Manchin urges Treasury to block ‘loopholes' in EV tax credits

WASHINGTON — Sen. Joe Manchin is urging the U.S. Treasury Department to prevent companies from using loopholes to bypass stringent eligibility rules in the Inflation Reduction Act's electric-vehicle tax credits.

In a letter sent Monday to Treasury Secretary Janet Yellen, Manchin asked that the tax credit for commercial EVs is implemented in "a manner that strengthens domestic manufacturing while ensuring economic and national security" and that it does not allow companies to "cheat the system."

The West Virginia Democrat pointed to public comments submitted by some automakers and foreign governments last week asking for a broad interpretation of the commercial EV tax credit that would allow rental cars, leased vehicles and ride-hailing vehicles such as those used by Uber and Lyft to qualify for the full $7,500 commercial credit, known as 45W.

If allowed, Manchin argued, companies could then effectively bypass sourcing and assembly requirements in the tax credit for consumers buying new EVs, known as 30D.

"If these vehicles are deemed eligible, I can guarantee that companies will focus their attention away from trying to invest in North America to meet the requirements of 30D and will instead continue with business as usual, putting our transportation sector further at risk," he said in the letter.

Manchin is urging Treasury to follow "congressional intent" and release guidance ensuring the commercial EV tax credit cannot be applied to vehicles that are leased, rented or used for ride-hailing purposes.

"Instead of trying to find loopholes within these credits, domestic automakers should be seizing the opportunity to solidify our country's role as the automotive superpower we can and should be," the senator said.

As of the Inflation Reduction Act's enactment in mid-August, eligible new EVs must be built in North America. Restrictions on sticker price, buyer income, and battery component and critical mineral sourcing take effect Jan. 1, disqualifying automakers such as Hyundai Motor Group that do not yet make EVs in the U.S.

In addition to the tax credit for commercial EVs, the law includes a used EV credit for income-qualified buyers that's equal to 30 percent of the total cost of a used battery-electric, plug-in hybrid or fuel cell vehicle. The used EV credit is capped at $4,000.

Eligible vehicles that fall under used or commercial EV tax credits are not subject to the same stringent sourcing and assembly requirements as the revamped tax credit for new EVs.

Rivian, Hyundai and Kia, among other automakers, had asked the administration to let consumer vehicle leasing qualify for the commercial EV tax credit, a Reuters report stated.

The South Korean government in comments to Treasury also asked for a broad interpretation of the commercial EV tax credit that would apply to rental cars, leased vehicles and vehicles purchased for use in Uber or Lyft fleets, the report said.

Tesla said commercial credits "should apply exclusively for commercial end-users" and the consumer tax credit "should apply exclusively for individual end-users," the report stated.

The Treasury Department is preparing to issue proposed guidance by Dec. 31 that will further define how to meet the eligibility restrictions of the tax credits amid requests from automakers and U.S. allies for flexibility in the rules and equal treatment, the Reuters report said.