Washington, D.C. — House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-WA); Subcommittee on Energy, Climate, and Grid Security Chair Jeff Duncan (R-SC); Subcommittee on Oversight and Investigations Chair Morgan Griffith (R-VA); and Subcommittee on Environment, Manufacturing, and Critical Materials Chair Bill Johnson (R-OH), on behalf of the Energy, Oversight, and Environment Subcommittees, today sent a letter to Environmental Protection Agency Administrator Michael Regan. The Chairs’ letter raised concerns that loopholes in the so-called “Inflation Reduction Act’s (IRA) electronic vehicle (EV) tax provisions might lead to an increased reliance on China. 

KEY EXCERPT: 

“We are concerned that EPA potentially overestimates the impact of the IRA’s tax credits in supporting domestic supply chains for critical minerals and electric vehicle batteries. EPA asserts that widespread vehicle electrification ‘will not lead to a critical long-term dependence on foreign imports of minerals or components’ and that increased demand will not threaten national security. However, increased adoption of electric vehicles to meet the demands of this rule could force the United States to rely on foreign adversaries such as China, which dominates much of the electric vehicle supply chain.” 

BACKGROUND: 

• The IRA permits individuals to claim a federal income tax credit for purchasing a qualifying new clean vehicle. 
• The IRA placed restrictions on which vehicles are eligible for this credit, including: 
• Critical Minerals Requirement: A certain percentage of the vehicle’s battery be extracted or processed in the United States or any country with which the United States has a free trade agreement, or recycled in North America, starting with 40 percent for vehicles placed in service on or after April 18, 2023, and before January 1, 2024, and escalating to 80 percent for vehicles placed in service after December 31, 2026; 
• Battery Components Requirement: A certain percentage of the value of the vehicle’s battery components must be manufactured or assembled in North America (battery components requirement), starting with 50 percent for vehicles placed in service on or after April 18, 2023, and before January 1, 2024, and escalating to 100 percent for vehicles placed in service after December 31, 2028; and  
• Final Assembly Requirement: Final assembly of the vehicle must occur in North America.  
• The IRA also added a credit for qualified commercial clean vehicles, which allows businesses to claim a federal income tax credit for clean vehicles dedicated to commercial use, and not for resale.  
• Note: This credit, the Commercial Clean Vehicle Credit, does not include tax credit eligibility limitations—such as the critical minerals requirement, the battery components requirement, or the final assembly requirement. 
• As Members discussed at a recent hearing on the Committee’s Subcommittee on Oversight and Investigations, car manufacturers may exploit the absence of the critical minerals requirement, the battery components requirement, and the final assembly requirement in the Commercial Clean Vehicle Credit. 
• Reportedly this “loophole” is “quickly changing the behavior of foreign automakers.” 
• For example, Hyundai is “direct[ing] many more of its [electric vehicle] customers to leases.” 

The Chairs requested that Administrator Regan respond to the following questions by July 10, 2023: 

• Prior to issuing this final rule, does the EPA plan to analyze the extent to which vehicle manufacturers and retailers may focus on increasing leases of electric vehicles, as compared to those purchased? 
• If so, how does the EPA plan to do so? 
• If not, why not? 
• Has the EPA communicated, or does it plan to communicate, with any other relevant entities or agencies, such as the Department of Treasury, regarding the extent to which stricter requirements for vehicles eligible for the Clean Vehicle Credit than the Commercial Clean Vehicle Credit may lead to an increase in the number of leased electric vehicles, as compared to those purchased? 

CLICK HERE to read the full letter.