Feds Strengthen EV Tax Credit Rules

US Treasury Issues Guidance on Battery/Mineral Source Requirements

The US Treasury Department has released its eagerly anticipated guidelines for battery production and mineral sourcing, under the Inflation Reduction Act (IRA), which is going to be enforced beginning April. This was initially set to be published towards the end of last year; however, it may puzzle some consumers, so we have come up with the major requirements.

Commencing April 18, 2023, the $7,500 credit will be divided into two parts: fulfilling the criteria for battery components made in North America and sourcing essential minerals from the US or its free-trade comrades like Canada and Mexico.

At least forty percent of the value of minerals needed for battery production must derive from extraction or processing in either a US jurisdiction or any country holding an existing free-trade accord, with the other option comprising recycled components originating in North America.

By 2027 – the concluding year of yearly augmentations – it will swell to 80%. It goes further, necessitating that 50% of the worth of battery components be either manufactured or put together in North America. By 2029 this necessity will upgrade to 100%. Correspondingly to the minerals condition, the latter will also experience annual augmentations. This is where customers must take extra special notice.

Beginning in 2021, electric vehicles (EVs) with batteries containing any components produced by a “foreign entity of concern,” such as China, will no longer qualify for the full credit. This rule will become applicable to battery minerals in 2025. A list of “foreign entities of concern” will be published at a later date.

A source of disarray is which cars are presently able to meet all the necessary criteria. Up to the 29th of March, there existed 39 vehicles entitled to IRS recognition, including the Chevrolet Bolt EV and Bolt EUV, Model 3 Tesla, and Genesis Electrified GV70. This array was last re-done at the commencement of February.

It is anticipated that further vehicles will be eligible upon the automakers provision of mandatory information to the government. Note that some electric vehicles may only receive partial credit regarding the production of such products. Granting incentives for buying EVs is not the only aspiration with regards to this legislation, as domestic fabrication was a subject of debate between West Virginia Senator Joe Manchin and the Senate on Energy.

Yesterday, he threatened to take legal action against the Treasury Department if the regulations didn’t stretch far enough to include the production of battery components and acquisition of minerals from domestic sources. To this moment, Manchin has yet to give his opinion on the updated guidelines.

The regulations concerning battery minerals and processing are projected to shift as the U.S. is conducting debates with Japan and the European Union over the possibility of taking part in possible subsequent free trade pacts.