Treasury Seeks Comments on How to Measure Value of Battery, Determine Where Assembled
Although the IRS has no ability to push out the deadlines for battery or vehicle assembly in North America, or the deadlines for sourcing critical minerals domestically or from FTA partners, it is seeking comments on how to determine where assembly was done, and how to define value, all of which may make it easier or harder for electric vehicles to qualify for consumer tax credits.
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The Treasury Department announced Oct. 5 that it would like input on how to write regulations needed to implement the Inflation Reduction Act, including in the area of EV vehicles. There have been questions about whether any vehicles could qualify for the full $7,000 credit in 2023, and assertions that no vehicle could qualify in 2024, when battery components from China would make half the credit out of reach.
Comments are due by Nov. 4, but the department said it will consider later comments if it's possible to do so without delaying the regulations.
The department asked: "What factors and definitions should be considered to determine the place of manufacture or assembly of the components of a battery of a clean vehicle and, in particular, to determine whether manufacture or assembly occurred in North America? What factors and definitions should be considered to determine the total value of the components contained in the battery of a clean vehicle, and the percentage of that total value attributable to components that were manufactured or assembled in North America?"
Half the credit is tied to the sourcing of critical minerals. The department asked, "What factors and definitions should be considered to determine the place of extracting or processing such critical minerals, and, in particular, to determine whether extracting or processing occurred in the United States or in any country with which the United States has a free trade agreement in effect?" And, it asked, how should the government assess the value of the minerals in the battery, and the value from FTA partners or the U.S.?
It asked about supply chain tracking methodologies both for these segments, and to verify that a manufacturer is not using inputs from a "foreign entity of concern." That is understood to mean China and Russia, but the department also asked: "Is guidance needed to clarify the definition of 'foreign entity of concern'?"
Comments can be submitted at regulations.gov, IRS-2022-0046.