Baldwin, Colleagues Push Biden Administration to Correct Inflation Reduction Act Guidelines that Undercut U.S. Manufacturers

WASHINGTON, D.C. – U.S. Senators Tammy Baldwin (D-WI), Sherrod Brown (D-OH), Bob Casey (D-PA), John Fetterman (D-PA), and Tina Smith (D-MN) called on the Biden Administration to correct the Department of the Treasury’s guidance on an Inflation Reduction Act (IRA) program that would undercut American manufactures and workers. The Senators are calling on the Treasury to reexamine their guidance for the IRA’s Domestic Content Bonus Credit to ensure that steel and iron in solar electricity generation projects is produced in the United States. Correcting current guidance will ensure that the IRA champions American products and American workers and does not unwittingly benefit China and other countries.

In the letter to Department of the Treasury Secretary Janet Yellen and Internal Revenue Service Commissioner Danny Werfel, the Senators outlined specific concerns with the placement of structural steel components of photovoltaic trackers, which are mounting structures, in the Manufactured Product Category instead of the Steel and Iron category. As reported in The Wall Street Journal, the guidance currently in place “would let firms use steel from abroad and still qualify for the 10%.”

“Correcting this error in the Guidance will help ensure that the steel and iron in solar electricity generation projects is produced in the United States. It also ensures that the IRA does not unwittingly benefit China and other countries that have a history of dumping their excess steel capacity in the U.S. market, to the detriment of U.S. workers and industry,” the Senators concluded.

“Earlier this year, America’s largest domestic steel producers, the United Steelworkers, and organizations representing the industry and its workers warned that the current Guidance would significantly damage U.S. domestic steel producers and the millions of Americans workers who depend on the domestic steel industry,” said Michael Stumo, CEO of the Coalition for a Prosperous America. “The legislative intent of the Inflation Reduction Act was clearly to require the structural steel components of new solar projects eligible for the domestic content bonus credit requirements to be manufactured with steel and iron that are produced entirely in the United States. Fixing this error in the Guidance is consistent with the clear intent of Congress and it ensures that the Guidance does not unwittingly benefit China and other countries that have a history of using predatory, illegal trade tactics to target the U.S. steel industry.”

Earlier this year, before the Administration released guidance on the Domestic Content Bonus Credit, Senator Baldwin sent a letter urging the U.S. Department of Treasury and IRS to prioritize American manufacturing and workers in the implementation of the clean energy tax credits passed in the IRA. In the letter, Senator Baldwin noted that tax credits will give American workers a competitive advantage against Chinese manufacturers that are racing to own the clean energy manufacturing market.

The full letter is available here and below.

Dear Secretary Yellen and Commissioner Werfel:

We are writing in response to Domestic Content Bonus Credit Guidance (“Guidance”) published by the Department of the Treasury and the Internal Revenue Service describing rules for implementing the domestic content bonus credit requirements for solar and other renewable energy electricity generation projects under the Inflation Reduction Act (IRA). Specifically, we are writing to request that you address a provision of the Guidance which we believe is contrary to Congressional intent.

In enacting the renewable energy credits of the IRA, Congress sought to incentivize the development of the U.S. renewable energy sector. With the domestic content bonus credit, the intention of Congress was more specifically to incentivize the development of U.S. clean energy supply chains. Toward that end, Congress provided a domestic content bonus credit for projects that meet two requirements:

1. that all the steel or iron in a project must be produced in the United States (herein, the “steel or iron requirement”), and
2. that an increasing percentage of the manufactured products in a project must be produced in the United States (herein, the “manufactured product requirement”). 

In the Guidance, Treasury and IRS apply the steel or iron requirement to components that are structural in function. In general, we believe this decision is in line with Congressional intent. 

However, the Guidance departs from this principal in the table included in the “safe harbor” provisions, where Treasury and IRS include in the manufactured products category components that are clearly structural in nature.

We are specifically concerned with the categorization of “photovoltaic tracker” as a manufactured product. A photovoltaic tracker is merely a mounting structure that has the capability to follow, or “track,” the position of the sun, as described in the Department of Energy’s supply chain report on solar photovoltaics in response to Executive Order 14017. The steel structural components of tracking systems, including torque tubes, foundations, and rails, therefore, must be included in the “steel and iron” category, as they are in fixed-tilt ground-mount systems. Torque tubes, while not appearing in fixed-tilt systems, are structural in nature, in that they bear the load of the solar panels, to which they are attached via rails and purlins. The fact that they rotate does not change their structural nature. We do believe that the non-structural components of tracking systems, including bearings, drive train components, and shock absorbers, are properly categorized as manufactured products.

Recognizing the structural nature of tracking systems with this Guidance has great importance, because mounting structures are where the steel and iron in a solar project are concentrated. To include tracking systems in the manufactured products category has the effect of removing as much as 50 percent of the steel and iron used in a project from the “steel and iron” category, where it would be required to be of U.S. origin.

Instead, categorization of tracking systems as manufactured products would permit many of the structural steel components of new solar projects in the U.S. to be imported from China and other countries, so long as the overall project met the percentage domestic content requirement. This was certainly not Congress’s intent.

To avoid this result, we ask that the Guidance, specifically the safe harbor table, be amended to distinguish between the structural steel components and the other components of tracking systems. This can be done by including in the Steel/Iron category, and excluding from the Manufactured Product category, “steel or iron in module rails, support columns, torque tubes, and any other elements that are structural in function.” This change would be consistent overall with the Guidance, which, as we have noted, states, “The Steel or Iron Requirement applies to Applicable Project Components that are construction materials made primarily of steel or iron and are structural in function.”

Correcting this error in the Guidance will help ensure that the steel and iron in solar electricity generation projects is produced in the United States. It also ensures that the IRA does not unwittingly benefit China and other countries that have a history of dumping their excess steel capacity in the U.S. market, to the detriment of U.S. workers and industry.

Thank you for your attention to this important matter.

Sincerely,

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