Inflation Reduction Act 2022: Sec. 13401 Clean Vehicle Credit

The Inflation Reduction Act (IRA) of 2022, which seeks to reduce domestic inflation – notably brought by the global energy crisis – whilst tackling climate change, establishes a Clean Vehicle Credit of up to USD 7,500 per vehicle to incentivise and accelerate the adoption of electric vehicles. Eligible battery-powered electric vehicles must meet the Critical Mineral and Battery Component Requirement, which establishes the following conditions:

1. A baseline for the percentage of the value of the applicable critical minerals contained within the electric vehicle battery that were (i) extracted or processed in the United States or in a country with which the United States has a free trade agreement; or (ii) recycled in North America. This baseline begins at 40% for vehicles placed in service before 1 January 2024 and escalates to 80% for vehicles placed in service after 31 December 2026.
2. A baseline for the percentage of the value of the components contained within the electric vehicle battery that were manufactured or assembled in North America. This baseline begins at 50% for vehicles places in service before 1 January 2024 and escalates to 100% for vehicles placed in service after 31 December 2028.
3. Foreign Entity of Concern (FEOC) Exclusions: Starting January 1, 2024, vehicles containing battery components manufactured or assembled by a foreign entity of concern are not eligible for the credit. Additionally, starting January 1, 2025, vehicles containing critical minerals that were extracted, processed, or recycled by a foreign entity of concern are not eligible for the credit. A foreign entity of concern is defined under section 40207(a)(5) of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5)). 

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