S-369-119
Read twice and referred to the Committee on Finance.
Sponsored by Rick Scott (R-FL)
What it does
This bill would prohibit entities linked to China, Cuba, Iran, North Korea, Russia, or the Maduro government of Venezuela from claiming a wide range of federal energy-related tax credits and deductions. Covered entities include those governments and their agencies, companies organized under or headquartered in those countries, and any company owned, controlled, directed, influenced by, or having significant financial or contractual ties to those governments or entities. The disqualified tax benefits include credits for clean energy production, electric vehicles, hydrogen, carbon capture, advanced manufacturing, and energy-efficient buildings, as well as excise tax refunds on certain fuel mixtures.
Who benefits
U.S.-based clean energy manufacturers and producers who compete with foreign-linked entities and would face less subsidized competition. Domestic advanced manufacturing companies, particularly in battery and solar supply chains. Taxpayers broadly, if the bill prevents federal tax dollars from flowing to entities connected to adversarial governments. National security advocates who seek to limit foreign influence in U.S. energy infrastructure. Workers at domestic clean energy firms that may gain competitive advantage.
Who is hurt
Foreign-linked companies — most prominently Chinese battery and solar manufacturers such as Gotion (the bill's namesake), CATL, and others with U.S. operations — that currently claim or plan to claim these credits. U.S. businesses that have joint ventures, supply contracts, or financial relationships with covered entities, who may lose access to credits or face pressure to restructure partnerships. State and local governments that recruited foreign-linked clean energy manufacturers with the expectation of federal tax credit eligibility. U.S. consumers and utilities if reduced competition in clean energy supply chains raises costs. Legal and compliance professionals who would need to navigate the broad "influenced by" and "contractual connections" definitions.
Supporters argue
Supporters argue that U.S. taxpayers should not subsidize companies with ties to geopolitical adversaries, particularly given documented concerns about Chinese government influence over nominally private firms under China's National Intelligence Law. They contend that entities like Gotion — a subsidiary of Gotion High-Tech, which has ties to the Chinese Communist Party — have received or sought hundreds of millions in U.S. tax incentives, effectively using American subsidies to entrench foreign control over critical clean energy supply chains that the Inflation Reduction Act was designed to build domestically.
Opponents argue
Opponents argue that the bill's broad definitions — particularly "influenced by" and "certain financial or contractual connections" — could sweep in U.S. companies with routine commercial ties to covered countries, creating legal uncertainty that chills legitimate clean energy investment. They contend that disqualifying entities from tax credits without clear, administrable standards risks arbitrary enforcement, may slow the domestic clean energy buildout that these credits were designed to accelerate, and could raise due process concerns under the Fifth Amendment given the vagueness of the "influenced by" standard.
Constitutional context
The Taxing and Spending Clause (Art. I, §8, cl. 1) gives Congress broad authority to set conditions on tax benefits, including restricting eligibility based on national origin or foreign government ties. The Fifth Amendment's Due Process Clause may be implicated if the bill's "influenced by" and "contractual connections" standards are found unconstitutionally vague as applied to U.S.-based entities. No directly controlling Supreme Court precedent governs this specific mechanism, though NFIB v. Sebelius (2012) affirmed Congress's wide latitude in structuring tax incentives.
Checks and balances
Congress would restrict Treasury and IRS authority to grant these credits to covered entities; the IRS and Treasury would implement eligibility determinations; courts could review whether the "influenced by" and "contractual connections" definitions are applied consistently and constitutionally.
Historical precedent
The Uyghur Forced Labor Prevention Act (2021) similarly restricted U.S. economic benefits to entities linked to Chinese government-connected supply chains, and the CHIPS Act (2022) included "guardrails" prohibiting recipients from expanding semiconductor manufacturing in countries of concern, establishing a precedent for conditioning federal benefits on foreign-government-connection restrictions.