A newly introduced bipartisan resolution in Congress would block the implementation of a recent tax credit rule that applies to the production of component parts and critical minerals used in clean energy equipment.
The Inflation Reduction Act of 2022 enacted the new tax credit, which is referred to as either the advanced manufacturing production credit or the 45X credit based on the credit’s Internal Revenue Code section 45X.
The Internal Revenue Service (IRS) in October issued final regulations regarding the 45X credit, which subsidizes the production of five types of goods: solar energy components, wind energy components, battery components, inverters, and critical minerals. Businesses may only claim the credit for goods produced in the United States or its territories. Goods produced from recycled materials qualify for the credit, according to a Nov. brief from the nonpartisan Congressional Research Service (CRS).
At the same time, the rule does not prohibit foreign ownership of the companies receiving the credits, CRS says, and several members of Congress are trying to reduce the potential influence of foreign adversaries or foreign entities of concern on 45X credit-eligible supply chains.
U.S. Rep. John Moolenaar (R-MI), for instance, says that the rule as currently written would allow companies affiliated with the Chinese Communist Party (CCP) to receive American tax dollars for producing battery components. He is sponsoring House Joint Resolution 225 to block implementation of the rule.
“Under no circumstance should the CCP be allowed to benefit from the tax dollars of hard-working American families,” Moolenaar said Nov. 20 when introducing the resolution.
“Unfortunately, the Biden administration’s 45X rule has left the door open for CCP-affiliated companies, like Gotion, to reap billions in taxpayer funding,” added the congressman. “That’s wrong and the common-sense bipartisan legislation we are introducing… will stop it.”
The proposed resolution would use the Congressional Review Act, which gives Congress the authority to disapprove regulations from the Executive Branch, to stifle the IRS’s final rule.
“America must be a nation of producers, not just consumers,” said U.S. Rep. Jared Golden (D-ME), the lead cosponsor of the resolution. “That’s the goal of domestic manufacturing credits: to support America’s production economy.
“But the Biden administration has consistently included loopholes in rulemaking that allow foreign-owned companies — including those with ties to adversarial foreign governments — to benefit from preferential tax treatment intended for American firms,” Golden said. “The administration needs to go back to the drawing board and ensure they are not subsidizing our global competitors.”
If the resolution is approved by the U.S. House of Representatives and the U.S. Senate, and then signed into law by the president within 60 legislative days of the section 45X rule being released, then the rule would be ended, according to the lawmakers.