Illustration: Annelise Capossela/Axios
Republicans are weighing whether to keep a coveted IRA manufacturing tax credit while putting stricter guardrails on Chinese imports.
Why it matters: The 45X tax credit is among the most popular incentives from the climate law, boosting the U.S. supply chain for EVs, solar panels, and other energy tech undercut by Chinese competition.
- It appears likely to stay in place as Republicans look to take a "scalpel" to the law in reconciliation to pay for tax cuts.
Driving the news: The 45X incentive "has probably been the biggest conversation piece" around the IRA's fate, Rep. Troy Balderson told Axios.
- Balderson said most companies at a National Association of Manufacturers gathering this month told him they favor keeping the credit.
- "Here's what we're telling them: 'You've got to communicate with us. Tell us what you know your benefit is,'" Balderson said.
- Balderson is still gathering feedback and isn't advocating for or against the credit yet.
What they're saying: "Obviously, I've got a vested interest in this," said Rep. Buddy Carter, whose district is home to a Hyundai EV plant — something he noted is Georgia's largest-ever economic development project.
- Carter is one of 18 GOP members who signed last year's letter to House leaders arguing against IRA repeal.
- "My hope is, as we indicated in the letter to the speaker and leadership, that we'll look at these carefully and consider them," Carter told Axios.
The big picture: Potential support for 45X reflects a bipartisan desire to use a combination of carrots and sticks to bolster U.S. manufacturing and secure a supply chain of critical minerals.
- Rep. Carol Miller and then-Sen. Marco Rubio sponsored legislation last session that would prevent 45X credits from supporting companies tied to foreign adversaries, such as China, Russia, North Korea, and Iran.
- Sen. Rick Scott, who cosponsored the Senate 45X bill, told Axios he supports tax policy that grows the U.S. economy while blocking credits for "people that want to destroy our way of life, like anybody involved in the Chinese government."
Between the lines: Slapping "foreign entity of concern" restrictions on the credit could yield some savings in a reconciliation bill because it could allow fewer companies to qualify.
Zoom in: Manufacturers, automakers and miners supporting the credit oppose tax loopholes that allow Chinese imports to qualify and excluding the costs of extraction.
- The Biden administration finalized 45X tax guidance in October that allowed mineral mining and processing costs to be eligible for companies that mine and refine in the U.S.
- Any credits that remain should close those loopholes, Miller said in a statement.
- "I have seen firsthand how many of these tax credits would need to be changed to be effective, including 45X," she said.
The bottom line: "Businesses are making investment decisions, and you want to recognize that people have to have confidence in moving forward for our economy," Rep. John Moolenaar, chair of the China select committee, told Axios.
