The specific critical minerals required for the EV tax credit under the current U.S. regulations relate to those contained in the battery of the electric vehicle. To qualify for the credit, a certain percentage of the value of these critical minerals must be extracted or processed in the United States or in a country with which the U.S. has a free trade agreement, or be recycled in North America. The Inflation Reduction Act (IRA) sets gradually increasing domestic sourcing thresholds starting at 40% in 2023 and reaching 80% from 2027 onward.
While the exact list of critical minerals is not explicitly detailed, the focus is generally on the minerals used in lithium-ion batteries, which commonly include:
- Lithium
- Cobalt
- Nickel
- Manganese
- Graphite
- Rare earth elements
These critical minerals are essential for the EV battery’s performance and are subject to the sourcing and processing requirements to qualify for up to a $3,750 portion of the $7,500 total tax credit for clean vehicles.
The Treasury’s final regulations also require a detailed tracing of the battery supply chain, assessing value added through extraction, processing, and recycling to ensure compliance with the domestic content requirements under Section 30D of the Internal Revenue Code.
In summary, to be eligible for the EV tax credit related to critical minerals:
- The minerals must be extracted, processed, or recycled domestically or in free trade partner countries.
- The covered minerals are primarily those used in EV batteries (lithium, cobalt, nickel, manganese, graphite, and related elements).
- The required percentage of domestic sourcing increases annually from 40% in 2023 to 80% in 2027 and beyond.
This sourcing requirement specifically addresses the critical minerals contained in the EV battery, forming a key component of the new clean vehicle tax credit structure.
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