Biden administration proposes electric vehicle tax credit guidance amid feud with Manchin

The Biden administration on Friday proposed new rules about when electric vehicles can be eligible for a consumer tax credit — though its disagreements with Sen. Joe Manchin (D-W.Va.) on the issue appear to be ongoing. 

In order to get Manchin’s approval of the Democrats’ climate, tax and health care bill, they added stipulations that limit which vehicles can get subsidies that aim to incentivize the purchase of climate-friendly cars. 

The law lifted a cap on how many cars can be eligible, but also added new hurdles, specifically pertaining to where the vehicles’ battery minerals are sourced and where the batteries are manufactured.

Manchin has said that these stipulations will ensure that the adoption of these vehicles will lead to more domestic manufacturing jobs and security in mineral supply chains, but opponents say they will make it difficult for many electric vehicles to actually qualify for the credit. 

Under the law, a new vehicle would be eligible for half of the $7,500 if a portion of its battery components are manufactured or assembled in North America and the other half if a portion of the minerals in its battery are refined or processed in countries with which the U.S. has a free trade agreement. 

A vehicle could also be eligible for the second half of the credit if the minerals used in its battery were recycled in North America. 

While those stipulations were supposed to take effect at the start of the year according to the law, the Biden administration delayed them in December until the issuance of Friday’s guidance.

Manchin at the time took issue with both the delay and other interpretations of the law held by the administration. 

The new guidance, which lays out how the stipulations will be implemented, says that now the stipulations will be effective for vehicles placed in service after April 17, the day the draft guidance will officially publish in the Federal Register. 

The guidance also offers a definition for a free trade agreement that could include additional countries, including Japan, with which the U.S. recently signed a minerals agreement. 

The West Virginia senator, in a new written statement, expressed disagreement with the new guidance, though his statement did not point to any specific provisions. 

“Yet again – the guidance released by the Department of Treasury completely ignores the intent of the Inflation Reduction Act,” Manchin said. 

“It is horrific that the Administration continues to ignore the purpose of the law which is to bring manufacturing back to America and ensure we have reliable and secure supply chains. American tax dollars should not be used to support manufacturing jobs overseas,” he added.

Meanwhile, the Alliance for Automotive Innovation, an auto industry trade group, reiterated concerns about the battery minerals requirement in a new blog post. 

“This latest turn will further reduce the number of eligible EVs. Fewer vehicles (and fewer customers) will qualify for the full $7,500 credit in the near term,” said the post from the group’s president and CEO John Bozzella.

Bozzella added that his organization has urged the department to consider a trade deal with the European Union and that discussions between the U.S. and its allies are ongoing.