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1 1 (February 28, 2024)

handle is hein.crs/goveoll0001 and id is 1 raw text is: Congjressional ____ ~ ~Research Service Foreign Entity of Concern Requirements in the Section 30D Clean Vehicle Credit February 28, 2024 The Inflation Reduction Act (IRA; P.L. 117-169) made significant changes to the clean vehicle credit (CVC) in Section 30D of the Internal Revenue Code (IRC). The CVC allows individuals and businesses to reduce their federal income taxes by either $7,500 or $3,750 for purchases of qualifying new electric vehicles (EVs). To qualify for the CVC, vehicles acquired after 2023 cannot use battery components manufactured or assembled by a foreign entity of concern (FEOC). Similarly, for vehicles acquired after 2024, critical minerals in the vehicles' batteries cannot have been extracted, processed, or recycled by an FEOC. This Insight describes both the CVC's FEOC requirements and the Internal Revenue Service's (IRS's) regulatory enforcement of those requirements. Foreign Entities of Concern: Definition and Key Issues The term foreign entity of concern describes nonstate actors potentially posing economic or security threats to the United States. Terrorist groups, for example, are classified as FEOCs; so too are businesses significantly influenced by the governments of China, Russia, North Korea, or Iran (known as covered nations). At present, the input markets for battery components and critical minerals are dominated by China. Recent research finds that 65% of all EV battery components are made in China, and China refines roughly two-thirds of the nickel, lithium, and cobalt used in EV batteries. Department of Energy and U.S. Geological Survey data also suggest that China produces most of the world's aluminum, gallium, graphite, magnesium, and silicon-all of which are used in EV batteries. There are two questions regarding the regulatory interpretation of the FEOC requirements. First, for companies that operate in multiple countries or have owners in multiple countries, it is not clear at what point the company is deemed to be significantly influenced by an FEOC. The CHIPS and Science Act (P.L. 117-167) subjects companies to certain restrictions if 25% or more of their stock, voting shares, or board seats are owned by individuals or businesses in a covered nation. In general, organizations pushing for greater EV uptake have called for higher ownership thresholds, while proponents of domestic manufacturing have called for lower thresholds. The maximum ownership share would apply not just to Congressional Research Service https://crsreports.congress.gov IN12322 CRS INSIGHT Prepared for Members and Committees of Congress

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