US Senate Democratic deal would expand electric vehicle tax credits

WASHINGTON, July 27 (Reuters) – A Senate Democratic deal includes a new $4,000 tax credit for used electric vehicles and other new tax credits and grants for automakers to retool vehicles. factories to build greener cars.

The deal reached between Senate Majority Leader Chuck Schumer and Democratic Sen. Joe Manchin also includes an extension of the existing $7,500 electric vehicle tax credit as well as a new fuel tax credit. $10 billion investment to build clean technology manufacturing facilities, according to a summary from Schumer’s office. .

The bill Schumer and Manchin agreed to also includes $2 billion in cash grants to retool existing auto manufacturing facilities “to make clean vehicles, ensuring auto manufacturing jobs stay in the communities that depend on them. “.

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If it becomes law, it will additionally provide up to $20 billion in loans to build new clean vehicle manufacturing facilities and $30 billion for additional production tax credits “to accelerate the American manufacturing of solar panels, wind turbines, batteries and critical mineral processing”.

Schumer said the Senate is expected to vote on the bill next week and then it will go to the Democratic-controlled House of Representatives.

Last year, President Joe Biden proposed increasing tax credits for electric vehicles to $12,500 per vehicle — including $4,500 for union-made vehicles — and lifting the cap on 200,000 vehicles per manufacturer on the $7,500 credit. Automakers including General Motors (GM.N) and Tesla (TSLA.O) have hit the cap and are no longer eligible for the existing electric vehicle tax credit.

Toyota Motor Corp <7203.T> said this month it had hit the sales cap, meaning its $7,500 credit will be phased out over the next year.

Automakers have pushed hard for an extension of the electric vehicle tax credit, warning that they cannot meet aggressive emissions reduction targets without tax incentives that make electric vehicles more competitive.

The new electric vehicle tax credits would be limited to trucks, vans and SUVs with a suggested retail price of no more than $80,000 and cars with a price of no more than $55,000. They would be limited to families whose adjusted gross income does not exceed $300,000 per year.

They would also be subject to increasing annual requirements limiting the sources of critical minerals used in batteries. Congressional aides and automakers said the provision targeted China, which produces much of the world’s critical minerals for batteries.

The deal would additionally provide $3 billion to the US Postal Service to purchase zero-emission vehicles and electric vehicle infrastructure such as charging stations.

Republicans have harshly criticized Democrats for touting electric vehicles as a solution to rising gas prices, saying they are unaffordable. Democrats argue tax credits are key to keeping Americans away from gas-powered vehicles.

Biden has set a goal of making half of all new vehicles sold in 2030 as electric or plug-in hybrid vehicles, but refused to endorse setting a date for phasing out internal combustion vehicles.

In the bill, an additional $1 billion would be earmarked for schools and other government entities to purchase heavy vehicles, such as school and transit buses and garbage trucks.

The bill will also include new tax credits and grants “to support domestic biofuel production and to build the infrastructure needed for sustainable aviation fuel (SAF) and other biofuels.” The SAF tax credit is worth at least $1.25 per gallon.

The Department of Energy already has $2.9 billion in grants it plans to give out for battery production and offers low-cost loans for cleaner auto and parts production.

On Monday, the department said it plans to lend $2.5 billion to a joint venture of GM and LG Energy Solution (373220.KS) to help fund the construction of new lithium-ion battery cell manufacturing facilities. in Ohio, Tennessee and Michigan.

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Reporting by David Shepardson; Editing by Sandra Maler and Bradley Perrett

Our standards: The Thomson Reuters Trust Principles.

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