US House Panel Probes Treasury Over Federal Tax Credits for Chinese Companies

A U.S. House panel on China asked the Treasury to clarify whether it would endorse U.S. taxpayer funding to Chinese green energy companies.
US House Panel Probes Treasury Over Federal Tax Credits for Chinese Companies
The rural Michigan community of Green Charter Township was to become home to a Chinese EV battery plant. (Courtesy of Jim Chapman)
Terri Wu
9/15/2023
Updated:
9/15/2023
0:00

A U.S. House panel on China asked the Department of Treasury to clarify whether it would endorse U.S. taxpayer funding for a Chinese green energy company over its battery plant in Michigan.

The inquiry comes as the Treasury formulates its guidance on applying the term “foreign entity of concern” to incentives under the Inflation Reduction Act (IRA), a new law partly aimed at reducing U.S. dependence on China for renewable energy.

“It is perplexing that the U.S. government would perpetuate this chokehold by actively supporting CCP-backed companies expanding their foothold in the U.S. market, especially in a crucial sector such as lithium-ion battery manufacturing,” the chair and the ranking member of the House Select Committee on the Chinese Communist Party (CCP) wrote in their Wednesday letter to the Treasury, saying that the United States is trying to “reduce the CCP’s chokehold over critical supply chains.”

The Committee focused on Gotion High-Tech Co., whose U.S. subsidiary Gotion Inc. is building a $2.4 billion battery manufacturing facility on 260 acres in Mecosta County, Michigan. Production will start in the second quarter of 2025, and the battery materials will feed to a second U.S. location, making battery cells at a capacity of between 30 and 40 gigawatt-hours a year, said Chuck Thelen, Gotion’s vice president of North America operations, at a local government meeting in April.

Gotion is a leading producer of lithium-iron-phosphate batteries, better known as LFP, a type of battery that’s cheaper but less energy-dense than the nickel-cobalt-manganese (NCM) batteries currently dominating the market. Chinese companies monopolize LFP battery technology, while Japanese and South Korean companies champion nickel-based batteries.

A Race for Market Domination

South Korea’s SNE Research ranks Gotion third globally in terms of its market share in providing LFP cathode battery materials and eighth regarding installed battery volumes in electric vehicles (EV). The research firm refers to Gotion as Guoxuan, Gotion’s Chinese name, in its reports.
Earlier this month, the second location Mr. Thelen mentioned in April was disclosed as a 150-acre site at Manteno, Illinois. Gotion has invested in a $2 billion facility there to make LFP batteries.

In February, Ford Motor Co. announced that it had licensed LFP battery technology from the world’s largest EV battery maker, China’s Contemporary Amperex Technology Co. Ltd. (CATL), to produce 35 gigawatt-hours—enough batteries for 400,000 EVs—each year starting in 2026.

American automakers’ adoption of LFP batteries is essential for the LFP technology to dominate the global EV battery market, according to a December report by Adamas Intelligence, a critical minerals market research firm.
“Allowing a CCP-supported company to erode U.S. strength and development in the domestic battery sector threatens U.S. national security and vital supply chains, particularly when such companies can leverage U.S. taxpayer-funded investments and credits for lithium-ion batteries as offered by the Inflation Reduction Act.”

Strengthen National Security Reviews

The bipartisan panel leaders also sought the Treasury’s input to expand the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS), a federal interagency panel that reviews foreign acquisitions for national security risks.

CFIUS, under the leadership of the Treasury, determined that Gotion’s purchase of the land for the Michigan battery plant was out of its jurisdiction or not a “covered transaction,” the company announced in June.

In addition to potential federal tax credits, Gotion has also enjoyed a lucrative state and local incentive package.

The state of Michigan approved in April a $715 million incentive package, including a 30-year tax break valued at $540 million, to Gotion’s new battery plant, according to MLive.

Gotion’s Link to the CCP

Gotion’s link to the CCP has come under scrutiny recently. The Chinese parent company’s article of incorporation contains chapters about establishing a CCP committee in the company and that the Party secretary should be the chairman.

“Do we have articles of incorporation that require specific paragraphs, or you don’t do business in the country of China? Yes, but it is not a corporate culture,” Mr. Thelen said at the local government meeting in April.

Reports on Gotion’s Chinese website seem to tell a different story.

In its 2022 corporate responsibility report, Gotion said it had 923 CCP members and 11 chapters in the section titled “Party development solidifies the foundation and forges the soul.” The report also listed various CCP-related activities, including visiting historical Red Army battlefields and studying reports of the 20th National Congress of the CCP.
In April, a law firm registered Gotion Inc. as a foreign principal—an entity organized under the laws of a foreign country—under the Foreign Agents Registration Act, according to a filing (pdf).

When Gotion announced the Michigan plant, it said it would work with Ferris State University to build a talent pipeline for the 2,360 jobs it said it would add to the local economy and Michigan Works to prioritize hiring within the state.

In response to The Epoch Times’ question about the recruitment progress, a spokesperson of Michigan Works wrote in an email that “there is not any information to report at this time.” The dean of Ferris State’s engineering school at the time of the Gotion deal announcement had left the university “before the summer,” according to a school spokesperson, who didn’t respond to whether the planned educational partnership was still ongoing. Gotion’s Mr. Thelen didn’t react to an Epoch Times inquiry.

The Epoch Times has contacted the Department of Treasury for comment.

Terri Wu is a Washington-based freelance reporter for The Epoch Times covering education and China-related issues. Send tips to [email protected].
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