US DOE issues final interpretive guidance on the definition of foreign entity of health care

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Final Guidance Provides Clarity on Conditions That Limit FEOCs' Clean Vehicle Tax Credits and Support Growth in Domestic Battery Materials Processing and Manufacturing

WASHINGTON, D.C. — Today, the U.S. Department of Energy (DOE) rounded are guidelines interpreting the statutory definition of “foreign entity of health care entity” (FEOC) in Section 40207 of the Bipartisan Infrastructure Law (BIL). The FEOC Interpretive Guidelines are intended to limit FEOC participation in domestic battery supply chains and enhance the growth of domestic and friendly battery materials processing and production. It is being finalized largely as originally proposed in December, with refinements and clarifications that take into account public comments and will help automakers and other stakeholders identify FEOCs in their battery supply chains.

In addition, today the Department of the Treasury and the Internal Revenue Service (IRS) issued their final rule implementing the Section 30D Clean Vehicle Tax Credit in the Inflation Reduction Act. This rule refers to DOE's FEOC interpretive guidance. DOE worked closely with the Treasury Department and the IRS to ensure that the FEOC's interpretive guidance can be applied in the context of the BIL Section 40207 grant program and the IRA Section 30D Clean Vehicle Tax Credit.

Sales of plug-in electric vehicles (EV) have quadrupled since President Biden took office, reaching record numbers last year and projecting US sales to reach 1.9 million by 2024. according to to Bloomberg New Energy Finance (BNEF). So far in 2024, every month the EV market share has increased compared to the previous year.

Even as EV sales grow, the US is still dependent on foreign sources for many of the processed essential minerals needed to produce EV batteries. Through the President's Investing in America agenda, the Biden-Harris administration has taken swift action to secure a reliable and sustainable battery supply chain, sourced primarily from America and allied trading partners. A key element of this action is the implementation of the FEOC provision in the BIL.

The BIL defines a FEOC in part as an entity that is “owned, controlled, or subject to the jurisdiction or direction of a government of a foreign country that is a covered nation.” Countries covered in BIL are defined as China, Russia, Iran and North Korea. Under current DOE guidance interpreting this phrase, an entity is considered an FEOC if it has its principal place of business, legal personality, or relevant operations in a covered country, if 25% or more of its voting power, board seats, or equity interests are owned of the government of a covered country, or if the entity is effectively controlled by an FEOC through a license or contract with that FEOC.

Under the Treasury Department and IRS final rule on Section 30D Tax Credit for Clean Vehicles, an EV with battery components manufactured or assembled by an FEOC will not be eligible for the tax credit beginning in 2024. Likewise, an EV with a battery that contains critical minerals extracted, processed or recycled by an FEOC will no longer be eligible for this tax credit starting in 2025.

In DOE's Battery Materials Processing and Manufacturing grant program, the Office of Manufacturing and Energy Supply Chains (MESC) will prioritize applications that do not use battery materials supplied by an FEOC.

For questions regarding DOE's final interpretive guidance, stakeholders can contact: [email protected]