Safeguarding U.S. Supply Chains Act

Bill Number

H.R. 2871

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-04-10: Referred to the House Committee on Ways and Means.

Last Updated

2025-05-16T10:38:11Z

AI-Generated Summary

Purpose

The Safeguarding U.S. Supply Chains Act (H.R. 2871) aims to protect U.S. supply chains for advanced manufacturing by limiting tax incentives for products linked to certain foreign companies. It targets "foreign entities of concern," which are defined in existing law as entities (like certain Chinese firms) that pose national security risks due to their ties to adversarial governments. The goal is to encourage domestic or allied production of critical components, such as those used in clean energy technologies.

Key Provisions

• Denial of Tax Credit for Direct Production: No advanced manufacturing production credit (under Section 45X of the Internal Revenue Code) can be claimed for any "eligible component" (e.g., solar panels, wind turbines, or inverters) if it is produced by a foreign entity of concern.
• Restrictions on Battery Components: The credit is also unavailable for "qualifying battery components" (parts used in electric vehicle or energy storage batteries) if they involve technology that is designed, developed, manufactured, licensed, or supplied by a foreign entity of concern.
• Effective Date: These rules apply to components produced and sold after the bill's enactment.

Significant Changes to Existing Law

• Amends Section 45X(d) of the Internal Revenue Code by adding a new paragraph (5) that explicitly bars the credit for components made by foreign entities of concern, building on the existing credit for U.S.-based advanced manufacturing.
• Adds a new subparagraph (C) to Section 45X(c)(5), expanding restrictions to include indirect involvement (e.g., use of foreign technology) in battery production, which was not previously addressed in this way.

These changes narrow eligibility for a tax credit originally created to boost U.S. clean energy manufacturing under the Inflation Reduction Act of 2022.

Potential Impacts

• On Government Agencies: The IRS (Internal Revenue Service) will need to verify compliance, potentially increasing administrative workload for audits and claims processing. It supports broader national security goals of agencies like the Department of Defense and Department of Energy by reducing reliance on risky foreign suppliers.
• On Citizens and Businesses: U.S. manufacturers in sectors like batteries and renewables may face higher costs if they cannot claim credits for foreign-sourced parts, but it could spur job growth in domestic production. Consumers might see indirect effects through higher prices for electric vehicles or energy products if supply chains shift.
• On International Relations: Could strain ties with countries hosting foreign entities of concern (primarily China), escalating trade tensions by limiting U.S. market access for their technologies. It may strengthen alliances with countries offering alternative supply chains, like those in Europe or North America.

Main Stakeholders Affected

• U.S. Manufacturers and Taxpayers: Companies claiming the advanced manufacturing credit, especially in battery and clean energy sectors, must adjust supply chains to qualify, affecting profitability.
• Foreign Entities of Concern: Firms (e.g., certain Chinese battery or tech companies) lose eligibility for U.S. tax incentives, reducing their competitiveness in the American market.
• U.S. Government and Policymakers: Benefits from enhanced supply chain security but may face pushback from industries reliant on global sourcing.
• Workers and Communities: Potential gains for U.S. workers in manufacturing hubs, but risks for those in import-dependent roles.

Notable Legal, Constitutional, or Political Implications

• Legal: Relies on Congress's constitutional power to regulate taxes and commerce, with clear definitions tied to existing law (e.g., the 2021 National Defense Authorization Act). It may lead to litigation over what constitutes "involvement" by foreign entities, requiring IRS guidance for enforcement.
• Constitutional: No direct challenges anticipated, as it aligns with national security exceptions in trade and tax law, but it reinforces the government's role in protecting critical infrastructure.
• Political: Advances bipartisan priorities on supply chain resilience and reducing dependence on adversarial nations, potentially influencing future trade policies or negotiations. It could spark debates on balancing economic incentives with security without overly burdening U.S. innovation.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Miller, Max L. [R-OH-7]

Recent Actions

• 2025-04-10: Referred to the House Committee on Ways and Means.
• 2025-04-10: Introduced in House
• 2025-04-10: Introduced in House

Bill Versions

• Safeguarding U.S. Supply Chains Act — issued 2025-04-10 — PDF (3 pages)