By Jonathan Tucker | Principal – R&D Tax Credits
Republican Senators Tom Cotton (R-AR) and Rick Scott (R-FL) have introduced a resolution (S.J.Res. 119) to overturn final regulations (TD 10010) implementing the Section 45X Advanced Manufacturing Production Credit, a green energy tax incentive created by the Inflation Reduction Act. This mirrors a bipartisan House resolution (H.J.Res. 225) introduced in November.
The Congressional Review Act (CRA) is being used to block the Treasury Department’s regulations, which are set to take effect on December 27. Critics argue the rules allow foreign companies, particularly Chinese-owned entities like Gotion Inc., to benefit from U.S. tax credits, undermining domestic manufacturers and national competitiveness.
Key Concerns About the Regulations
- Foreign Loopholes: The regulations could allow subsidiaries of foreign companies, including those tied to adversarial nations like China, to qualify for credits intended for U.S. manufacturing.
- Economic Disadvantage: Incentivizing foreign entities risks reducing competitive advantages for U.S.-owned companies, contrary to the credit’s intent.
- National Security Risks: Allocating taxpayer-funded credits to companies with ties to nations like China poses potential economic and security risks.
The Section 45X credit is designed to incentivize the U.S.-based production of critical components like solar and wind energy parts, batteries, and minerals. However, lawmakers claim the Biden administration’s rules include loopholes that benefit foreign companies, undermining the credit’s original purpose of strengthening U.S. manufacturing.
By leveraging the CRA, the Senate and House resolutions aim to block the rule and push for stricter regulations prioritizing American-owned businesses. With a Republican-controlled Congress and presidency incoming, the resolutions have a stronger chance of enactment. If successful, they would prevent the finalized regulations from taking effect and require the Treasury Department to revise the rules.
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About the Author
Jonathan Tucker | Principal – Cost Segregation
Jonathan Tucker is based in Atlanta, GA, and has over 18 years of experience providing federal business tax advisory services, primarily in R&D tax credits and fixed asset/cost segregation reviews, to clients in various industries including technology, manufacturing, transportation, healthcare, retail and consumer products, hospitality, media and entertainment, financial, and other professional services industries. Read More.