Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. NOW BACK TO THE GOOD STUFF: For an electric vehicle to be eligible for the full credit under the Treasury regs, at least half of its battery parts must be made in North America and at least 40 percent of its critical minerals must be sourced domestically or from a country with which the U.S. has a free trade agreement. Vehicles can qualify for half of the credit if they meet one of those criteria. The devil in the details arises in how Treasury decided to define “critical minerals” and countries’ “free trade agreements” in the provisions describing eligibility for the credit. For instance, Treasury decided to classify metal powders in an EV battery’s electrode as “critical minerals” as opposed to “battery components” — the reverse decision would have greatly restricted the number of eligible vehicles, since almost all electrode powders are made in Asia. But the guidance alienated Manchin and many GOP members over their concerns about making tax breaks available to Chinese companies. The Biden administration is “leaving America’s key supply chains in the control of the Chinese Communist Party,” Rep. Jason Smith (R-Mo.) said in a statement on the regulations. “The ever-changing, and late, Treasury guidance on electric vehicle tax credits has once again failed to follow through on promises that minerals and components sourced from China would be barred from electric vehicles qualifying for the tax credits,” the Senate’s top GOP tax writer, Mike Crapo (R-Idaho), said. In addition, while countries that have formal free trade agreements with the U.S., such as Canada, Mexico, Israel and South Korea, automatically qualify for the credit, Treasury’s guidance left room for countries with more narrow agreements on critical minerals, such as one signed between the U.S. and Japan just last week, to qualify. That has not only rankled GOP tax writers like Rep. Adrian Smith (R-Neb.) but also some Democrats on what they say is the questionable constitutionality of international deals struck without Congressional approval. “The administration’s guidance bypasses the intent of Congress when we passed the Inflation Reduction Act by redefining our understanding of a free trade agreement,” said Rep. Suzan DelBene(D-Wash.). A QUICK TANGENT: The report released by Finance Committee Chair Ron Wyden (D-Ore.) last week on Credit Suisse’s role in shielding $700 million from the IRS — in violation of its 2014 plea deal for criminal tax evasion with the Department of Justice — did not go unnoticed among tax writers over in the House. Ways and Means member Don Beyer (D-Va.), who served as the ambassador to Switzerland and Lichtenstein under President Barack Obama from 2009 through 2013 and worked with Justice on the 2014 tax evasion case against Credit Suisse, had some strong words on the subject. “It was embarrassing just from a Swiss perspective,” Beyer said of Wyden’s report. “It’s stupid.” Beyer said he met with Swiss Ambassador Jacques Pitteloud and several Swiss parliamentarians Thursday afternoon on the subject. “They were setting themselves up. Ten years of mistakes,” Beyer said. THAT OTHER IRS APPOINTEE: After all the brouhaha surrounding the nomination and confirmation of IRS Commissioner Danny Werfel, you might have forgotten about that other political appointee that Congress must approve for the IRS: the agency's chief counsel. Wyden spokesperson Ryan Carey said Friday that the senator's office does not have an update on the selection for the IRS’s top lawyer. “Senator Wyden looks forward to processing a nominee to fill this important position once the president makes a selection,” Carey said. Still, it’s been a while since the last chief counsel, Michael Desmond, who was confirmed under President Donald Trump in March 2019, left the office in January 2021. Acting Chief Counsel Bill Paul is by all accounts an extremely competent agency professional. But the long delay in picking the top lawyer for the agency has raised some eyebrows in the tax community, especially as Treasury has its hands full issuing regulations of new provisions from the IRA — including those pertaining to the new corporate alternative minimum tax, the excise tax on stock buy backs and the slew of green energy credits. A confirmed chief counsel may be especially necessary because of the political considerations, as underscored by the EV credit debacle, that Treasury must take into account before issuing guidance on the legislation's most consequential tax laws. “People look to a confirmed chief counsel I think differently to play that coordinating role on a policy and political level that a career person wouldn’t be expected to play,” Desmond said in an interview with Morning Tax, noting that he had to coordinate heavily with senior personnel at the Labor Department to craft regulations on credits created by coronavirus relief legislation. While former Treasury Secretary Steven Mnuchin liked to get into the weeds of tax policy, most secretaries defer to the IRS chief counsel on the technical decisions, Desmond added. The last speculation about a possible replacement came a long time ago — in September 2022. The word around town then was that Beth Kaufman, a partner at Caplin & Drysdale D.C.’s office, would likely be tapped by the Biden administration for the role. Kaufman is an expert on estate, trust and gift tax issues.
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