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Adds new section 199B to Part VI of subchapter B of chapter 1 (Internal Revenue Code) establishing an enhanced deduction equal to 200 percent of eligible wages for qualifying taxpayers (subject to an election), and defining qualifying taxpayer, eligible wages, applicable individual, pension requirements, denial of duplicate deduction under section 162(a), election rules, and certification requirement.
Redesignates existing paragraph (15) of section 56A(c) as paragraph (16) and inserts a new paragraph (15) that reduces adjusted financial statement income by the deduction for eligible wages allowed under new section 199B (to the extent allowed for taxable income) and requires adjustments to disregard wages double‑counted on applicable financial statements and other Secretary‑specified adjustments so wages are accounted for consistently.
Clerical amendment adding a new item to the table of sections for part VI of subchapter B of chapter 1 to reflect the newly added section (199B) concerning wages paid to automobile manufacturing workers.
Adds a new 'Deemed compliance' subsection to Section 206 of the Clean Air Act (42 U.S.C. 7525) providing that compliance with CAFE standards under 49 U.S.C. 32902(a) (including via payment of civil penalties or purchase of credits under Title 49) will be considered compliance with applicable fleet-average greenhouse gas emissions standards under Clean Air Act section 202 for those vehicles in that model year.
Adds a new 'Deemed compliance' subsection to 49 U.S.C. 32902 providing that compliance with fleet-average greenhouse gas emissions standards under Clean Air Act section 202 (including via purchased credits) for light-duty and medium-duty vehicles in a model year will be considered compliance with the average fuel economy standard under this section for those vehicles in that model year.
Adds a new paragraph (4) to subsection (b) prohibiting the Administrator from granting waivers under paragraph (1) to enforce state standards that differ from federal standards beginning on enactment. The bill also separately revokes waivers issued under section 209(b) prior to enactment.
Repeals Section 177 of the Clean Air Act (42 U.S.C. 7507). The provision states simply that the section is repealed.
Amends subsection (e)(3) by striking the second sentence of that subsection.
Creates a new tax deduction to incentivize U.S. automobile manufacturers to increase wages and benefits for certain manufacturing workers, cancels several recent federal vehicle emissions and fuel‑economy rules, bars states from adopting their own vehicle emissions standards (including revoking existing waivers), and directs federal agencies to adopt new national CAFE and greenhouse‑gas standards on a short timetable. The package ties tax incentives to employer benefit requirements, centralizes vehicle‑emissions policy at the federal level, and imposes deadlines and limits for new federal fuel‑economy and GHG rules.
Adds 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 claim it.
Defines 'qualifying taxpayer' as an entity that (1) produces automobiles or automotive components in the U.S.; (2) had final assembly of at least 75% of vehicles sold for U.S. use occur in the U.S.; (3) had at least 75% of finished engines, transmissions, or advanced battery cells incorporated into the entity's new vehicles produced in the U.S.; (4) did not transfer production outside the U.S. of any automobile or component that was manufactured in the U.S.; (5) during the preceding taxable year offered all applicable individuals platinum-level (or higher) group health coverage and participation in a pension plan meeting subsection (e) requirements; (6) offered retired former applicable individuals platinum-level (or higher) group health coverage; (7) for every $1,000,000,000 in non-recurring dividends or certain stock redemptions during the taxable year, provided at least $2,000 to each applicable individual through a profit-sharing plan (in addition to prior commitments); and (8) maintained a neutral position in labor organizing efforts and in employees’ exercise of rights under the National Labor Relations Act.
Defines 'eligible wages' as wages paid to an 'applicable individual' during the taxable year that are at or above the 75th percentile of wages for that occupation (by 4-digit NAICS industry group); limits wages counted to $150,000 per applicable individual per taxable year.
Defines 'applicable individual' as an individual directly engaged in manufacturing automobiles or automotive components in the United States.
Pension requirements for qualifying taxpayers: for defined benefit plans, the plan must be projected to provide at least 50% wage replacement for the retiree’s entire retirement if the individual is employed and participates for at least 30 years; for defined contribution plans, the employer contribution must be at least 10% of the participating employee’s wages in the preceding tax year (qualified 401(k) arrangement).
Who is affected and how:
U.S. automobile manufacturers: Directly targeted by the new tax deduction. Eligible manufacturers that meet the wage, pension and health‑coverage requirements can reduce taxable income through an enhanced wage deduction; they will also face new certification and reporting requirements to claim the benefit.
Automotive workers: Certain manufacturing employees may become the focus of the tax incentive (wage categories and eligibility are defined in law). Employers must meet specified pension and health coverage conditions to claim the deduction, which creates an incentive to maintain or expand benefits for covered workers, but eligibility is limited by statutory definitions and employer elections.
Automotive suppliers and related industry: Changes in federal standards and incentives will influence product design, powertrain choices, and investment timing across the supply chain; suppliers tied to electric‑vehicle components or traditional drivetrains could see shifts in demand depending on the design of the new federal standards.
Vehicle buyers and the public: Repeal of recent emissions and fuel‑economy rules and the removal of state waiver authority likely reduces the prospect of state‑level stricter mandates (for example, zero‑emission vehicle mandates), which can change vehicle model availability, long‑term fuel/ownership costs, and air‑quality outcomes. Environmental and public‑health implications depend on the stringency of the new federal standards.
State governments and state environmental regulators (including California): Immediately lose the ability to obtain and rely on CAA waivers that allowed more stringent state standards; state programs and regulatory plans tied to those waivers will be legally preempted and may require significant policy and administrative changes.
Federal agencies (EPA, NHTSA, Treasury, IRS): Must complete rapid rulemakings, update compliance and enforcement programs, and implement new reporting/certification frameworks—creating substantial near‑term administrative workload and legal exposure (including likely litigation over preemption and standards).
Climate, public‑health, and environmental stakeholders: Outcomes hinge on the new federal standards’ stringency. Repealing previously adopted stricter rules and revoking state waivers is likely to lower near‑term regulatory pressure to reduce vehicle emissions unless the new federal standards are equally or more stringent.
Legal and financial markets: Expect near‑term legal challenges from states and environmental groups, and market responses from investors and companies repositioning product plans, manufacturing footprints, and capital spending in response to the tax incentive and new regulatory regime.
Overall effect: the measure combines a targeted tax incentive for domestic auto manufacturing with broad deregulatory and preemptive changes to vehicle emissions law, shifting authority away from states and imposing an accelerated federal rulemaking timetable. The net environmental, economic, and distributional impacts will depend on the detailed technical design of the replacement CAFE/GHG standards and how manufacturers use the tax incentive.
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Read twice and referred to the Committee on Finance.
Introduced February 25, 2025 by Bernardo Moreno · Last progress February 25, 2025
Read twice and referred to the Committee on Finance.
Introduced in Senate