US Sen. Manchin requests review of key EV tax credit that could lead to overhaul

US Sen. Joe Manchin (D-W.Va.) escalated his opposition to the Biden administration's interpretation of a key electric vehicle tax credit by asking a congressional watchdog agency to issue an opinion that could open existing guidance to a Congressional overhaul.

The Senator sent a letter to the Comptroller General of the US Government Accountability Office (GAO) on Dec. 18 requesting the agency issue a legal opinion on whether guidance from the US Treasury Department on a major EV tax credit — created by section 30D of the US Inflation Reduction Act and worth up to $7,500 — is subject to review under the US Congressional Review Act (CRA).

In the letter, the senator takes issue with both initial guidance released in the US Federal Register in April, as well as draft language from Dec. 1 that outlined "foreign entity of concern" restrictions for material sourcing. If the agency decides the proposed rule is subject to the CRA, it could provide a path for Congress to block the implementation of the credit as written.

US mining companies and others allowed to supply tax-credit eligible raw materials to automakers stand to benefit if Manchin's stricter view of the law is upheld.

The GAO will likely issue a legal opinion, although it does not yet have a timeframe to do so, an agency spokesperson told S&P Global Commodity Insights.

"The [Treasury] Secretary's 'proposed regulations' do not 'carry out the purposes of' section 30D adopted by Congress," Manchin said in the letter. "They pursue, instead, the Administration's own unenacted policy preferences."

Sourcing rules in question

Manchin's major objections pertain to the Treasury Department's interpretation of sourcing requirements for critical minerals and battery components for credit-eligible vehicles.

Regarding the April guidance, Manchin said the Treasury Department's interpretation weakens critical minerals requirements by applying a "value added test" versus an "applicable percentage" threshold when it comes to the annually increasing portion of critical minerals used in a credit-eligible EV that must come from the US or one of its free trade partners. The senator also objected to the inclusion of "constituent materials" language in the guidance, saying that it blurs the line between critical mineral processing and battery component manufacturing requirements.

Manchin also reiterated past disagreements with the Treasury Department's interpretation of which trade agreements qualify as free trade agreements for the purpose of the credit. In Manchin's view, limited free trade agreements, such as the one that the US signed with Japan in March, should not clear the bar for trade pacts covered by the credit.

The senator also outlined concerns over recent "foreign entity of concern" guidance, which would bar credit-eligible vehicles from sourcing battery components and critical minerals from companies with significant interests held by or operations within covered nations including China and Russia. Specifically, Manchin said in the letter that certain proposed transition rules, including for "non-traceable battery metals," go against statutory requirements.

Congressional overhaul

Should the GAO decide the guidance is subject to CRA review, it could offer Congress an opportunity to overturn the guidance.

The CRA opens the door to the use of a special mechanism called a joint resolution of disapproval, through which Congress can consider a rule's overturning. If both the House and Senate approve the joint resolution and the president signs it, or if Congress overrides a presidential veto with a two-thirds majority in both chambers, the rule in question cannot continue to be in use.

Senior administration officials have expressed confidence in the Treasury Department's interpretation of the law.

"We're implementing the bill as written," John Podesta, senior advisor to the president for clean energy innovation and implementation, said during a Dec. 19 press call on the administration's climate goals. "We will continue to show fealty to the statute that already passed and ... [Sen. Manchin], I think, will continue to try to push us in a direction that we think is not warranted by the statute, but we're going to implement the statute."

The Treasury Department did not respond to a request for comment.

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