Senator Joe Manchin has introduced a bill to impose battery sourcing requirements immediately.
US Senator Joe Manchin, chairman of the powerful Senate Committee on Energy and Natural Resources, has introduced legislation to immediately impose battery sourcing requirements on electrified vehicles to qualify for the $7,500 tax credit.
This is a potential problem for President Biden because Manchin wants to close a loophole in the Inflation Reduction Act (IRA) regarding battery sourcing. Manchin wants the plug-in vehicle tax credit requirement to specify that a certain amount of battery materials has to be sourced from North America. Furthermore, he wants this amount to increase in the years ahead.
The Treasury Department, however, has not published the guidelines for battery sourcing requirements. It plans to do so in March.
"It is unacceptable that the US 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," a statement from Manchin reads. "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."
Manchin wants that changed retroactively to January 1 of this year. This means some consumers would see part of their credit revoked. Until or if that happens, plug-in electrified vehicles that meet pricing and battery size requirements remain eligible for that $7,500 credit - regardless of where the batteries are sourced.
The Treasury is essentially delaying the full tax credit eligibility that'll require US assembly, North American rare earth mineral sourcing, and battery assembly. Manchin wants to stop the current free for all immediately.
For now, Manchin is not focusing on another recent big IRA loophole: leasing. This exception was just made for consumers who lease foreign-built plug-ins, such as the Hyundai Ioniq 5, to still qualify for the $7,500 credit.
While this loophole certainly pleases Hyundai and other foreign automakers who objected to several aspects of the IRA, it could only be a matter of time until Manchin introduces new legislation to end this exception.
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