The penalties for not meeting the critical mineral requirements pertain mainly to the loss of eligibility for the associated clean vehicle tax credit rather than direct fines or other specific penalties.
Under the Inflation Reduction Act, in order for a new clean vehicle to qualify for a $3,750 tax credit portion related to critical minerals, a required percentage of the value of the critical minerals in the battery must be extracted, processed, or recycled in the U.S. or a country with which the U.S. has a free trade agreement. This percentage requirement increases over time from 40% in 2023 to 80% beginning in 2027.
If a vehicle does not meet the critical mineral requirement for a given year, it simply becomes ineligible for the $3,750 credit portion tied to critical minerals. Thus, the “penalty” for missing this threshold is effectively the forfeiture of that part of the credit rather than a monetary fine or other enforcement action.
Manufacturers are required to comply with due diligence and tracking standards to confirm compliance, but the regulatory guidance focuses on eligibility for tax credits rather than imposing explicit punitive penalties for noncompliance.
In summary:
- The critical mineral requirement is a condition to qualify for part of the clean vehicle tax credit.
- Failure to meet the required percentage means the vehicle does not receive the $3,750 credit related to critical minerals.
- There are no specified fines or penalties beyond losing eligibility for this credit.
This aligns with the guidance and proposed rules released by the U.S. Treasury and IRS on the critical mineral requirements under the Inflation Reduction Act.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-penalties-for-not-meeting-the-critical-mineral-requirements/
