Biden Offers Automakers Flexibility on EV Battery Minerals in Final Tax Credit Rules

Biden Administration Eases Tax Credit Rules for Electric Vehicles

The Biden administration is providing some flexibility to automakers regarding the stringent requirements for qualifying for the $7,500 government tax credit.

Challenges in Meeting Domestic Sourcing Requirements

The Internal Revenue Service (IRS) has clarified that electric vehicles will still be eligible for the full tax credit if the manufacturers make a good-faith effort to meet the domestic sourcing requirements for battery components and critical minerals. This temporary reprieve is a response to the auto industry’s concerns about the feasibility of quickly complying with the strict sourcing rules.

Treasury is giving companies extra time — and extra flexibility — to meet the stringent new requirements it is putting in place around batteries and critical mineral sourcing.

Investing in Domestic Supply Chains

Automakers are investing billions of dollars in constructing new factories and developing domestic supply chains for electric vehicle batteries. However, these facilities and mines will require several years to become operational. In the interim, car manufacturers are grappling with the challenge of meeting the tax credit’s eligibility criteria.