H.R. 5686: Battery Fire Prevention Act

The Battery Fire Prevention Act proposes several measures aimed at improving safety and recycling related to batteries, particularly lithium batteries. Below are the key components of the bill explained in simpler terms:

Tax Credit for Battery Detectors

The bill introduces a tax credit for businesses that buy devices known as battery detectors. These detectors must use advanced technologies, such as:

• X-ray technology
• Artificial intelligence
• Radio-frequency identification

To qualify for the tax credit, the detectors must:

• Be used in the business of recycling batteries.
• Be purchased new by the taxpayer (the initial owner).

The tax credit equals 30% of the costs incurred for the purchase of these detectors. However, businesses cannot claim this credit and receive another tax benefit or deduction for the same expenses.

Tax on Battery Sales

The bill also imposes a 5% tax on the sale of batteries made by manufacturers, producers, or importers. This tax will apply to all sales starting after December 31, 2025.

Lithium Battery Buy-back Trust Fund

To manage the proceeds from the new battery sales tax, the bill establishes a trust fund called the Lithium Battery Buy-back Trust Fund. This fund will collect the tax revenue and direct it toward:

• Funding the National Battery Recycling Program (described below).

This means that the money raised from the battery sales tax will be specifically earmarked for recycling efforts related to lithium batteries.

National Battery Recycling Program

The bill mandates the creation of a National Battery Recycling Program within five years of the bill's enactment. This program will focus on the following:

• Identifying and approving facilities that can recycle lithium batteries, making this information publicly available.
• Providing competitive grants to approved recycling facilities to help them set up systems for collecting used lithium batteries. These facilities may offer financial incentives for individuals to recycle their used batteries.

Additionally, federal agencies are encouraged to purchase lithium batteries from these approved recycling facilities, promoting a preference for environmentally friendly options.

Effective Dates

The bill states that:

• The tax credit for battery detectors will apply to expenses in taxable years beginning after December 31, 2025.
• The new tax on battery sales will also be applicable for sales made after December 31, 2025.
• The provisions related to the Lithium Battery Buy-back Trust Fund will come into effect for taxes received after December 31, 2025.

Conclusions on Impacts

This bill aims to enhance safety measures against battery fires, incentivize the recycling of lithium batteries, and gather funds to support these initiatives, thereby addressing environmental concerns associated with battery waste.

Relevant Companies

• TSLA - Tesla, Inc.: As a major manufacturer of electric vehicles and batteries, Tesla may face increased operational costs due to the new sales tax on batteries. They could also benefit from the new recycling initiatives.
• GE - General Electric Company: Involvement in energy solutions may lead GE to adapt to new regulations regarding battery safety and recycling.
• DLTR - Dollar Tree, Inc.: The tax on battery sales could impact retail pricing for batteries sold in their stores.