US Lawmakers Take Aim at Tax Credits for Chinese Solar Companies

(Bloomberg) -- Companies with ties to China and other foreign adversaries would be barred from getting a tax credit meant to bolster domestic energy manufacturing under legislation advanced Wednesday by Democratic Senator Sherrod Brown.

The measure gives Brown an opportunity to burnish his pro-manufacturing bonafides during a tough reelection contest in Ohio, amid growing scrutiny of Chinese companies building vehicle battery and solar panel factories across the US. Although the legislation is unlikely to swiftly reach a Senate floor vote, a similar proposal could be taken up by the House in September. 

“We cannot allow American tax dollars to go to Chinese companies that cheat and undermine American solar manufacturing,” Brown said in a news release. This “bipartisan bill will make sure that only American companies are supported by taxpayer dollars and support the creation of manufacturing jobs throughout the solar supply chain across Ohio.” 

Like other Democrats fighting for reelection in swing states, Brown has sought to make appeals to moderate voters who may be more concerned about populist and pocketbook issues, including domestic economic growth. Ohio, a Rust Belt state with deep manufacturing roots, went for Trump in both 2016 and 2020.

The legislation, cosponsored by Republicans Bill Cassidy of Louisiana and Rick Scott of Florida as well as Democrat Jon Ossoff of Georgia, takes aim at the 45X advanced manufacturing tax credit revived by the Inflation Reduction Act. The subsidy is meant to encourage investments in domestic manufacturing of equipment critical for the energy transition, from solar cells and wind towers to battery components and critical minerals. 

The credit already has helped drive a wave of investment in factories nationwide, but it’s also stoked criticism focused on projects involving companies with Chinese ties. These include an electric vehicle battery plant a Gotion High-tech Co. Ltd. subsidiary plans to build in Michigan and an Ohio solar factory that’s a joint venture of Chicago-based renewable developer Invenergy LLC and China’s LONGi Green Energy Technology Co. Ohio also is home to First Solar Inc. manufacturing facilities.

Opponents of the current approach say it risks bolstering a geopolitical rival that already dominates cleantech manufacturing while diminishing the benefit for US competitors looking to build their own market share.

“Congress must ensure that American taxpayers’ dollars are used to strengthen our own industrial base, not to subsidize our greatest geopolitical and military threat,” said Michael Stumo, chief executive officer of the Coalition for a Prosperous America.

Supporters argue the factories create jobs and other economic benefits for America, regardless of their foreign ties or corporate parentage. 

The legislation would bar credits from flowing to entities manufactured or assembled by a “foreign entity of concern,” including China, Iran, North Korea and Russia. Congress included similar prohibition in the Inflation Reduction Act for other tax credits.

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