With a revised $7,500 electric car tax credit going into effect January 1, the U.S. Treasury Department announced Monday that it would delay publication of its proposed guidance regarding the sourcing of batteries for electric vehicles until March.
This announcement may mean that some electric cars will be eligible for a short window of eligibility before battery rules become effective in 2023.
Complex restrictions are imposed by the $430 billion Inflation Reduction Act. These tax credits can only be used to purchase critical minerals and components of batteries. The law, signed by President Joe Biden on August 3, limits EV tax credit to vehicles built in North America. It was partially intended to wean the United States from batteries from China which currently account for 70% of the global supply.
It only allowed the Treasury Department to finish year-end in order for them to resolve difficult questions regarding battery sourcing rules.
Certain requirements regarding tax credits will take effect immediately on January 1, including new income caps and lower retail prices. Treasury announced Monday that tax credit could be available to some buyers for electric vehicle purchases. However, the final rules on battery sourcing will still need to be followed.
Due to be delayed by the Treasury until March, the requirements for $3,750 are contingent upon at least 40% of critical minerals in the battery being extracted, processed, or recycled in North America.
For the $3,750 additional cost, at least half of all battery components must have been manufactured in North America. These percentages increase each year.
Washington is being pressed by many countries to provide a wide definition of free trade. However, other countries and automakers from abroad want different interpretations.
Treasury stated that it would “release information about the expected direction” of its rules by December 31. Treasury stated that the “critical mineral and battery components requirements will take effect only when Treasury issues this proposed rule.”
General Motors Co., and Tesla Inc., vehicles are now eligible for EV credit credits starting Jan. 1, after Congress lifted the per-manufacturer limit on EV tax incentives in August.
Uncertain if Treasury would address any other issues by December 31, including whether it will permit automakers to lease vehicles to consumers to get commercial clean vehicle credit.
