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Senator Joe Manchin (D-W.Va.) is unimpressed with the temporary leniency shown toward electric vehicles in terms of the federal tax credit, and he’s determined to do something about it. On Wednesday the Senator introduced a new bill, “the American Vehicle Security Act of 2023.” The bill would immediately implement the much stricter new tax credit rules contained in last year’s Inflation Reduction Act even though the Department of the Treasury hasn’t finished working out how to do that. Should Manchin’s bill pass, it looks unlikely that any EV would qualify.
“It is unacceptable that the U.S. Treasury has failed to issue updated guidance for the 30D electric vehicle tax credits and continues to make the full $7,500 credits available without meeting all of the clear requirements included in the Inflation Reduction Act,” Manchin said in a statement sent to Ars.
That’s not all. According to some outlets, the Senator wants anyone who might have been issued an EV tax credit in 2023 to have to repay it, unless they could prove the car satisfied the domestic sourcing requirements. And that could be costly news for anyone who rushed out to buy a new Tesla after that company slashed prices to allow more of its EVs to qualify for the new tax credit rules.
Where’d you mine this lithium?
Last year’s Inflation Reduction Act changed the way a vehicle qualifies for a tax credit, which remains a maximum of $7,500. Before, the amount was tied to the capacity of the battery, but Manchin—known to oppose EV tax credits—wrote new language that instead tied the credit to the contents of the battery pack. In order to qualify, an increasing proportion of the minerals have to come from the US or a country we have a free-trade agreement with. The same applies to an increasing proportion of the pack’s value having originated from the US or a free-trade partner.
Perhaps by design, this would probably make every EV on sale ineligible, at least until the many new US battery factories have come online in the coming years—we won’t know for sure until the Department of the Treasury publishes its guidance in a couple of months’ time.
In December the Treasury said it would have that guidance ready by March; until then, it’s merely enforcing the other requirements, such as the vehicle’s final assembly taking place in North America, detailed in this Ars Technica explainer.
When I wrote that guide a few weeks ago, I knew it would need to be updated. But I did not expect it to be so soon.
According to Manchin,
The Treasury Department failed to meet the statutory deadline of December 31, 2022, to release guidance for the 30D credit and have created an opportunity to circumvent stringent supply chain requirements included in the IRA. 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 for the critical minerals needed to produce EV batteries… Being an automotive powerhouse is in our blood which is why it is shameful that we rely so heavily on foreign suppliers, particularly China, for the batteries that power our electric vehicles.
However, the situation might not be as dire as it seems. Last year’s Inflation Reduction Act was considered must-pass legislation by the Democratic majority, a fact that gave Manchin much leverage due to the party’s tiny Senate majority. By contrast, this new bill does not command any such priority, has no co-sponsors, and is sure to be the subject of frenzied lobbying on behalf of the automotive industry.
