Senator Joe Manchin this week introduced a bill seeking to delay federal EV tax credits, claiming the Treasury Department isn't adhering to recently enacted rules.
The federal tax credit of up to $7,500 for qualifying vehicles was re-upped under the Inflation Reduction Act (IRA) passed last year, but with added requirements including one that EVs and their battery packs be assembled in North America.
Volkswagen ID.4 built at Chattanooga
The Treasury Department has delayed full guidance on the battery component of the rules to March, but allowed the rest of the program to be implemented January 1. In the meantime many vehicles that most certainly won't be eligible for the tax credit as it was passed by the IRA are able to claim a full credit.
So Manchin wants the Treasury Department to stop issuing tax credits for vehicles that have foreign-assembled battery packs or minerals sourced from outside the regular U.S. trade sphere. In a press release, he described the IRA as "first and foremost an energy security bill," saying EV tax credits are needed to protect domestic supply chains and ensure the U.S. is "not beholden to countries that don’t share our values."
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Separately, the new rules will also require dramatically different reporting from automakers and sellers, including new metrics and data streams that some companies were not previously keeping, so just proving compliance will be more complex.
For now, though, there's another potential way for nearly any EV to net a tax credit. The IRA created a tax loophole in the associated 45W for commercial vehicles, allowing leased passenger vehicles—even imports—to claim government money, provided there's a captive lease arm to issue the lease.
Some brands, such as Lucid, are already tapping into that to get credits for luxury vehicles that exceed price caps set by the IRA. And federally subsidized foreign luxury EV leases, it seems, may be just around the corner.