Biden Administration to Clarify EV Tax Credit Rules Amid Controversy

Automakers may receive temporary relief from restrictions on EVs with battery parts from China, as IRS guidance on 'foreign entities of concern' is due this week.

• The Biden administration is expected to announce on Friday the specifics of what will disqualify EVs from eligibility for the $7,500 subsidy, with potential temporary reprieve from proposed restrictions on EVs containing battery parts or materials coming from China.
• The requirements, part of Biden’s climate law, will not allow tax breaks for vehicles containing battery components or critical minerals from foreign entities of concern starting in 2024 and 2025.
• Tesla has already informed customers that the new rules will likely reduce or remove the tax credit for Tesla vehicles next year.
• Democratic Sen. Debbie Stabenow of Michigan has expressed support for the concerns of the automakers, while Sen. Joe Manchin plans to push back if the administration softens its stance on EV materials coming from adversarial nations.
• The IRS guidance on how it will define 'foreign entities of concern' is due later this week, which should clarify how much Chinese content makes an EV ineligible for a tax credit.

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