Ways and Means Chairman Questions Chinese Inputs, Tech in IRA-Subsidized Projects
House Ways and Means Chairman Jason Smith, R-Mo., is questioning why Chinese intellectual property and components used in U.S. assembly plants for electric vehicle batteries and solar panels should be eligible for tax credits under the Inflation Reduction Act.
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At an April 19 hearing called "The U.S. Tax Code Subsidizing Green Corporate Handouts and the Chinese Communist Party," Smith said in his opening statement: "Solar cells manufactured in China and assembled into panels in the U.S. will qualify for these special interest tax breaks – even if they are implicated in human rights abuses. The world’s largest solar manufacturer is a Chinese company that just had its solar shipments confiscated at the border last fall over forced labor concerns. They are now planning to partner with a business in Ohio to utilize these very credits to build a facility here in the United States. Are these the type of businesses we should be rewarding?
“This is just one area where the Biden Administration has opened the door to China. To develop projects like EV battery manufacturing, U.S. companies are partnering with Chinese Communist Party-controlled companies that control over 50 percent of the processing capacity of key battery ingredients. Meanwhile, White House regulations and red tape make it difficult for America to develop critical resources for EV battery ingredients here at home."
Earlier in the week, Smith announced he had sent letters to Ford, which is the company licensing designs from CATL, a Chinese EV manufacturer, as well as to 10 other automakers who make EVs, because he's worried they too, could partner with Chinese firms.
Smith notes that the IRA says there can be no consumer tax credit for vehicles whose batteries contain either critical minerals or components from a "foreign entity of concern." Which firms qualify as foreign entities of concern has not yet been decided, as these restrictions start in 2024 and 2025.
Smith told Ford's CEO that he believes the licensing deal for its new battery plant in Michigan "appears to leverage a loophole in the IRA rules regarding battery components manufactured or assembled by a 'foreign entity of concern.'"
He asked why Ford chose to license the design rather than enter a joint venture with CATL, how many CATL employees will be at the plant, and whether Ford believes a 50/50 ownership structure would have impacted eligibility for tax credits. He also asks the CEO to say whether the company plans to claim advanced manufacturing tax credits, and whether it anticipates consumers will be able to qualify for the portion of the tax credit that depends on where the battery and its components are made.
A Ford spokesperson didn't immediately respond to a request for comment.