On Wednesday, July 31, a bipartisan legislation led by Senator Sherrod Brown of the Democratic Party from Ohio was introduced in the United States Senate. The proposed legislation aims to prevent companies with connections to foreign adversaries such as China from obtaining federal tax breaks.
The bill is named the “American Tax Dollars for American Solar Manufacturing Act” and is designed to provide a fair competitive environment for American workers and manufacturers, while also strengthening U.S. energy independence and national security.
“We cannot allow American taxpayers’ money to flow to Chinese companies that deceive and harm the U.S. solar manufacturing industry,” Brown emphasized in a press release. “We will not permit the Chinese government to undermine American solar manufacturing.”
He stated that the legislation will ensure that taxpayers’ funds only support advanced manufacturing in the United States and help develop manufacturing in the solar supply chain in Ohio, creating more job opportunities.
Ohio is a state with a strong manufacturing base in the Rust Belt region that supported Republican presidential candidate Donald Trump in both 2016 and 2020. However, as a senior Democratic senator, Brown enjoys high support locally.
This bill, initiated by Brown along with Senators Bill Cassidy (Republican from Louisiana), Rick Scott (Republican from Florida), and Jon Ossoff (Democratic Party from Georgia), targets federal tax incentives for advanced manufacturing under Section 45X of the Internal Revenue Code amended by the Inflation Reduction Act (IRA).
The IRA was passed in August 2022 and is the largest single investment in climate and energy sectors in U.S. history, providing billions of dollars in federal subsidies to homeowners, tenants, and businesses to promote the development of domestic energy manufacturing in the United States.
The program provides various federal income tax deductions, including funding for manufacturing, installation, and production investments in clean energy technologies such as solar and energy storage.
The initiative has spurred a wave of investment in new energy factories across the country but has also triggered criticism of projects involving companies linked to China.
Opponents argue that this practice could potentially empower geopolitical competitors who already dominate the clean technology manufacturing industry, while undermining the interests of American companies seeking to expand their market share.
The legislation will prohibit tax breaks from flowing to components manufactured or assembled by Foreign Entities of Concern (FEOC). These restrictions are part of the Bipartisan Infrastructure Law passed in 2021.
The legislation defines “Foreign Entities of Concern” as entities owned, controlled, or subject to the jurisdiction or direction of foreign governments from covered countries, which include China, Russia, Iran, and North Korea.