With the help of Senator Joe Manchin, Democrats and the Biden administration revived parts of the old Build Back Better agenda, specifically EV tax credits, in the Inflation Reduction Act, dubbed the IRA.
The new proposal for the FY2022 Budget Reconciliation bill will invest approximately $300 billion in deficit reduction and $369 billion in energy security and climate change programs during the next 10 years.
Additionally, the agreement calls for comprehensive permitting reform legislation to be passed before the end of the fiscal year. Permitting reform is essential to unlocking domestic energy and transmission projects, which will lower costs for consumers and help us meet long-term emissions goals.
Manchin, who acted as bottleneck to EV credits, just reversed course on them in the last week. In a press release about the IRA, he said it “(r)evises the tax credit for electric and hydrogen vehicles to drive the onshoring of supply chains for critical minerals and batteries and require cars to be assembled in North America.
“Opens the clean vehicle market to the average American by creating a new credit for previously owned vehicles. Targets refueling incentives in rural and low-income areas. Invests in cleaner, sustainable aviation fuels of the future.”
By the numbers
Specifically, the bill removes the caps on the numbers of vehicles. Companies such as Tesla and General Motors had reached the previously 200,000-unit limit and Ford and Toyota are close to doing so as well. However, the $7,500 credit for a new EV is only available to individual buyers with an income of less than $150,000 or family income of less than $300,000. Customers with larger incomes would not be eligible for the credit.
Used battery-electric vehicles would be eligible for $4,000 tax credits, helping foster a market for used EVs. The tax credits are limited to individuals with incomes of less than $75,000 or family income of $150,000 for those filing joint returns. All the credits expire in 2032.
The credits would not apply to sedans, selling for more than $55,000 and vans, SUVs and pickup trucks with selling prices of more than $80,000.
However, cars would qualify for the full credit only if the batteries were made with materials and components from the U.S. or from countries with which the U.S. has trade agreements such as Mexico and Canada.
Bill puts more momentum behind EVs
Electrification Coalition Executive Director Ben Prochazka said the landmark deal will help accelerate electrification for all sectors, which will improve the country’s economic and national security, and climate future. A long-term extension of the Alternative Fuel Refueling Property Tax Credit with a lift of the project cap and bidirectional charging was also included.
The bill also includes $3 billion in funding to electrify the U.S. Postal Service as well as $60 million for the Diesel Emission Reduction Act program; $2 billion for the Domestic Manufacturing Conversion Grant program; $3 billion for the Advanced Technology Vehicle Manufacturing program; $600 million for a Clean Heavy-duty Vehicle Grant Program; and $2.25 billion to reduce air pollution at ports through deploying zero-emission technology.
The bill with the revised EV tax credits must now pass through the closely divided U.S. Senate where every single Democrat must vote for reconciliation so Vice President Kamala Harris can break the tie. So far, Senator Kristen Sinema (D-Arizona) has yet to announce she if will vote for Manchin’s compromise with Senate Majority Leader Chuck Schumer (D-New York).
Mums the word
“Senator Sinema does not have comment as she’s reviewing the text and will need to see what comes out of the parliamentarian process,” a Sinema spokesperson told The Hill on Sunday.
However, Manchin defended the compromise Inflation Reduction Act, which has been hailed by President Joe Biden, during a series of appearances on five different news shows Sunday morning.
“We’ve taken a $3.5 trillion aspirational bill that I never could come to an agreement on in any way, shape or form — but I tried, couldn’t get there,” he said. “And we’ve taken $3.5 trillion of spending down to $400 billion of investing without raising any taxes whatsoever.”
“She has (had) a tremendous amount of input in this piece of legislation,” Manchin said on NBC’s “Meet the Press.” “And I would like to think she would be favorable towards it, that I respect her decision. She’ll make her own decision based on the contents.”