The provision, opposed by major automakers such as Ford Motor Co. and General Motors Co., includes prohibitions on batteries and critical minerals that are processed in China and other “foreign entities of concern,” which could render the consumer credit largely useless for years to come.
Those stipulations, and other limits on who qualifies for the $7,500 per-vehicle tax credit, were key to gaining the support of Senator Joe Manchin, who has railed against the incentive for months and even dismissed it as ludicrous. Manchin’s support for the overall package is necessary in the 50-50 Senate, in the face of united Republican opposition.
At the behest of Manchin, the legislation would also impose new limits on vehicle price and buyers’ income seen as restricting its use.
The legislation, dubbed the Inflation Reduction Act, which Senate leaders plan to bring to the floor as soon as today, lifted a 200,000-vehicle per manufacturer cap in a win for automakers such as Tesla Inc. and Toyota Motor Corp., who have reached that limit.
Under Senate rules governing the fast-track budget procedure Democrats are using to advance their climate spending and tax bill policy, provisions that are found to be incidental or extraneous to the federal budget can be challenged. Those that do not must be removed or modified.
A move in the bill to tie the value of clean energy tax credits to criteria such as paying workers prevailing wages had been seen as ripe for a “Byrd Rule” challenge as well, but they also survived, Ashley Schapitl, a spokeswoman for the Senate Finance Committee spokesman, said.
“We’re moving forward on the clean energy tax package with no Byrd Rule changes,” Schapitl said.