Treasury Finalizes Rules to Cut Consumer Costs, Boost Clean Vehicles & Energy Security
TL/DR –
The US Department of the Treasury and the Internal Revenue Service have released final rules on the clean vehicle provisions of the Inflation Reduction Act, which have led to decreased costs for consumers and increased private sector investment in the clean vehicle and battery supply chain. The Act’s clean vehicle credits offer consumers up to $7,500 off on a new vehicle, and have led to the development of new manufacturing ecosystems across the country. The final rules also include details on credits for new clean vehicles and the previously-owned clean vehicle credit, as well as new measures to ensure supply chain integrity.
US Treasury and IRS Release Final Rules on Clean Vehicle Provisions
The US Department of the Treasury and the Internal Revenue Service (IRS) have unveiled the final rules regarding the clean vehicle provisions of the Inflation Reduction Act (IRA). The new guidelines are anticipated to lower costs for consumers, foster a surge in US manufacturing, and strengthen energy security through resilient supply chains.
Following the election of President Biden, the US clean vehicle and battery supply chain has seen an astounding $173 billion in private-sector investment. Secretary of the Treasury Janet L. Yellen stated that the Inflation Reduction Act has sparked an investment and manufacturing boom in the United States, with clean vehicle credits saving consumers up to $7,500 on a new vehicle.
John Podesta, Senior Advisor to the President for International Climate Policy, acknowledged the rapidly growing EV marketplace and the clear movement towards a future with more affordable, American-made EVs and plug-in hybrids.
The final rules issued aim to bolster and secure supply chains, providing certainty for manufacturers and taxpayers. The Treasury Department and IRS have outlined definitions and rules concerning taxpayer and vehicle eligibility for new clean vehicles and previously-owned clean vehicle credits. The Department of Energy (DOE) is also issuing final interpretive guidance related to Foreign Entity of Concern for the 30D clean vehicle credit and the battery manufacturing grant program.
Regarding the 30D clean vehicle credit of up to $7,500 and 25E previously owned clean vehicle credit of up to $4,000, rules are now in place for transferring these credits to registered dealers. This mechanism has allowed more than 100,000 credits to be transferred at the point of sale this year, totaling in over $700 million in upfront savings for consumers.
The rules also introduce robust program integrity measures, including upfront review of compliance with critical mineral and battery component requirements. The IRS, with assistance from DOE, will conduct a review of materials sourcing requirements to ensure qualified manufacturers are accurately representing their battery contents.
Calculating $3,750 Critical Minerals Credit
The introduced rules provide a new test for determining qualifying critical mineral content, known as the traced qualifying value add test. This test requires manufacturers to conduct detailed supply chain tracing for extraction, processing, and recycling.
Foreign Entity of Concern
For the Foreign Entity of Concern (FEOC) restriction, the final regulations enforce allocation-based accounting rules for critical minerals in a battery cell. The regulations also identify certain impracticable-to-trace battery materials and specify transition rules for these materials until 2027.
The Biden-Harris Administration is set to use every tool available to build secure, resilient, and trusted supply chains for EVs and EV batteries, creating good-paying jobs throughout the EV supply chain. The White House plans to convene domestic critical mineral producers, battery manufacturers, and automakers to identify opportunities to accelerate growth in this sector.
Press release from U.S. Department of Treasury.
—
Read More US Economic News