By SEMA Washington, D.C., Staff
U.S. Senate Democrats have released a reconciliation bill covering a wide range of issues from climate change and energy production to prescription drug policies that they are seeking to enact into law in the coming weeks. The package, called the Inflation Reduction Act of 2022, includes an extension of electric-vehicle tax credits, stricter requirements on the sourcing of critical materials for automakers and a new minimum corporate tax rate. The Congressional Budget Office estimates that the package will reduce the federal deficit by $305 billion over 10 years, as the package combines $790 billion in revenue through increased taxes and health savings with $485 billion in new spending. Specific provisions include:
- Eliminates the 200,000-vehicle-per-automaker cap on the current $7,500 per-vehicle tax credit for consumers who purchase new battery-electric, hybrid plug-in and fuel-cell vehicles at the point of sale. The bill also provides a tax credit of up to $4,000 for the purchase of used vehicles listed above.
- The tax credit can only be used on cars that cost up to $55,000 and pickup trucks, SUVs and vans that cost up to $80,000. It can only be claimed by buyers with incomes up to $300,000 for joint filers.
- The tax credit sets increasing sourcing requirements for the critical minerals used in EV batteries to be extracted or processed in the U.S. or in a country where the U.S. has a free trade agreement in effect or from materials that were recycled in North America (40% in in 2024, 80% in 2027 and 100% by 2029).
- Sets a 15% minimum corporate tax rate that would apply to corporations with profits averaging at least $1 billion annually over three years.
- Allows Medicare to negotiate the cost of some prescription drugs with pharmaceutical companies.
Senate Democratic leadership is attempting to pass the bill through budget reconciliation—a process that requires only a simple majority to pass legislation that has a budgetary impact. Under this expedited legislative procedure, the Senate parliamentarian must certify that each provision is consistent with Senate rules, which require only provisions directly tied to revenue be included (policy issues that only have an incidental impact on the budget are not eligible). A vote on the package in the Senate is expected to occur in early August with House Democratic leadership announcing plans to bring their members back to D.C. to vote on it later in the month.
For more information, contact Caroline Fletcher at carolinef@sema.org.