Emerging scandal: Why are we giving $8 billion to Chinese company with CCP ties to build a $2 billion IL battery factory? Updated – Wirepoints

Gotion High-Tech Co. is a PRC company that has direct ties to the CCP and state-owned financial institutions. Gotion has been an active participant in the PRC-based version of the “Thousands Talent Program,” a program the FBI itself says encourages theft of trade secrets and economic espionage. Gotion has established multiple “Communist Party Units” within its operations and has publicly sought PRC provincial government support for its desire to expand its operations overseas. Even when courting major Western investment, Gotion has been adamant about retaining PRC-based control, including requiring that Volkswagen give up part of its voting rights, despite Volkswagen acquiring over 25 percent of the company. [Footnotes omitted.]

“It is perplexing,” says the letter, that the U.S. government would perpetuate China’s domination of key technology “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.”

Perplexing, indeed.

Equally perplexing is the sheer size of the subsidies, regardless of the recipient. Gotion is qualified to receive $7.5 billion of federal tax credits over five years, as we wrote Wednesday. That’s in addition to $536 million of incentives awarded by the State of Illinois for the Illinois plant, which is expected to employ 2,600 workers. So, Gotion will be gifted over $8 billion for a factory that will cost only $2 billion.

We have independently confirmed the amount of the federal tax credit available for Gotion’s Illinois project. The total potential credit is $9.75 billion, although a complex phase-out begins after five years, so we have used only the five year total of $1.5 billion per year, or $7.5 billion. It should also be noted that the credit may not be available until the plant is completed. In any event, the precise number matters little since the total clearly exceeds to cost of the plant by billions.

The Coalition for a Prosperous America (CPA) is a national non-profit organization representing exclusively domestic producers across many sectors and industries of the U.S. economy. They’ve been heavily criticizing the tax credit program, which is known as “45X.” CPA Chairman Zach Mottl told us this:

It’s unconscionable that the State of Illinois would contribute $500 million and the federal government an additional $7.5 billion to construct a project that will cost just a fraction of that. And to give that money to a Chinese company that is already subsidized by the Chinese government is a serious mistake. China‘s goal is to dominate the global battery industry, and forcing American taxpayers to unwittingly fund the CCP’s ambitions is a direct threat to U.S. economic and national security.

A federal panel that has power to veto some investments in the U.S. by national security threats like China is the Treasury Department Committee on Foreign Investments (CFIUS). CFIUS was earlier reported to have disclaimed jurisdiction over a similar Gotion project in Michigan, but that’s not the whole story. Gotion only submitted minimum disclosures to CFIUS when requested to by the township where its plant is to be located. But Gotion never submitted what’s needed — a full disclosure statement, known as a Form 800, to allow for a proper review.

That’s what should be compelled for Gotion’s projects in both Michigan and Illinois — submission of Form 800.

That’s what’s being demanded in Michigan by opponents of Gotion’s plant there. Through the Michigan-China Economic and Security Review Group (MCESRG), as reported by the Daily Caller, former U.S. Ambassadors Peter Hoekstra and Joseph Cella called on the Treasury Department’s Committee on Foreign Investment in the United States (CFIUS) to compel Gotion, Inc., a subsidiary of China-based Gotion High-Tech, to file the disclosure paperwork and submit to a full CFIUS review.

The root source of the tax credit problem is in the legislation that created the 45X program — the Inflation Reduction Act . Congress must change that, as the Gallagher-Moolenaar letter says. Authorization for 45X was in the mislabeled Inflation Reduction Act of 2022, and the authorization does not contain the same prohibitions on foreign entities of concern that are in other parts of the Act and other laws, according to JD Supra.

The entire conception of 45X in that legislation was botched. It was initially estimated to cost the U.S. Treasury $31 billion, but it’s now estimated to cost as much as $200 billion. It was simply too generous, leading to a frenzy of new battery factory announcements by companies drawn to the handout.

Good Jobs First, a worker-oriented policy group in Washington, D.C., has documented the ridiculously oversized tax credits for recent battery plant announcements. Their July report includes this chart where you can see that the 45X tax credits far exceed the cost of many new battery plants, just as Gotion’s will in Illinois.