Manchin Submits Comments to U.S. Treasury on 30D New Clean Vehicle Tax Credits

June 12, 2023

Washington, DC – U.S. Senator Joe Manchin (D-WV), Chairman of the U.S. Senate Energy and Natural Resources Committee, submitted comments to the U.S. Department of the Treasury on the proposed rulemaking for 30D new clean vehicle tax credits in the Inflation Reduction Act (IRA) filed in the Federal Register on April 17, 2023.

A sample of Chairman Manchin’s comments are below. To read the full comments, please click here.

The proposed rule 

Regrettably, it appears that the Treasury has seriously misconstrued the plain language and clear purpose of the critical minerals and battery component requirements in subsection (e).  Either that or the Treasury thinks it has a better approach than the one enacted by Congress and it is using its subsection (e)(3) rulemaking authority to substitute its approach for the one that Congress enacted into law.  But the Treasury has no such power.  As the Supreme Court has previously admonished the Treasury, “[t]he power … to prescribe rules and regulations … is not the power to make law … but the power to adopt regulations to carry into effect the will of Congress as expressed by the statute.” The proposed rule deviates from the will of Congress in at least three major respects.

1. The “50% of value added test”

            First, § 1.30D-3(c)(17) of the proposed rule creates a new “50% of value added test,” which the Treasury proposes to use to determine whether the critical minerals requirement in section 30D(e)(1) is met.  This new test is not found in section 30D(e) or anywhere else in the law.  It is purely of the Treasury’s own making.  This new, unauthorized, and unlawful test frustrates the purpose of the statutory test.  It both bifurcates the unified “extraction or processed” value test that Congress provided in section 30D(e)(1)(A)(i), and it cuts in half the percentage requirements prescribed by Congress in section 30D(e)(1)(B).

1. “Constituent materials”

The second major deviation from the statutory scheme is in the proposed rule’s use of the concept of “constituent materials” to count the value added by manufacturing processes as part of the value of the critical minerals rather than part of the value of the battery components.  The term “constituent materials” is not found in section 30D(e), though it is used in the definition of battery “processing” in section 40207 of the Infrastructure Investment and Jobs Act. Section 40207 established a “battery material processing grant” program at the Department of Energy, and broadly defined “battery material” to mean both “raw and processed” materials used in battery components.  Section 40207 of the Infrastructure Act, unlike section 30D, did not attempt to draw a bright line between the processing of critical minerals used in battery components and the manufacturing processes used to make those components.  As used by the Department of Energy, the term straddles the line between critical minerals and battery components.

Moreover, the constituent materials definition ignores the very purpose of section 30D as it has been amended by the Inflation Reduction Act. As the Treasury acknowledges in the preamble to its proposed rule, the purposes of the Act’s amendments to section 30D are not only “to promote the purchase and use of new clean vehicles … and to achieve significant carbon emissions reductions,” but “to promote resilient supply chains and domestic manufacturing … [and] to protect against improper credit claims….” The proposed rule defeats the latter purposes by discouraging investment in domestic battery component production capacity, perpetuating our dependence on foreign supply chains, and awarding costly tax credits to subsidize production of electric vehicle battery components outside of North America.

1. Free trade agreement countries

The third major deviation from the statute is in the definition of the term “country with which the United States has a free trade agreement in effect.”  The Treasury proposes a two-part definition.  The first part, in §1.30D-3(c)(7)(ii), mostly reflects the list of countries with which the United States does, in fact, currently have a free trade agreement in effect.  To this list, however, the Treasury has added Japan, with which the United States does not have a “free trade agreement” within the meaning of the statute. 

The problem here is that not every foreign trade agreement is a “free trade agreement” as that term is generally understood and as Congress used it in section 30D(e)(1)(A)(i)(II). Although the term “free trade agreement” is not defined in the statute, it has a well-established meaning. A “free trade agreement” is an agreement between two or more countries in which each removes tariff and other restrictions on “substantially all” trade between the parties, not just a mineral here or a mineral there.

Conclusion

Congress rewrote section 30D to promote reliable critical mineral and battery manufacturing supply chains needed to supply the growing demand for electric vehicles.  It prescribed carefully tailored requirements in subsection (e) to serve this purpose.  It then asked the Treasury to issue regulations “to carry out the purposes of this subsection.”

The proposed regulations do not carry out Congress’s purposes.  They alter and weaken the requirements that Congress prescribed by adding a “50% of value added test,” treating manufacturing processes as mining processes, and treating non-free-trade-agreement countries as if they were free-trade-agreement countries.  Each of these is “an attempted addition to the statute of something which is not there.”

The notice of proposed rulemaking asks for comments on the proposed regulations. My comment is simple: Follow the law.

Timeline of Senator Manchin’s Work to Strengthen America’s Domestic Electric Vehicle Battery and Battery Component Supply Chain:

