Sen. Joe Manchin is lobbing fresh accusations at the Treasury Department, asserting it is either misreading or purposefully undermining the newly minted Inflation Reduction Act as it doles out lucrative tax credits for new electric vehicles.
The Senate Energy and Natural Resources Committee chair in comments to Treasury on Sunday blasted guidance the department released in March to implement Section 30D new clean vehicle credits — worth up to $7,500 each.
Manchin said the proposal deviates from the underlying statute in at least three “major” ways, including loosening critical mineral content requirements and expanding free-trade agreements.
“My comment is simple: Follow the law,” the West Virginia Democrat wrote.
The comments reflect a deepening standoff between Manchin, who largely wrote and helped pass the landmark climate law, and his fellow Democrats and President Joe Biden in a conflict that’s playing out ahead of Manchin’s potential reelection campaign in West Virginia.
They also offer a more substantial reading of Manchin’s complaints with Treasury’s implementation of the IRA, as well as hints at the legal strategy the senator may be assembling. The lawmaker said in March he’d consider going to court over the rule.
At the outset of his comments, Manchin said the original goal of the EV tax credit as it was written in 2008 — making plug-in vehicles more affordable and widely adopted — has been achieved and that, according to the White House, there are now more than 3 million EVs on U.S. roads.
What hasn’t been accomplished, the senator said, is coupling that effort with sufficient incentives to extract critical minerals, process them and assemble EV batteries in the U.S. and in countries that have a free-trade agreement with the U.S.
Manchin went on to highlight three specific but complicated concerns about how Treasury is implementing the law.
First, Manchin accused Treasury of creating a “new, unauthorized, and unlawful test” to judge whether a vehicle’s battery meets the requirements of the critical minerals portion of the credit, in which a car can get as much as $3,750 if 40 percent of the critical minerals are extracted or processed in the United States or in a country that has a free-trade agreement with the United States, or are recycled in North America, a percentage that increases in future years.
Treasury proposed a “50% of value added” test, in which the department would judge minerals as meeting the standard if more than half of the value added to the minerals from either processing or extraction happens within a compliant country. Manchin said the test is “purely of the treasury’s own making” and not acceptable under the law.
Second, Manchin said Treasury should not have allowed a battery’s “constituent materials” to be counted under the critical minerals portion of the credit.
That definition allows companies to count the cost of some battery manufacturing steps — such as making cathode powder — to be considered part of mineral processing, which allows it to happen in free-trade-agreement countries outside of North America, Manchin argued.
“Once again, this is not what the statute says or what Congress intended,” he wrote.
Lastly, Treasury is being too liberal with its definition of a free-trade agreement for purposes of the critical minerals credit, Manchin said, by keeping open the possibility that the United States could reach deals with other countries that could be added to the list.
This includes Japan, with which U.S. Trade Representative Katherine Tai recently struck a minerals-specific trade deal, as well as economies with which the U.S. is negotiating more deals, like the United Kingdom and the European Union.
Manchin said those pacts shouldn’t apply unless they cover large portions of U.S. trade with those countries.
“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 the relevant section of the IRA, Manchin wrote.
Manchin has previously been open to letting “reliable trading partners” be included in the law’s free-trade-agreement group, including Japan, the European Union, France and the United Kingdom.
Public comments on the Treasury guidance are due Friday.