The Biden administration’s proposed regulation on accessing electric vehicle (EV) tax credits is facing new challenges, as Energy Committee Chairman Senator Joe Manchin (D-W.V.) seeks to overturn it with a congressional vote.
Mr. Manchin sent a letter to the Government Accountability Office on Monday, requesting legal opinions on whether the Treasury’s proposed regulations are subjected to the Congressional Review Act. That law allows Congress to review and strike down any given rule enacted by federal agencies, but only applies to “final rules.”
The West Virginia senator argued the new guidance, made public on Dec. 1, would make it easier for China and other foreign adversaries to take advantage of the EV tax credit “while hurting American taxpayers and increasing America’s reliance on foreign nations for battery and vehicle component supply chains, including China,” according to a statement issued by Mr. Manchin’s office.
New Guidance
Amid growing concern over China’s dominance of batteries and critical minerals essential in the production of EVs and other green technologies, the Biden administration on Dec. 1 issued long-awaited proposed guidance regarding the Inflation Reduction Act’s (IRA) foreign entity of concern (FEOC) requirements for tax credit eligibility of EVs.Generally, the draft rule stipulates that starting in 2024, EVs that are eligible for the $7,500 tax credit may not contain any battery components that are manufactured or assembled by a FEOC.
The new proposed rules also stipulate that starting in 2025, eligible EVs may not contain any critical minerals that were extracted, processed, or recycled by a FEOC, in addition to some other requirements, such as that final assembly has to have been done in North America.
However, because of known “commingling” in critical mineral supply chains and the inability of suppliers to physically track certain specific minerals to battery cells or batteries, the newly proposed rule contains a temporary transition rule.
The transition rule will temporarily (through 2026) exempt some trace critical minerals from the new guidance, effectively allowing EVs that source critical minerals from Chinese firms to continue to be eligible for the U.S. taxpayer-funded credit.
The Biden administration’s approach was praised by industry representatives. John Bozzella, president of the Alliance for Automotive Innovation, a group representing nearly all major automakers, described the Treasury’s critical mineral exemption as “significant and well-advised.”
“The United States has never had to rely on foreign adversaries to build our cars and trucks,” Mr. Manchin said at the time. “We’ve always been able to make our own transmissions, our own alternators, and our own engines, and I do not understand why President Biden is allowing his administration to now route our essential supply chains through China.”
It’s unclear whether the regulation proposed by Treasury could be undone by the Democrat-controlled Senate.
So far, the Congressional Review Act has successfully overturned 20 rules since it was enacted in 1996.
Mr. Manchin has for months blasted the Biden administration for its interpretation of electric vehicle tax credits in the IRA, which he helped author.
