ISRI testifies on behalf of recycling tax benefit

Joe Pickard, chief economist and director of commodities of the Washington-based Institute of Scrap Recycling Industries (ISRI), has testified that a proposed tax policy could result in less recycling in the United States.

During a late-February Internal Revenue Service (IRS) hearing on the Advanced Manufacturing Production Credit, Pickard said the current guidance for section 45X of that document “severely" restricts the eligibility of recyclers and recycled metal manufacturers from claiming the credits, which creates a disincentive in the market.

“ISRI strongly supports the legislative initiatives approved by Congress and the Biden-Harris Administration to incentivize the recycling of critical minerals," he said. "Unfortunately, the recently proposed rulemaking by the IRS and Treasury Department falls well short of those objectives.”

According to ISRI, current guidance on section 45X disincentivizes recycling by providing a credit for the production within the U.S. and sale of certain eligible components including solar and wind energy components, inverters, qualifying battery components and applicable critical minerals.

According to a notice of proposed rulemaking published in the Federal Register, the IRS proposed regulations to implement the advanced manufacturing production credit established by the Inflation Reduction Act of 2022 to incentivize the production of eligible components within the U.S.

The exclusion of recycled aluminum and other recycled metals from the section 45X tax credits is at odds with the administration’s advanced manufacturing, critical minerals and supply chain initiatives, the association says.

ISRI recommends the IRS/Treasury Department rule making should:

• be finalized to clarify that production by the taxpayer includes secondary production (this is discussed in the preamble to the proposed rules but not the rules themselves);
• reverse its decision on commodity grade aluminum;
• clarify and expand the eligibility of metals and metal alloys; and
• include the cost of production as it relates to electrode active material and expand the list of critical minerals to include recycled raw materials.

“ISRI looks forward to working with [the] IRS and Treasury Department officials to remove the unintended disincentives to recycling contained in the proposed rulemaking,” Pickard says.

The trade group represents more than 1,600 companies in the U.S.