Foreign Entities of Concern and the Electric Vehicle Tax Credit.
Recent legislation, such as the Inflation Reduction Act, provides incentives for American-based manufacturers to onshore production and establish supply chains with not only countries the United States has a Fair Trade Agreement with, but also to support and create domestic supply chains in North America for critical materials, thereby reducing its dependence on China. A prominent example is the Electric Vehicle Tax Credit.
The Inflation Reduction Act of 2022 (Public Law 117-169) amended the Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC 30D), now known as the Clean Vehicle Credit, and added a new requirement for final assembly in North America that took effect on August 17, 2022. Additional requirements apply for vehicles placed in service (delivered) on or after January 1, 2023, and the amount of the credit will depend on whether the vehicle meets new critical minerals and battery components requirements for vehicles placed in service after April 17, 2023. See the IRS Plug-In Electric Drive Vehicle Credit for more information. Taxpayers who purchase an eligible vehicle may qualify for a tax credit of up to $7,500. Additional details are provided below based on when the vehicle is purchased or placed-in-service.
Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Tax Credit
There are several minor requirements that a vehicle must meet to be eligible for the tax credit, e.g weigh less than 14,000 pounds and the battery must be over 7kwh (for vehicles sold in 2023 and after). But the main focus was 3 items.
Vehicle Assembly: The vehicle must also undergo final assembly in North America. This requirement that took effect on August 17, 2022. For new electric, fuel cell electric, and plug-in hybrid electric vehicles acquired, delivered, and placed in service after August 18, 2022, this final assembly requirement applies.