Manchin bill slaps back at Biden in EV tax credit fight

Source: By Hannah Northey, David Ferris, E&E News • Posted: Wednesday, January 25, 2023

Sen. Joe Manchin (D-W.Va.).

Senate Energy and Natural Resources Chair Joe Manchin (D-W.Va.). Francis Chung/POLITICO

Senate Energy and Natural Resources Chair Joe Manchin took another swipe at the Biden administration Wednesday, releasing legislation that would stop the Treasury Department from issuing subsidies for consumer electric vehicles that don’t comply with strict sourcing requirements for batteries and battery minerals.

The West Virginia Democrat brought out the “American Vehicle Security Act of 2023,” a bill that would bar automakers from making an end run around sourcing requirements under the newly minted Inflation Reduction Act, or IRA.

Moreover, Manchin’s office suggested Tuesday that the bill would force some EV buyers who got a tax credit to return the money.

In a statement, Manchin cast the bill as a means of reducing the United States’ reliance on countries like China for EV batteries and criticized Treasury for failing to issue guidance linking the incentives to sourcing provisions meant to grow domestic manufacturing.

“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,” Manchin said.

Sourcing requirements have emerged as a point of tension on Capitol Hill, the White House and beyond, with Manchin accusing Treasury of watering down the Inflation Reduction Act’s requirements. 

The senator, whose office wrote the relevant provisions, designed the nation’s EV strategy around that credit. But the IRS changed that calculation by focusing instead on the commercial vehicle credit.

Manchin has argued that pushing drivers toward the commercial tax credit will hinder the federal government’s effort to move EV supply chains out of China and into the sphere of the United States and its allies (E&E Daily, Jan. 3).

At issue are the Inflation Reduction Act’s commercial-vehicle tax credits, known in the tax code as 30D, which includes leased vehicles. Tax officials suggested last month that automakers could rely on that credit, which has no sourcing rules (Climatewire, Jan. 3).

That would avoid complications around the consumer-vehicle tax credit. The tax credit places stringent but as yet unclear rules requiring half the minerals used in batteries be mined, processed or recycled domestically — before a $7,500-per-vehicle federal tax credit is issued.

The new law’s EV incentives have become a political hot potato between the Biden administration and international allies, such as France, Germany and South Korea. Many foreign automakers are planning to build EV factories in the United States that would comply with the new rules, but until those factories open years from now, the companies’ customers will miss out on the tax credits.

Giving tax credit money back?

The law required those receiving a tax credit to show that 40 percent of their batteries were made from minerals extracted or processed in the United States or a country that has a free-trade agreement with the United States, or were recycled in North America. The sourcing percentage climbs each successive year.

Treasury late last year signaled that it would take more time to figure out how the mineral-sourcing provisions would actually work and vowed to issue guidance in March to provide a final plan around those requirements.

But a Democratic committee aide, who was granted anonymity to speak candidly, told reporters on a call Tuesday that Manchin’s bill would ensure the department’s timeline doesn’t slip and that the legislation would apply to any credits given out as of Jan. 1, 2023. Anyone who received a credit this year but couldn’t show compliance with the sourcing requirements would need to return the money, said the aide.

Manchin in his statement accused Treasury of failing to issue the 30D guidance by the statutory deadline by Dec. 31, 2022 and creating an “opportunity to circumvent stringent supply chain requirements included in the IRA.”

The measure may face tough sledding given widespread support for EV tax credits. The senator, according to the aide, has not shared the legislative text with the auto industry or Treasury, nor has he reached out for co-sponsors.

What’s more, provisions that Manchin wants to impose have raised concerns among Asian and European automakers.

Those countries have warned that provisions in the Inflation Reduction Act meant to boost America’s EV production base could make it harder for foreign brands such as Honda, Kia and BMW to qualify for tax credits that make EVs more affordable in the United States (Energywire, Nov. 9, 2022).