The Treasury Department and IRS announced on Thursday that they are delaying restrictions on which electric vehicles can be eligible for tax credits under Democrats’ climate and tax bill from earlier this year, drawing ire from Sen. Joe Manchin (D-W.Va.).
The legislation, known as the Inflation Reduction Act, removed caps on how many electric vehicles would be eligible for consumer tax credits, but added new stipulations regarding the manufacturing of and sourcing of minerals for electric vehicle batteries.
The law says that these stipulations will take effect when the Treasury issues guidance for their implementation, which was supposed to happen “not later than December 31.”
But the Treasury said on Thursday that the guidance will not be ready until March and that in the meantime it will continue to use prior battery capacity requirements to determine if a vehicle can meet the credits.
The stipulations in the Inflation Reduction Act were expected to create some new hurdles, requiring that at least 50 percent of the value of the battery components be manufactured or assembled in North America in order to be eligible for a $3,750 credit.
Another $3,750 credit is available to electric vehicles if 40 percent of the value of the minerals contained in its battery are mined or processed in countries where the U.S. has a free trade agreement. In lieu of being mined or processed in such countries, the minerals could instead be recycled in North America to meet the second requirement.
Industry stakeholders said that the minerals requirements was expected to be particularly difficult to meet and could hamper electric vehicle adoption in the short term.
The provisions were likely included to secure Manchin’s support for the legislation, as the senator had previously raised concerns about electric vehicle tax credits and the supply chains for the minerals used to build them.
Manchin, in a written statement on Thursday, slammed the Treasury’s announcement.
“The intent of the Inflation Reduction Act was clear — bring our energy and manufacturing supply chains onshore to protect our national security, reduce our dependence on foreign adversaries and create jobs right here in the United States,” he said.
“The information released today from the Treasury Department outlining how they will be implementing the commercial and consumer EV tax credits bends to the desires of the companies looking for loopholes and is clearly inconsistent with the intent of the law,” he added.
The senator called on the department to “pause the implementation” of the credits until the guidance is issued.
The Treasury, meanwhile, said that its latest announcement, which also includes information on the expected guidance, “reflects months of working through significant complexities and consulting with technical experts across the federal government on battery components and critical minerals.”
The agency noted that it is in the process of reviewing thousands of public comments on the issue.
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