On May 16, 2024, the Internal Revenue Service (“IRS”) and Department of Treasury (“Treasury”) published Notice 2024-41 (the “2024 Guidance”), which provides new guidance for securing the domestic content bonus credit established by the Inflation Reduction Act (“IRA”). As described in more detail below, the 2024 Guidance builds on the existing framework contained in Notice 2023-38 (the “2023 Guidance”), which was released last May. Most notably, the 2024 Guidance expands the range of applicable projects subject to the safe harbor in the 2023 Guidance and adds a “New Elective Safe Harbor” to determine cost percentages for the domestic content calculation in solar, onshore wind, and battery storage projects.Continue Reading Treasury and IRS Release New Guidance on Inflation Reduction Act Domestic Content Bonus Credit
Federal Highway Administration Announces Proposed Rule Ending Longstanding Buy America Waiver for Manufactured Products
On March 7, 2024, the Department of Transportation’s (“DOT”) Federal Highway Administration (“FHWA”) announced a proposed rule to rescind a longstanding general waiver of Buy America requirements for manufactured products (the “Manufactured Products Waiver”). If finalized, this would be a major change for the agency, reversing a policy that has been in place for more than 40 years.
FHWA has imposed Buy America requirements for domestic iron and steel on its projects since 1978 (see 23 U.S.C. § 313; 23 CFR § 635.410), but in 1983, the agency determined that it was in the public interest to waive the requirement as to manufactured products based on the agency’s belief that manufactured products were not used in federal highway projects in sufficient quantities to have an effect on the overall cost of a project and therefore did not require Buy America protections. That general waiver has been in place ever since.
This change in policy comes in the wake of the 2021 Infrastructure Investment and Jobs Act’s Build America, Buy America (“BABA”) provisions, which expanded Buy America coverage broadly in federal financial assistance programs for infrastructure. BABA requires that all steel, iron, construction materials, and manufactured products used in such products be “produced in the United States.” BABA also discourages the use of general applicability waivers like FHWA’s Manufactured Products Waiver and required review of existing waivers.
FHWA sought comments on its longstanding manufactured products waiver in March 2023 and received over 9,400 comments from the public. Commenters included manufacturers, labor organizations, construction contractors, industry associations, State departments of transportation, and even members of Congress. Based on a consideration of this feedback and in recognition of other domestic content policies, including Executive Order 14005, “Ensuring the Future Is Made in All of America by All of America’s Workers,” FHWA is proposing to discontinue its Manufactured Products Waiver and modify its regulations to include domestic content requirements for manufactured products.Continue Reading Federal Highway Administration Announces Proposed Rule Ending Longstanding Buy America Waiver for Manufactured Products
Key Domestic Sourcing Provisions of the House and Senate Versions of the Fiscal Year (FY) 2024 National Defense Authorization Act (NDAA)
Domestic sourcing requirements are not new, but the Government is always developing new tools for increasing the sourcing of goods from the U.S. and allied countries. Both sides of the political aisle have marched to a drumbeat of increased domestic sourcing for the past several years. Most recently, the Biden Administration implemented Executive Order 14005 to “maximize” the U.S. Government’s purchase of goods and services produced in the United States and Executive Order 14104 to increase domestic manufacturing and commercialization in certain research and development supported by federal funding. The ongoing bi-partisan support for bolstering domestic sourcing is illustrated no better than through this year’s NDAA, which focuses on expanding the domestic supply chain for materials and supplies critical to the U.S. military, encouraging the purchase of domestic end items, and providing more opportunities for the Department of Defense (“DoD”) to engage with and purchase from domestic businesses.Continue Reading Key Domestic Sourcing Provisions of the House and Senate Versions of the Fiscal Year (FY) 2024 National Defense Authorization Act (NDAA)
Treasury Releases Long-Awaited Guidance for Domestic Content Bonus Credit Under Inflation Reduction Act
On May 12, 2023, the Department of Treasury issued long-awaited guidance addressing the so-called domestic content “bonus credit” available under the Inflation Reduction Act of 2022 (“IRA”). As we have discussed elsewhere in detail, the IRA incorporates extensions of the existing clean energy tax credits under IRC section 45 and section 48 and establishes new “technology neutral” versions of these credits (pursuant to sections 45Y and 48E) that will become available starting in 2025. At the same time, the IRA also establishes a new 10% domestic content bonus credit that may be claimed in combination with these tax credits provided that the taxpayer: (1) uses U.S.-made iron and steel during construction of the energy-generation facility; and (2) ensures that the cost of any domestic manufactured products that are components of the facility meets a specified domestic content threshold.