• On April 20, 2023, Senator Manchin convened an Energy and Natural Resources Committee hearing to examine the President’s budget request for the U.S. Department of Energy for fiscal year 2024. During the hearing, Senator Manchin pressed Secretary of Energy Jennifer Granholm on the administration’s botched implementation of the Inflation Reduction Act, including the implementation of electric vehicle tax credits. Senator Manchin said in part: “The EV tax credits for cars, my personal belief is we didn’t need any.  But with that being said, I said if we’re going to do it, let’s get something for it. And changing to electric [vehicles] when we had dependence on a foreign supply chain, mostly China — that doesn’t make any sense. So, we put this together saying $3,750 would come if you secured and sourced and do the processing in North America or countries with a free trade agreement. And then the other $3,750 would be for manufacturing the battery in North America… I am so upset about this because [the administration] is doing every they can to bust the budget, what we promised the American people that bill would cost.”
• On March 31, 2023, Senator Manchin released a statement following the Department of the Treasury’s release of EV tax credit guidance. Senator Manchin wrote in part:“Yet again – the guidance released by the Department of the Treasury completely ignores the intent of the Inflation Reduction Act. It is horrific that the Administration continues to ignore the purpose of the law which is to bring manufacturing back to America and ensure we have reliable and secure supply chains.”
• On March 10, 2023, Senator Manchin published an op-ed in The Houston Chronicle discussing Senator Manchin’s dissatisfaction with the way the Inflation Reduction Act is being implemented. Senator Manchin wrote in part: “For example, the Department of Treasury has grossly mishandled the implementation of the electric vehicle tax credits designed to curtail China’s dominance over this critical industry. Instead of abiding by the law, the department pandered to climate activists. With this in mind, I was unable to support Danny Werfel, the administration’s nominee to serve as commissioner of the Internal Revenue Service.”
• On March 9, 2023, Senator Manchin responded to comments from White House Senior Adviser John Podesta that Chinese companies will be “big players” in growing domestic energy production using the Inflation Reduction Act (IRA) and the Chips and Science Act. Senator Manchin wrote in part: “It is beyond irresponsible for someone speaking on behalf of the White House to not only condone but also advocate for sending American tax dollars to Chinese companies. That is not consistent with either the IRA or the CHIPS + Science Act, which had widespread bipartisan support due to concerns about Chinese supply chains. These words are especially concerning as rumors circulate about the Administration thoughtlessly considering opening up the EV credit’s eligibility beyond our free trade agreement partners and allow the laundering of Chinese minerals and materials through Trojan horse agreements.”
• On February 2, 2023, Senator Manchin joined a group of bipartisan Senate colleagues to send a letter to Secretary of the Interior Deb Haaland urging the Secretary to reconsider adding copper as an official U.S. Geological Survey Critical Mineral. Electric vehicles and vehicle batteries require copper, and adding copper to the critical mineral list would help ensure a secure and reliable domestic supply chain.
• On February 2, 2023, Senator Manchin, Chairman of the Senate Energy and Natural Resources Committee, convened a hearing to examiner the Department of Energy’s implementation of the bipartisan Infrastructure Investment and Jobs Act. During the hearing, Senator Manchin questioned the Deputy Secretary of Energy about Chinese influence in America’s electric vehicle battery supply chain.
• On January 26, 2023, Senator Manchin took to the Senator floor to ask for unanimous consent to pass his bipartisan American Vehicle Security Act (AVSA), legislation introduced in response to the U.S. Department of Treasury’s failure to release guidance to implement electric vehicle tax credits by the deadline required in the Inflation Reduction Act (IRA). The AVSA would fulfill Congressional intent by ensuring the 30D new consumer vehicle tax credit is only made available according to the IRA by requiring compliance with battery manufacturing and critical mineral sourcing requirements as of January 1, 2023.
• On January 25, 2023, Senator Manchin introduced the American Vehicle Security Act (AVSA) to to direct the U.S. Department of Treasury to implement the new 30D consumer vehicle tax credits for vehicles according to the law by requiring compliance with battery and battery material sourcing requirements as of January 1, 2023.
• On December 29, 2022, Senator Manchin released a statement urging the U.S. Department of the Treasury to pause the implementation of the 45W commercial vehicle and 30D new consumer vehicle tax credits until Treasury is able to issue guidance in line with the intent of the Inflation Reduction Act to onshore supply chains, protect our national security, reduce our dependence on foreign supply chains and create U.S. jobs.
• On December 13, 2022, Senator Manchin sent a letter to U.S. Treasury Secretary Janet Yellen calling on Secretary Yellen to release guidance that ensures Section 45W Qualified Commercial Clean Vehicle Credits — included in the Inflation Reduction Act — are intended only for commercial use.
• On December 13, 2022, Senator Manchin, Chairman of the Senate Energy and Natural Resources Committee, convened a full committee hearing to examine the Department of the Interior’s implementation of the Bipartisan Infrastructure Law. During the hearing, Senator Manchin questioned Deputy Secretary of the Interior Tommy Beaudreau about the Bureau of Land Management’s delay in permitting critical minerals projects.
• On April 7, 2022, Senator Manchin, Chairman of the Senate Energy and Natural Resources Committee, convened a full committee hearing on the scope and scale of critical mineral demand and recycling of critical minerals. Senator Manchin highlighted the need to responsibly develop a domestic critical minerals supply chain to meet growing demand and ensure America’s energy and national security
• On March 31, 2022, Senator Manchin, Chairman of the Senate Energy and Natural Resources Committee, convened a full committee hearing to discuss the opportunities and challenges facing domestic critical mineral mining, processing, refining and reprocessing. Senator Manchin called for a North American energy alliance that would utilize our manufacturing base and leverage our relationships with friendly nations, like Australia and Canada, to ensure that their critical minerals are sent here for processing instead of China.
• On December 21, 2020, Senator Manchin, serving as Ranking Member of the Senate Energy and Natural Resources Committee, announced that the Energy Act of 2020 would be included in the Consolidated Appropriations Act of 2021. The Energy Act of 2020 was the first comprehensive, all-of-the-above update to our nation’s energy policies in 13 years that included the American Mineral Security Act to reduce the United States’ reliance on foreign minerals and
• On July 16, 2019, Senator Manchin’s Rare Earth Element Advanced Coal Technology Act (REEACT) passed out of the Senate Energy and Natural Resources Committee. The bill would allow for the development of technology capable of extracting rare earth elements from coal and coal by-products to re-establish a U.S.-based supply chain.

To read the full comments, please click here.