US Treasury Issues Proposed Rules on IRA Clean Vehicle Credits
The Treasury Department has proposed rules for the IRA's $7,500 clean vehicle tax credit, clarifying the strict North American and FTA-partner sourcing requirements for battery components and critical minerals that automakers must now meet.
The U.S. Treasury Department has issued a notice of proposed rulemaking to clarify the complex sourcing requirements for the Section 30D new clean vehicle tax credit, as amended by the Inflation Reduction Act. The guidance is critical for automakers, battery manufacturers, and mineral suppliers, as the full $7,500 credit per vehicle is now split into two parts, each with stringent prerequisites: one for critical minerals and another for battery components.
Sophisticated counsel and clients in the automotive and energy sectors care deeply because these rules dictate which vehicles will be eligible for a credit that heavily influences consumer demand. Compliance requires a fundamental restructuring of supply chains to favor processing and manufacturing in North America or in countries with which the U.S. has a free trade agreement. The proposed regulations outline multi-step procedures for calculating the value percentages for both minerals and components. Counsel should analyze these proposed tests to advise on supply-chain strategy and consider submitting comments on the rulemaking.