As Roosevelt Institute’s Todd Tucker has noted, the IRA grafts the kinds of provisions usually found in procurement deals onto its broad suite of tax incentives. That is, requirements that would usually be in place only when certain firms sell goods and services to the government will now be inscribed into the tax code.
Off the bat, for instance, 40 percent of the components of cars will need to be made in the US or in a free trade partner to qualify for a new $7,500 electric vehicle tax credits furnished by the IRA. That requirement will ramp up by 10 percent per year, toward an 80 percent requirement by 2027. As of now only 21 of the 72 electric vehicles now available in the US are eligible for the credit through the end of this year.
By 2024, cars featuring any battery components made or assembled by a “foreign entity of concern,” including China, will be ineligible for the credit. The year after, batteries must exclude so-called critical minerals like lithium or cobalt that are extracted, processed or recycled by the same countries. China currently refines 73 percent of the world’s cobalt, 68 percent of its nickel, and 59 percent of its lithium—all essential components of batteries used in EVs and for energy storage. Such constraints, some experts argue, could make all EVs available in the US ineligible for IRA-provided tax credits in the coming years.
