BATT to Senate Leaders: Without 45X Tax Changes China Will Continue to Dominate Critical Minerals
Dear Majority Leader Thune and Senate Finance Committee Chairman Crapo,
The Battery Advocacy for Technology Transformation (BATT) Coalition, representing the upstream critical minerals and battery supply chain, appreciates the efforts of the Senate and Senate Finance Committee in putting forward language on Section 45X, the Advanced Manufacturing Production Tax Credit. BATT member companies strongly support Section 45X and also support clean and workable foreign entities of concern (FEOC) provisions to promote and expand the domestic supply chain. We believe the Senate Finance Committee language is a step in the right direction. However, we also believe opportunities exist to strengthen Section 45X to transition away more fully and more quickly from reliance on FEOCs, particularly Chinese FEOCs in the battery sector.
Provide a longer extension of the credit for critical minerals. Current law provides an exception from the Section 45X phaseout for critical minerals. As a sector with long development lead times, the phasing out of the credit for critical minerals starting in 2031 does not provide the necessary financial incentive to fully encourage domestic production. While BATT continues to support reinstating the critical minerals phase-out exception, at a minimum, we propose aligning the credit phase-out with that provided the baseload electricity sectors under the clean electricity credits.
Implement stronger Prohibited Foreign Entity (PFE) requirements on critical minerals for the Section 45X battery provisions. With the proposed repeal of Section 30D, Section 45X would be the only remaining tax provision to provide market pull for domestically produced battery materials. The proposed PFE restrictions on the inputs for eligible battery components are significantly weaker than the current FEOC restrictions in Section 30D. With the repeal of the 30D likely in this bill, this serves to significantly weaken market incentives for cell producers to source from non-Chinese battery materials companies. Since the battery industry has been preparing to comply with the Section 30D FEOC restrictions for the past 3 years, the BATT Coalition believes a similar provision in Section 45X would not be overly disruptive and should be considered differently than the other 45X credit technologies that did not have sourcing requirements in the original 45X credit. We propose including a prohibition against eligible components using critical minerals from PFEs that includes an 18-month phase-in to ease the transition, which is in line with the 30D transition rule timeline at DOE.
American companies are making historic investments in expanding the production, processing, and development of critical minerals and derivative products that rely on them, such as semiconductor wafers, anodes, and cathodes. All of these are essential not only to store electricity, but also to power a wide range of military systems and applications in the power and transportation sectors. If America wants to truly prioritize the building of a domestic critical minerals supply chain here, policies need to adequately respond to the outsized role China plays in the critical minerals industry, and policies must be put in place to promote and incentivize the production and manufacturing in the United States. As written, the battery section of the 45X credit would allow tens of billions of dollars to flow to Chinese battery materials companies annually.
We understand that the Senate, and Congress as a whole, are trying to thread the needle among competing interests. However, we believe the United States must move forward to reduce our reliance on China and other foreign sources for critical minerals and fortify our ability to compete, not only with China, but across the globe. The U.S. should lead the world in supporting the most innovative mineral extraction and processing technologies. We believe the changes we put forward will help us do exactly that and we are eager to be a resource to you, your staff, and other Senators as this process moves forward.
Sincerely,
Samuel J. Gillard, Co-Founder & Executive Director The BATT Coalition
Drew Ronneberg, Co-Founder & Policy Director The BATT Coalition
See letter here.