On September 22, the Commerce Department published a final rule implementing the national security-related restrictions and obligations on recipients of incentive funds under the CHIPS and Science Act of 2022 (the “CHIPS Act”). The final rule clarifies in some respects, and substantially expands in other respects, the definition of “foreign entity of concern” that appeared in Commerce’s proposed rule, issued in March.
When Commerce issued its proposed rule, the Treasury Department cross-referenced Commerce’s definition of “foreign entity of concern” in Treasury’s concurrently proposed regulations for the CHIPS Act’s tax credit under section 48D of the Internal Revenue Code. We commented at the time that if Treasury were to adopt that same definition for the section 30D electric vehicle (EV) credit under the Inflation Reduction Act (the “IRA”), there could be a significant reduction in the number of vehicles eligible for such credits relative to market expectations. Treasury issued proposed regulations for other aspects of the 30D credit one week after the CHIPS Act guidance, but did not include an interpretation of the term “foreign entity of concern,” and to date has yet to do so (though it has signaled an intent to do so later this year).Continue Reading Commerce Final Rule Heightens Uncertainty as to How Treasury Will Interpret “Foreign Entity of Concern” for EV Credits Under Section 30D of the Inflation Reduction Act