EU Pleased With Change for Commercial Vehicles Tax Credit in IRA

The European Union said it is glad that the U.S. Treasury Department is reaffirming that European companies can benefit from the Commercial Clean Vehicle Credit without changing their production plans. "The EU welcomes this guidance, which reflects the constructive engagement as part of the EU-US Inflation Reduction Act Task Force at senior official level," the press office said Dec. 29, the day that guidance was released.

"This is a win-win for both sides, as it strengthens EU-US cooperation in our shared goal of fighting climate change and bolsters transatlantic supply chains: US taxpayers will be able to take advantage of highly efficient EU-made electric vehicles and components, while EU companies that provide their customers through leases with cutting-edge clean vehicles can benefit from the incentives under the IRA."

The Commercial Clean Vehicle tax credit covers both mobile machinery, such as construction, farming and mining equipment, and passenger cars and trucks that are purchased or leased by a company.

The bloc said it is still seeking similar treatment for EU automakers in the consumer market, whose cars will not qualify unless they are assembled in Mexico, Canada or the U.S.

"Discriminating against EU produced clean vehicles and inputs violates international trade law and unfairly disadvantages EU companies on the US market, reduces the choices available to US consumers and ultimately reduces the climate effectiveness of this green subsidy," the bloc said.

The EU said it is pleased that the government is considering an expansive interpretation of what a free trade agreement is. However, since the North American assembly requirement is not expected to change, that may only affect the critical minerals subset of the credit.

Sen. Joe Manchin, D-W.Va., who insisted on many of the buy-North-America provisions in the IRA, said he thinks the white paper and guidance released by Treasury on the commercial and consumer EV tax credits "bends to the desires of the companies looking for loopholes and is clearly inconsistent with the intent of the law. It only serves to weaken our ability to become a more energy secure nation."

He complained that Treasury did not issue a proposed rule for the consumer tax credit, just a white paper, since the IRA mandates that the guidance be released by the end of 2022. The department said that proposed rule would come out in March.

"In the meantime, they have decided to move forward on implementing these credits without the necessary guidance to ensure taxpayer dollars are being responsibly used. This is an unacceptable outcome and I call on Treasury to pause the implementation of both commercial and new consumer EV tax credits until they have issued the appropriate guidance," he said in a statement on the Senate Energy and Natural Resources Committee website; he is the committee chair. "In addition to calling for this pause on the implementation of these credits, when Congress returns to session in the coming weeks I will introduce legislation that further clarifies the original intent of the law and prevents this dangerous interpretation from Treasury from moving forward.”