Biden Admin Issues Sweeping EV Tax Credit Rules, Leaving Door Open For Foreign Companies

The U.S. Internal Revenue Service (IRS) announced new guidance on how it will interpret President Joe Biden’s signature Inflation Reduction Act (IRA), leaving the door open for European automakers to cash in on the bill’s subsidies.

The new rules are expected to immediately limit the number of electric vehicles that qualify for tax credits when they go into effect on April 18, thanks to stricter requirements for both sourcing battery components and manufacturing in the U.S. or nations that have a “free trade agreement” with the U.S., Axios reported. The Biden administration has faced significant pressure from foreign allies to ensure that their countries are eligible for tax credits, according to The Wall Street Journal.

The proposal names 21 foreign nations that the IRS considers to have free trade agreements in effect, including South Korea and Japan, who had each expressed concerns that the IRA was a protectionist policy that violated existing trade deals. The U.S. recently struck a deal with Japan regarding minerals sourcing, and work is ongoing for a similar deal to be reached with the European Union, which remains ineligible under the current guidance.

“We’re quite optimistic that we can reach an agreement of the same sort of substantial scope as the Japanese,” Margrethe Vestager, E.U. executive vice president said Thursday, the WSJ reported.