The Biden administration on Thursday outlined its plans to implement billions of dollars worth of tax credits for manufacturers producing clean energy products in the United States. The incentives are a key part of President Biden’s strategy to reduce the United States’ dependence on countries like China for electric vehicle production.
The proposed rules, released by the Treasury Department, explain how corporations can gain access to the more generous subsidies contained in the Inflation Reduction Act of 2022. The incentives, which are expected to provide companies with more than 100 thousand million dollars in savings over a decade, aim to encourage companies to produce solar panels, process minerals and manufacture electric vehicle components in the United States.
Biden and his top advisers have highlighted investments in clean energy as central to the administration’s strategy to revive American manufacturing, emphasizing investments in poor and rural parts of the country that have seen factories close in recent decades.
“Today’s announcement sets the stage for investing in a clean energy future here in the United States in ways that create good jobs for American workers,” Lael Brainard, director of the White House National Economic Council, said in a statement.
The promise of tax benefits has attracted investment in the United States, as well as controversy.
Chinese battery companies such as Gotion and Contemporary Amperex Technology Company have made multimillion-dollar investments in Michigan and Illinois, but have faced backlash from local officials and Republicans in Washington who view Chinese investments as a threat.
The administration has taken steps to limit the ability of Chinese companies to benefit from some of the new subsidies. For example, the Treasury Department outlined rules this month that stipulate that to qualify for up to $7,500 in tax credits, electric vehicles must be manufactured without components from countries considered foreign entities of concern, such as China, Russia. and North Korea.
But the manufacturing tax credits unveiled Thursday have no such restrictions. That could pave the way for Chinese companies to benefit from American subsidies if they set up shop in the United States.
Because of the way the law was written, the Treasury Department did not have the authority to include restrictions on foreign companies in the rules that will govern tax credits for investing in clean energy industrial facilities and critical minerals production. However, officials pledged to continue scrutinizing foreign investments for national security reasons.
“We have other tools that look at foreign direct investment in the United States, including CFIUS, which will look at foreign direct investment,” said Wally Adeyemo, deputy secretary of the Treasury, referring to the Committee on Foreign Investment in the United States. “Ultimately, for a company to have access to this credit, it has to add value here in the United States, hire American workers and pay American taxes.”
Adeyemo said that only 2 percent of clean energy investments made in the United States during the Biden administration have been made by Chinese companies and that the rest have been made by American companies or US allies.
Republicans in Congress have been calling on the Treasury Department to take steps to block Chinese investments. This week, Senator Marco Rubio of Florida and Representative Carol Miller of West Virginia unveiled legislation that would prohibit companies owned or controlled by a “foreign adversary” from receiving any advanced manufacturing tax credits.
Rubio criticized the existing legislation for “giving foreign adversaries the opportunity to profit from American tax dollars while putting American companies out of business.”
It has been difficult to quantify the final cost of the tax credits because it will depend on how aggressively companies decide to invest in clean energy projects.
The left-leaning Center for American Progress noted in a recent report that manufacturing credits were initially projected to cost $30.6 billion over a decade, but the Joint Committee on Taxation raised that estimate to $134.9 billion this year. . The Coalition for a Prosperous America, a conservative think tank, warned in a report this year that Chinese manufacturers could earn up to $125 billion in tax credits under the law.
