WASHINGTON—The House Ways and Means Committee Sept. 10 released its proposal for consumer tax credits in the $3.5 trillion budget reconciliation bill that would support affordable electric vehicles, domestic battery production and union jobs.
The committee's legislative proposal—led by U.S. Rep. Dan Kildee, D-Mich.—would boost EV tax credits for consumers to as much as $12,500 for EVs assembled by union workers with domestically manufactured batteries.
The fully refundable credit would be transferable at the point of sale and would phase out over 10 years.
In the first five years, the base credit would be $7,500—the maximum tax credit currently available—with an additional bonus credit of $4,500 for vehicles made in a factory represented by a labor union and another $500 bonus if the auto maker has a domestic supply of batteries.
In the second five-year period, only EVs assembled in the U.S. are eligible for the $7,500 base credit.
The proposal—which goes through committee markup next week before being considered by the full House—also would set a cap on the manufacturer's suggested retail price of the EVs that qualify for the credit.
Electric sedans must have a retail price at or below $55,000. For vans, the limit is $64,000; SUVs, $69,000; and pickups, $74,000.
The bill also would have an adjusted gross income cap for qualifying EV purchasers. Based on IRS filing status, there would be a $400,000 annual adjusted gross income cap for individuals; a $600,000 limit for heads of household; and an $800,000 limit for joint filers.
"Basically, the purpose behind this is to support ... and align with President Biden's pledge that this plan will not increase taxes on anyone making $400,000 or less," Kildee told Automotive News via phone Friday. "That includes the loss of the tax benefits for the purchase of electric vehicles. So anyone making less than $400,000 would still qualify for the tax advantages of purchasing an electric vehicle. However, it is our intent that this tax credit not be used by high-wealth individuals to purchase luxury vehicles."
In addition, in the first two years of the credit, EVs with batteries that have power below 40 kilowatt-hours would only receive a $4,000 base credit instead of $7,500. In years three through five, batteries must have a minimum of 10 kWh to be eligible for the credit.
"We think it aligns very much with the president's goal of getting us to the point where we have half of the new vehicles sold in the United States being electric vehicles within a decade," Kildee said. "Once we're at that point, we don't think credits are going to be required anymore. We think the scale and the pricing will be such that the market will be fully able to integrate electric vehicles without any additional consumer credit support."
The committee's proposal comes after groups representing major auto makers and other EV stakeholders urged Congress to support the "broadest" EV tax credits for battery-electric and fuel cell vehicles in the budget plan—referred to as the Build Back Better Act.
In a letter sent last week, the Electric Drive Transportation Association—along with the Alliance for Automotive Innovation, Autos Drive America and the Zero Emission Transportation Association—asked Democratic lawmakers for tax credits that "apply to the broadest range of vehicles and be available to the broadest range of consumers."
Toyota Motor Corp., American Honda Motor Co., the American International Automobile Dealers Association and other non-union industry advocates have criticized a similiar proposal in the Senate that would tie additional EV tax credits for consumers to vehicles assembled in unionized U.S. factories.
Kildee said his proposal is "based roughly, but not precisely, on the Senate architecture."
House and Senate committees are expected to mark up various pieces of the budget bill by a nonbinding deadline of Sept. 15. The Democrat-supported budget bill can pass in the Senate with a simple majority vote, or 50 senators plus the vice president.