Joe Manchin to Introduce Bill to Delay EV Tax Credits

Source: By Yuka Hayashi, Wall Street Journal • Posted: Wednesday, January 25, 2023

Provision of Inflation Reduction Act is stalled by discord over rollout

Democratic Sen. Joe Manchin’s bill to delay implementing electric vehicle tax credits faces an uphill battle. PHOTO: GAELEN MORSE/BLOOMBERG NEWS

WASHINGTON—Sen. Joe Manchin (D., W.Va.) said he would introduce legislation Wednesday that delays implementation of new tax credits for electric vehicles amid disagreements with the Treasury Department over how to implement the program, a component of the Inflation Reduction Act.

Mr. Manchin’s new bill follows a decision by the Treasury Department in December to delay the issuance of the rules on battery contents and minerals until March, while allowing the rest of the program to be implemented on Jan. 1. The bill directs the Treasury Department to stop issuing tax credits for vehicles that don’t comply with battery requirements.

With strong support from Democratic lawmakers for the IRA, however, Mr. Manchin’s bill faces an uphill battle. A Democratic Senate aide said there was currently no co-sponsor for the bill and that he hasn’t reached out to other Democratic members of Congress.

Mr. Manchin, an author of the legislation, has been critical of the stance of the Treasury Department, which is tasked with writing details for implementing the program.

Following the delay of the battery rules, the department unveiled in late December its interpretation of the Inflation Reduction Act that paved the way for some vehicles assembled overseas to be eligible for tax incentives under a separate program for commercial vehicles if they are purchased for lease, rental or for ride-shares such as Uber.

To qualify for a full $7,500 tax credit, the Inflation Reduction Act requires 40% of the value of the minerals in an electric vehicle’s battery to come from the U.S. or a country that has a free-trade agreement with the U.S. That amount is set to rise to 80% after 2026.

The Treasury Department in December also hinted that the European Union and Japan, which don’t have FTAs with the U.S., could meet this requirement if other types of trade agreements are considered.

Mr. Manchin said the department’s interpretations are undermining the intent of the Inflation Reduction Act.

“The IRA is first-and-foremost an energy security bill, and the EV tax credits were designed to grow domestic manufacturing and reduce our reliance on foreign supply chains,” Mr. Manchin said in a statement. “The IRA and the EV tax credits must be implemented according to the Congressional intent to ensure the United States, as the superpower of the world, is not beholden to countries that don’t share our values.”

Treasury Secretary Janet Yellen said in an interview that Japan and the European Union would need to negotiate new trade agreements with the U.S. to meet the mineral-sourcing requirement.

“We don’t have something with Europe and Japan that we consider right now to be a free-trade area, but we could negotiate an agreement, ” she said.

Mr. Manchin was a key supporter of the Inflation Reduction Act, but suffered a previous setback related to the bill when he was forced to drop a planned follow-up measure to speed up federal environmental reviews of major energy projects.

Some Democrats had expressed concern about environmental protections being weakened, while Republicans criticized the bill as not going far enough in shortening reviews.

Write to Yuka Hayashi at Yuka.Hayashi@wsj.com