The IRA statutory provision left open several key questions regarding how these domestic content requirements would work in practice (including, for example, how the threshold percentage would be calculated). Last Friday, Treasury issued long-awaited guidance (Notice 2023-38 or the “Notice”) that, among other things, addresses: (1) the contours of the “iron and steel” requirement; and (2) the method by which the adjusted percentage is to be calculated. While the guidance is consistent with traditional Buy America principles in certain respects, it also introduces both new concepts and new terminology — particularly with regards to the domestic content percentage calculation — which we discuss in detail below. Continue Reading Treasury Releases Long-Awaited Guidance for Domestic Content Bonus Credit Under Inflation Reduction Act
National Security Update – Departments of Commerce and Treasury Release Notice of Proposed Rulemaking Regarding CHIPS “Guardrails”
On March 21, 2023, the Department of Commerce (“Commerce”) published a Notice of Proposed Rulemaking (the “Commerce Proposed Rule”) to implement certain provisions of the CHIPS and Science Act of 2022 (“CHIPS Act”) that place restrictions on certain activities of businesses receiving federal funding pursuant to the CHIPS Act (“Commerce Guardrails”). On the same day, the Department of the Treasury (“Treasury”) also published a Notice of Proposed Rulemaking (together with the Commerce Proposed Rule, the “Proposed Rules”) to implement the Advanced Manufacturing Investment Credit (“ITC”), including its own restrictions on certain activities that, in broad strokes, parallel the Commerce Guardrails (together with Commerce Guardrails, “CHIPS Guardrails”) (Covington alert). Continue Reading National Security Update – Departments of Commerce and Treasury Release Notice of Proposed Rulemaking Regarding CHIPS “Guardrails”
Department of Transportation Issues Two Proposed Waiver Notices for Build America, Buy America
On November 4, 2022, the U.S. Department of Transportation (“DOT”) published two proposed waiver notices with request for comments related to the Bipartisan Infrastructure Law’s Build America, Buy America Act (“BABA”). Both notices stated that DOT’s existing temporary waiver for construction materials would not be extended past its expiration on November 10, 2022. One notice proposes a public interest waiver for certain narrow categories of contracts and solicitations to continue transitioning the construction materials standard. The other notice proposes a public interest waiver for de minimis costs, small grants, and minor components. Comments are due November 20, 2022 for both notices.Continue Reading Department of Transportation Issues Two Proposed Waiver Notices for Build America, Buy America
GSA Issues Request for Information on Photovoltaic Systems
Last December, President Biden issued Executive Order 14057, “Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability,” which directed the government to adopt cleaner and more sustainable procurement practices, with the ultimate objective of net-zero emissions by 2050.
Pursuant to that directive, GSA has issued a new RFI seeking information regarding domestically manufactured solar photovoltaic (PV) panels and systems, as well as PV system installation. GSA intends to use the information to develop a solar PV procurement strategy and a procurement standard for use in future solicitations — including solicitations for Power Purchase Agreements (PPA), Energy Savings Performance Contracts (ESPCs), Utility Energy Service Contracts (UESCs), and other vehicles.
Given the RFI’s emphasis on sourcing and country of origin, it is possible that any new procurement standards for civilian contracting would parallel existing regulations at DFARS 252.225-7017, which generally require DoD contractors to make use of PV devices originating from the United States or certain designated or qualifying countries. Of course, the ultimate impact of the RFI on future procurement strategy remains to be seen. What is certain, however, is that the Administration is committed to clean technology procurements and that domestic preferences remain an overriding and central concern.
Comments in response to the RFI are due by November 18, 2022. More detail about specific topics covered in the RFI is below.Continue Reading GSA Issues Request for Information on Photovoltaic Systems
New Trade Agreements Act Thresholds Take Effect January 1, 2022
On December 30, 2021, the FAR Council issued a final rule to update the trade agreements thresholds implemented under the Trade Agreements Act (“TAA”). The new thresholds take effect January 1, 2022.
The TAA thresholds are adjusted every two years and set the value a contract must meet or exceed in order for the World Trade Organization Government Procurement Agreement (“WTO GPA”) and free trade agreements (“FTAs”) to apply. For supply, service, and construction contracts that meet or exceed the stated thresholds, Buy American Act (“BAA”) requirements are waived in accordance with the TAA, and the Government is required to treat eligible products and services from designated countries on an equal basis as domestic products and services.
The updated thresholds, to be listed in FAR 25.402(b), are provided below.Continue Reading New Trade Agreements Act Thresholds Take Effect January 1, 2022
The Made in America Office Website Is Live
Under the January 2021 “Made in America” Executive Order 14005, President Biden established a new Made in America Office to oversee and administer domestic preference requirements in federal procurements. Housed within the Office of Management and Budget (“OMB”), the Made in America Office was tasked with, among other things, reviewing and approving agency waivers of any Made in America Laws—including, for example, waivers of the Buy American Act (“BAA”) and Trade Agreements Act (“TAA”), as well as developing a publicly available website to post the descriptions of the proposed waivers and justifications for each. Last week, the Made in America Office launched its new website, establishing for the first time a centralized, government-wide database of all proposed waivers of Made in America Laws.
Continue Reading The Made in America Office Website Is Live
Biden Administration 100-Day Supply Chain Assessment: Insights for Pharmaceutical Manufacturers
Last month, the Biden administration released its report on the results of its 100-day review of U.S. supply chains for critical products: “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth” (the “Report”). Alongside the Report’s slate of policy recommendations, the Biden administration also announced immediate actions to strengthen supply chains and stimulate domestic competitiveness.
The Report is the result of President Biden’s February 24 “Executive Order on America’s Supply Chains” (the “Order”), which directed federal departments and agencies to conduct a review of supply chain risks in four critical product areas,[1] including pharmaceuticals and active pharmaceutical ingredients (“APIs”). The Report and its recommendations further the Biden administration’s broader goal of rebuilding the U.S. industrial base, reducing reliance on foreign competitors, and bolstering national and economic security.
The U.S. Department of Health and Human Services (“HHS”) led the review of the supply chain for pharmaceuticals and APIs, which focused primarily on drugs, in particular small-molecule drugs and therapeutic biological products. The Report makes a number of recommendations discussed herein that have the potential to impact pharmaceutical companies’ business plans and generate significant opportunities, though many such recommendations are long-term and will require dedicated funding so the actual impact of the Report’s suggestions remains to be seen.
Continue Reading Biden Administration 100-Day Supply Chain Assessment: Insights for Pharmaceutical Manufacturers