After years of negotiations, endless debates, whispered rumors and visions of doom, Senate Democrats seem to have come to an agreement regarding a possible reconciliation package. Leader Schumer (D-NY) and Senator Manchin (D-WV) announced that they came to an agreement centered on tax reform and major investments in clean energy and electric vehicles.
For months, electric vehicle advocates had heard there was little to no activity on extending the electric vehicle tax credit or creating new incentives. After the Build Back Better package’s defeat, it became clear that Senator Manchin would have a hand in shaping whatever package, if any, eventually passed. His opposition to electric vehicles is well documented: He has called EV tax credits “ludicrous” and said an enhanced credit for union-made EV’s was “wrong,” and “not American.”
However, this new agreement between Leader Schumer and Sen. Manchin contains $369 billion for climate and energy measures. If passed, the Inflation Reduction Act of 2022, as it is known, it would bolster President Biden’s goals of reducing US GHG emissions, bolstering the administration’s hand as they head to this fall’s international climate change negotiations. Leader Schumer’s office estimates that the package would slash carbon emissions by 40 percent by 2030.
Regarding electric vehicles, the package would extend the current $7,500 tax credit for the purchase of clean vehicles, meaning plug-in hybrid, battery-electric, and hydrogen fuel cell vehicles. It would also remove the current 200,000-vehicle cap, resulting in a major win for companies such as Tesla, Toyota and GM that have already sold over 200,000 clean vehicles.
For the first time, this package creates a $4,000 used electric vehicle tax credit with the aim of helping middle- and lower-income consumers afford EVs. Both of these tax credits contain caps on vehicle price, dependent on the type of vehicle and consumer income. For new vehicles, the electric vehicle tax credits would be capped at an income level of $150,000 for a single-filing taxpayer and $300,000 for joint filers. The cap for used vehicles resides at $75,000 for single-filing taxpayer and $150,000 for joint filers.
Electric vehicle manufacturers will also be able to take advantage of the package’s $10 billion investment tax credit for clean-technology manufacturing facilities and its $2 billion grant program to retrofit existing auto manufacturing facilities for EV production.
The package would also encourage governmental entities to obtain electric vehicles by setting aside $1 billion to purchase clean heavy-duty vehicles. In addition, it provides $3 billion for the US Postal Service to buy zero-emission vehicles and EV infrastructure.
Since most autonomous vehicles will be electric, these investments in EV technology will help prepare the nation’s infrastructure for AV deployment. One particular provision would disqualify any EV from receiving tax credits if it contains minerals “extracted, processed, or recycled by a foreign entity of concern.” This will help encourage the onshoring or ally-shoring of crucial supply chains for EV and AV development.
After months of waiting, Senate Democrats may pass a reconciliation package that prioritizes the climate and promotes electric vehicles. In a statement applauding the agreement, Joe Britton, executive director of the Zero Emissions Transportation Association said, “America owes a great deal of gratitude to all those who worked to negotiate this bill.”
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