Modification of advanced manufacturing production credit relating to battery production

(a)

Increase in credit amount for electrode active materials

Section 45X(b)(1)(J) of the Internal Revenue Code of 1986 is amended by striking 10 percent and inserting 25 percent. (b)

Special rules relating to production of electrode active materials

Section 45X(b) of such Code is amended by adding at the end the following new paragraph:

(5)

Special rules relating to electrode active materials

(A)

Production costs

The production of electrode active materials shall include the cost of raw materials, including material extraction from geological sources or waste products.

(c)

Sourcing requirements with respect to qualifying battery components and applicable critical minerals

Section 45X of such Code is amended by adding at the end the following new subsection:

(e)

Critical mineral and battery component sourcing requirements

(1)

Applicable critical minerals

(A)

In general

No credit shall be allowed under this section with respect to a qualifying battery component unless the percentage of the value of the applicable critical minerals contained therein that were— (i)extracted or processed— (I)in the United States, or (II)in any country with which the United States has a free trade agreement in effect, or (ii)recycled, and reintegrated into the supply chain, in North America,

is at least equal to the applicable percentage (as certified by the taxpayer in such form or manner as prescribed by the Secretary).

(B)

Applicable percentage

For purposes of subparagraph (A), the applicable percentage shall be— (i)in the case of any qualifying battery component sold to an unrelated person during calendar year 2026, 70 percent, and (ii)in the case of any qualifying battery component sold to an unrelated person after December 31, 2026, 80 percent. (2)

Qualifying battery components

(A)

In general

No credit shall be allowed under this section with respect to a qualifying battery component unless the percentage of the value of the constituent elements, materials, and subcomponents contained therein that were produced, manufactured, or assembled in North America is at least equal to the applicable percentage (as certified by the taxpayer, in such form or manner as prescribed by the Secretary). (B)

Applicable percentage

For purposes of subparagraph (A), the applicable percentage shall be— (i)in the case of qualifying battery components sold to an unrelated person during calendar year 2026, 70 percent, (ii)in the case of qualifying battery components sold to an unrelated person during calendar year 2027, 80 percent, (iii)in the case of qualifying battery components sold to an unrelated person during calendar year 2028, 90 percent, and (iv)in the case of qualifying battery components sold to an unrelated person after December 31, 2028, 100 percent. (3)

Regulations

The Secretary shall, to the extent practicable, prescribe regulations similar to regulations prescribed under section 30D(e) to carry out the purposes of this subsection.

(d)

Excluded entities

Section 45X(c)(1) of such Code is amended by adding at the end the following new subparagraph:

(C)

Excluded entities

The term eligible component shall not include any qualifying battery component with respect to which— (i) any of the applicable critical minerals contained therein were extracted, processed, or recycled by a foreign entity of concern (as defined in section 40207(a)(5) of the Infrastructure Investment and Jobs Act (42 U.S.C. 18741(a)(5))), and (ii)any of the constituent elements, materials, or subcomponents contained therein were produced, manufactured, or assembled by a foreign entity of concern (as so defined).

The term foreign entity of concern shall include any entity that is directly or indirectly owned by a foreign entity of concern described in subparagraph (C) of section 40207(a)(5) of such Act.

(e)

Modification of electrode active material definition

(1)

In general

Section 45X(c)(5)(B)(i) of such Code is amended— (A)by inserting electrode active precursor materials used in the production of cathode and anode materials, after anode materials,, (B)by inserting binders, after anode foils,, and (C)by inserting solid state electrolytes, after including. (2)

Electrode active precursor materials

Section 45X(c)(5)(B)(i) of such Code is amended— (A)by striking material.—The term and inserting the following:

material.—

(I)

In general

The term

, and

(B)by adding at the end the following new subclause:

(II)

Electrode active precursor material

The term electrode active precursor material means any of the following materials which are of a sufficient grade to meet the purity specifications to supply the electrode active materials market: Cobalt sulfate, manganese sulfate, iron sulfate, lithium hydroxide, metallurgical silicon, phosphoric acid, iron phosphate, nickel manganese cobalt oxide, graphene, sulfur, synthetic or natural graphite pitch, or lithium carbonate.

(f)

Certain silicon treated as applicable critical material

Section 45X(c)(6) of such Code is amended by redesignating subparagraphs (T) through (Z) as subparagraphs (U) through (AA), respectively, and by inserting after subparagraph (S) the following new subparagraph:

(T)

Silicon

Silicon which is silicon or silicon composite used as an electrode active material in battery anodes.

(g)

Effective date

The amendments made by this section shall apply to components produced and sold after December 31, 2025.