WASHINGTON — Sen. Joe Manchin said he’s prepared for a fight over how the U.S. Treasury Department might interpret battery production and critical mineral sourcing rules in the Inflation Reduction Act’s consumer tax credit for new electric vehicles.
“I think they’re going to try to screw me on this,” Manchin, a West Virginia Democrat, said at an industry event here Wednesday. “I’m willing to go to court. I’m willing to stop it all.”
At issue, Manchin said, is how Treasury might define key terms such as processing in the credit’s EV battery sourcing rules that could go against the law’s intent of U.S. energy security and reducing dependence on foreign adversaries such as China for battery materials and manufacturing.
“What I’m most concerned about is how they classify the processing with manufacturing,” Manchin told Automotive News. “Manufacturing is meant to bring manufacturing back to the United States. It’s not basically allowing everyone to put all the parts and build everything you can for that battery somewhere else and then send it here for assembly.”
The Treasury Department is expected to release its much-anticipated guidance on tax credit’s critical mineral and battery component requirements by Friday after missing its statutory year-end deadline in 2022.
After it is issued, the $7,500 tax credit for new EVs, known as 30D, will be parceled out in two halves for qualifying vehicles and buyers. Half is based on meeting escalating requirements for battery components to come from North America. The other half is based on critical minerals coming from the U.S. or free-trade partners.
In January, Manchin failed to pass a bill that would have amended the tax credit so that the effective date of the required battery sourcing would no longer be tied to Treasury’s release of proposed guidance on the restrictions.
While Treasury’s delay opened up more EVs to qualify for the full $7,500 credit during the interim, the Alliance for Automotive Innovation trade group has said no vehicles would be eligible for a full credit after the increasingly stringent sourcing rules take effect.
Once the guidance is released, the credit will require 40 percent of a battery’s critical minerals to be extracted or processed in the U.S. or in a country where the U.S. has a free-trade agreement in effect, or from materials that were recycled in North America. By 2027 — the last year of incremental increases — it will require 80 percent.
The credit also will require 50 percent of the battery components to be made or assembled in North America. By 2029 — the last year of increases for battery component production — it will require 100 percent.
Manchin’s comments come a day after the U.S. and Japan announced a trade agreement on critical minerals used in EV batteries. It is not yet clear whether the trade deal would qualify Japan-sourced critical minerals under the tax credit.
U.S. officials also have been negotiating with the European Union on a battery critical minerals deal.
“I’m fine with the processing in those areas. I’m just not fine with you all completing the project, and all we’re going to end up is assembling here,” Manchin said. “That is not the bill. That’s not how we wrote it, and it’s not how it should be implemented.”