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1 1 (Updated September 30, 2024)

handle is hein.crs/goveque0001 and id is 1 raw text is: Foreign Entity of Concern Requirements in the Section 30D Clean Vehicle Credit Updated September 30, 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. IRC Section 30D left certain aspects of the FEOC requirements to regulatory interpretation. First, Section 30D states that the term FEOC is as defined in ... 42 U.S.C. 18741(a)(5), with 42 U.S.C. §18741(a)(5) in turn stating that companies are FEOCs if they are owned by, controlled by, or subject to the jurisdiction or direction of a government of a foreign country that is a covered nation. For companies that operate in multiple countries or have owners in multiple countries, 26 U.S.C. §30D and 42 U.S.C. §18741(a)(5) do not clarify the exact point at which the company is deemed to be owned by, controlled by, or subject to the jurisdiction of' a covered nation's government. The CHIPS and Science Act (P.L. Congressional Research Service https://crsreports.congress.gov IN12322 CRS INSIGHT Prepared for Members and Committees of Congress

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