The U.S. Treasury DepartmentTreasury Department will release guidance next week on sourcing for electric vehicle battery tax subsidies under President Joe Biden's climate change law, the first in a series of highly anticipated rules to determine how broadly credits can be used.
The automobile, battery and clean energy industries have been waiting for guidance on complex questions governing eligibility for hundreds of billions of dollars of incentives in the Inflation Reduction Act, which was signed into law last year.
Treasury will follow the guidance on bonus tax credits for clean energy projects in fossil fuel-dependent communities, those that pay workers prevailing wages and employing apprentices after outlining battery sourcing rules, officials said.
It will also issue guidance on selling tax credits and making them refundable, which allows entities without tax liability to use them.
Treasury didn't say when future guidance announcements would be made.
The rules aim to give the United States a break from dependence on China, which dominates global supply chains of products like EV batteries and solar panels. Biden hopes to fight climate change by decarbonizing the U.S. economy.
A $7,500 EV tax credit is only available to North American-assembled vehicles that meet certain local battery production and mineral extraction processing standards, according to the IRA specifices.
In December, Treasury decided not to issue guidance on battery sourcing rules until March, giving some EVs not meeting new requirements a few months of eligibility in 2023 before battery rules take effect. Senate Energy Chairman Joe Manchin criticized the decision, saying it created an opportunity to circumvent stringent supply chain requirements. Half of the EV tax credit is contingent on at least 40 per cent of the value of the critical minerals in the battery being extracted or processed in the United States or a country with a U.S. free-trade agreement or recycled in North America.
The other half requires the manufacturing or assembly of at least 50 per cent of battery components in North America.
Foreign suppliers have objected, saying their products wouldn't qualify for credits.