challenge for automakers, and there were no electric vehicles on the market that met the battery minerals requirement. The Biden administration delayed these restrictions until it issued guidance in March, which Sen. Manchin condemned as inconsistent with the intent of the law.
Manchin May Sue if Guidance Circumvents Restrictions He Added to Law
Senator Manchin has threatened to file a lawsuit if the guidance circumvents restrictions he added to law on electric vehicle tax credits. It is not clear what the guidance will say, but it is expected to result in fewer vehicles receiving the credit.
In conclusion, Senator Joe Manchin intends to transfer EV supply chain from China and pay attention to how the Treasury will classify processing and manufacturing in determining eligibility for $7,500 EV tax credits. He plans to sue the Biden administration if necessary over its interpretation of new restrictions on electric vehicle tax credits not aligning with climate change law he wrote. It remains unclear how this situation will play out in court or affect electric vehicle adoption across America.
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