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Creates a new tax break that lets qualifying U.S. automobile manufacturers deduct 200% of certain high wage payments for U.S. auto manufacturing workers, cancels several recent federal vehicle pollution and fuel-efficiency rules, strips states of the authority to adopt vehicle emissions standards different from federal rules (including revoking past waivers like California’s ZEV mandate waiver), and replaces existing rules with a new set of federal fuel-economy and greenhouse-gas standards for model years roughly 2027–2035. The tax change applies to taxable years beginning after enactment; the regulatory changes cancel specified final rules immediately and set deadlines and criteria for new CAFE and GHG standards to be issued and implemented for vehicles over the 2027–2035 model-year period.
Adds a new Internal Revenue Code section 199B allowing a deduction equal to 200% of the total amount of eligible wages paid or incurred by a qualifying taxpayer for a taxable year if the taxpayer elects to apply subsection (g).
Defines a "qualifying taxpayer" by enumerated requirements (U.S. production, assembly, pension and health coverage, no transfer of production outside U.S., profit-sharing condition tied to certain dividends/stock redemptions, and a neutral position toward labor organizing).
Production and assembly threshold: For vehicles sold for use in the U.S. in the preceding taxable year, at least 75% of final assembly must have occurred in the United States.
Finished engines, transmissions, or advanced battery cells rule: For such items incorporated into the entity’s new vehicles in the preceding taxable year, at least 75% must have been produced in the United States.
Prohibition on offshoring: During the preceding taxable year the entity did not transfer production outside the United States of any automobile or automobile component manufactured in the United States.
Who is affected and how:
Automobile manufacturers and the domestic auto industry: Large direct effects. The new tax deduction creates a financial incentive for qualifying manufacturers that meet the bill’s U.S.-production and worker-benefit tests and pay high wages. At the same time, cancellation of recent EPA and NHTSA rules and the creation of a new federal standards regime change compliance obligations and long-term planning for manufacturers, suppliers, and powertrain investments (e.g., EV vs. internal-combustion strategies). Market uncertainty is likely while agencies and firms adjust.
Auto manufacturing workers: The tax incentive is explicitly tied to wages and worker-benefit conditions, so eligible workers could indirectly benefit through higher-compensation recruitment or retention efforts. The wage cap and 75th percentile requirement target higher-paid occupations.
Consumers and vehicle purchasers: Short- and medium-term effects could include different model offerings, timing of new technologies (e.g., EV rollouts), and potential price impacts as manufacturers adapt to new federal standards and the revoked rules. State-level changes may alter incentives and availability of certain vehicle types in some regions.
State governments and state regulators: States lose the ability to enact or maintain stricter or different vehicle emissions standards from the federal government; previously approved waivers are revoked. States that relied on waivers to pursue aggressive EV mandates or tighter standards (notably California and states aligned with it) will be directly affected and must adapt transportation, air-quality, and climate plans.
Federal agencies (EPA, NHTSA): Must abandon or replace recently finalized rules, comply with the bill’s new deadlines and feasibility criteria, consult stakeholders, and report to Congress. Agencies will incur implementation and rulemaking costs (the bill authorizes funding for implementation).
Environmental and public health communities: Revocation of emissions waivers and cancellation of stricter rules likely reduces state flexibility to pursue stronger local emissions reductions and could slow state-driven programs to cut vehicle emissions; impacts on air quality depend on the content of the new federal standards compared with the rescinded rules.
Legal and market uncertainty: The abrupt revocations and repeal of the waiver authority raise litigation risk, potential challenges under administrative law and the Clean Air Act, and rapid shifts in regulatory planning for automakers and states.
Fiscal and budgetary impacts:
Overall effect:
Adds a deemed-compliance subsection to Section 206 providing that compliance with applicable CAFE standards (including via payment of civil penalties or purchase of credits) constitutes compliance with fleet-average greenhouse gas emissions standards under Clean Air Act section 202 for the corresponding vehicles in that model year.
Adds a new paragraph (4) to subsection (b) prohibiting the Administrator from granting waivers under paragraph (1) to enforce standards that differ from federal standards, effective beginning on the date of enactment.
Repeals Section 177 of the Clean Air Act (42 U.S.C. 7507).
Amends 42 U.S.C. 7589(e)(3) by striking the second sentence of that paragraph.
Adds a new section 199B to the Internal Revenue Code establishing a special enhanced deduction (200% of eligible wages) for qualifying taxpayers that meet specified domestic production, assembly, wage, benefit, pension, profit‑sharing, and labor‑relations conditions.
Redesignates existing paragraph (15) as paragraph (16) and inserts a new paragraph (15) requiring adjusted financial statement income to be reduced by the deduction allowed under the newly added section 199B and providing rules to adjust for wages already taken into account on financial statements.
Expand sections to see detailed analysis
Referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Introduced April 10, 2025 by Troy Balderson · Last progress April 10, 2025
Referred to the Committee on Energy and Commerce, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Introduced in House