Gabriel Noronha, executive director of Polaris National Security, has expressed concerns that the Inflation Reduction Act allows Chinese companies to exploit U.S. tax subsidies by producing domestically. He made this statement on the social media platform X.
“Biden’s Inflation Reduction Act created a production tax credit (Section 45X,” said Noronha, President. “That bill enabled Chinese companies to earn unlimited subsidies. By setting up production stateside. The GOP fought that loophole hard.”
According to the Coalition for a Prosperous America, in early April 2023, House Ways and Means Committee Chairman Jason Smith proposed a reconciliation framework aimed at tightening eligibility for the Section 45X Advanced Manufacturing Production Tax Credit, part of the Inflation Reduction Act. Smith’s proposal seeks to apply the National Defense Authorization Act’s definition of “Foreign Entities of Concern” (FEOC) to the credit, thereby excluding entities with significant ties to adversarial nations like China. This move is intended to prevent companies with substantial Chinese ownership or control from benefiting from U.S. clean energy subsidies.
As reported by Congress, the Inflation Reduction Act of 2022 introduced a new tax credit under Section 45X to incentivize domestic production of battery components, solar cells, and other clean energy inputs. The credit provides a per-unit subsidy to manufacturers based in the United States, aiming to strengthen domestic supply chains. However, it has been noted that Chinese companies could access these subsidies by establishing or partnering in U.S.-based operations.
According to Energy Storage News, Section 45X highlights that companies like CATL, the world’s largest electric vehicle battery manufacturer with strong ties to China’s government, could still benefit from U.S. subsidies by forming joint ventures or licensing agreements with American firms. While the FEOC provision in the Inflation Reduction Act aims to exclude entities controlled by adversarial governments, enforcement mechanisms are limited, especially in cases where ownership is diluted through layered corporate structures. This situation has raised bipartisan concerns in Congress about the national security implications of taxpayer dollars subsidizing companies with links to the Chinese military or surveillance apparatus.
Noronha is also President of Polaris National Security and a Fellow at the Jewish Institute for National Security of America (JINSA), where he contributes to the Gemunder Center for Defense and Strategy. He previously served as Special Advisor for the Iran Action Group at the U.S. Department of State from 2019 to 2021 and as Special Assistant on the Senate Armed Services Committee under Chairmen John McCain and Jim Inhofe from 2017 to 2019. Noronha has worked extensively on U.S. national security policy related to Iran, Russia, and China and is proficient in Russian, Mandarin, and Spanish.
