On December 1, the Department of Energy (DOE) and the Department of the Treasury (Treasury) published highly-anticipated proposed rules that will significantly impact China’s and other covered nations’ roles in the battery supply chain for electric vehicles (EVs) sold to U.S. consumers. The proposed DOE Interpretive Rules and proposed Treasury Regulations interpret the term “foreign entity of concern” (FEOC) in the same manner for purposes of the Battery Manufacturing and Recycling Grant program under the Bipartisan Infrastructure Law and the EV credit under section 30D of the Internal Revenue Code introduced by the Inflation Reduction Act (IRA). The proposed rules take a more nuanced approach than the proposed and final rules that appeared in the context of the CHIPS and Science Act over the past year (discussed here, here, and here), but nevertheless purport to adopt bright-line rules. As we have previously noted, adopting a different approach to such term in section 30D is justified to balance the IRA’s dual policy goals of onshoring and “friendshoring” the U.S. EV battery supply chain while making credits sufficiently available to accelerate the electrification of the U.S. consumer vehicle fleet.
IRS issues notices requesting comments on IRA clean energy tax credits
On October 5, 2022, the Treasury Department and the IRS issued notices requesting comments on different aspects of the energy tax benefits in the Inflation Reduction Act (“IRA”). All comments are due by Friday, November 4, either electronically on www.regulations.gov or alternatively by mail to the IRS. Written comments submitted after that date will be considered as long as such consideration will not delay the issuance of guidance.
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