Credit for production of rare earth magnets

(a)

In general

The Internal Revenue Code of 1986 is amended by inserting the following new section after section 45AA:

45BB.

Credit for production of rare earth magnets

(a)

In general

(1)

Allowance of credit

For purposes of section 38, the credit for production of rare earth magnets determined under this section for any taxable year is an amount equal to the sum of the credit amounts determined under subsection (b) with respect to rare earth magnets which are—(A)manufactured or produced by the taxpayer, and(B)sold by such taxpayer to an unrelated person during the taxable year.(2)

Unrelated person

(A)

In general

For purposes of this subsection, a taxpayer shall be treated as selling rare earth magnets to an unrelated person if such magnet is sold to such person by a person related to the taxpayer.(B)

Election

(i)

In general

At the election of the taxpayer (in such form and manner as the Secretary may prescribe), a sale of rare earth magnets by such taxpayer to a related person shall be deemed to have been made to an unrelated person.(ii)

Requirement

As a condition of, and prior to, any election described in clause (i), the Secretary may require such information or registration as the Secretary deems necessary for purposes of preventing duplication, fraud, or any improper or excessive amount determined under paragraph (1).(b)

Credit amount

(1)

In general

The amount determined under this subsection is—(A)$20 per kilogram of rare earth magnets manufactured or produced in the United States by the taxpayer during the taxable year, and(B)$30 per kilogram of rare earth magnets manufactured or produced in the United States by the taxpayer during the taxable year if not less than 90 percent by weight of the component rare earth materials of such magnets are produced within the United States.(2)

Phase-Out

(A)

In general

In the case of any rare earth magnet manufactured or produced after December 31, 2034, the amount determined under this section with respect to such rare earth magnet shall be equal to the product of—(i)the amount determined under paragraph (1) with respect to such rare earth magnet, as determined without regard to this subsection, multiplied by(ii)the phase-out percentage described in subparagraph (B).(B)

Phase-out percentage

The phase-out percentage described in this paragraph is—(i)in the case of any rare earth magnet manufactured or produced in calendar year 2035, 70 percent,(ii)in the case of any rare earth magnet manufactured or produced in calendar year 2036 or 2037, 35 percent, or(iii)in the case of any rare earth magnet manufactured or produced after December 31, 2037, 0 percent.(c)

Definitions

For the purposes of this section—(1)

Rare earth magnet

The term rare earth magnet means a permanent magnet— (A) with an intrinsic coercivity (HCj) of 10 kOe or higher at 68 °F (20 °C), and (B)comprised of—(i)an alloy of neodymium, iron, and boron, which may also include praseodymium, terbium, or dysprosium, or(ii)an alloy of samarium and cobalt, which may also include gadolinium or any associated host mineral of a component rare earth material.(2)

Component rare earth material

The term component rare earth material means neodymium, praseodymium, dysprosium, terbium, samarium, gadolinium, and cobalt.(3)

Manufactured

The term manufactured means the manufacturing of a rare earth magnet, including the milling, pressing, sintering, and recycling of component rare earth material.(4)

Non-allied foreign nation

The term non-allied foreign nation has the meaning given to the term covered nation in section 4872(f) of title 10, United States Code.(5)

United States and possession of the United States

The terms United States and possession of the United States have the meaning given such terms in section 638.(d)

Special rules

(1)

Restriction on component sourcing

(A)

In general

Except as provided in subparagraph (B) or (C), no credit shall be allowed under this section with respect to a rare earth magnet if any component rare earth material used to manufacture or produce such magnet is produced in a non-allied foreign nation.(B)

Delayed restriction for certain component rare earth materials

In the case of the rare earth materials dysprosium, terbium, samarium, and gadolinium, the restriction under subparagraph (A) shall not apply to magnets manufactured or produced using such materials before January 1, 2027.(C)

Material seized from non-allied foreign nation during wartime

(i)

In general

Subparagraph (A) shall not apply with respect to any component rare earth material which is seized from a non-allied foreign nation during wartime by—(I)Ukraine, or(II)an allied country.(ii)

Certification

For purposes of this subparagraph, the taxpayer which manufactured or produced the rare earth magnet shall certify to the Secretary (at such time, and in such form and manner, as the Secretary may prescribe) that the component rare earth material used to manufacture or produce such magnet satisfies the requirements described in clause (i).(iii)

Allied country

For purposes of this subparagraph, the term allied country means any of the following:(I)A country that is a member of the North Atlantic Treaty Organization.(II)Australia, New Zealand, Japan, and the Republic of Korea.(III)Any other country designated as an allied country for the purposes of this subparagraph by the Secretary (with the concurrence of the Secretary of State and the Secretary of Defense).(2)

Trade or business requirement

No credit shall be allowed under this section with respect to a rare earth magnet unless such magnet is manufactured or produced in the ordinary course of a trade or business of the taxpayer.(3)

Coercivity requirement exception for eligible manufacturers

(A)

In general

The Secretary may elect to treat a magnet which does not meet the coercivity requirements of subsection (c)(1)(A) as a rare earth magnet if such magnet is manufactured by an eligible manufacturer.(B)

Eligible manufacturer

For purposes of subparagraph (A), the term eligible manufacturer means a manufacturer that—(i)receives a grant from, or is contracted by, the Department of Energy or the Department of Defense to produce a magnet, and(ii)commits to place in service a domestic manufacturing facility that produces magnets that the Secretary determines to demonstrate national security merit.(e)

Elective payment for production of rare earth magnets

(1)

In general

In the case of a taxpayer making an election (at such time and in such manner as the Secretary may provide) under this section with respect to any portion of the credit allowed under subsection (a), such taxpayer shall be treated as making a payment against the tax imposed by this subtitle for the taxable year equal to the amount of such portion.(2)

Timing

The payment described in paragraph (1) shall be treated as made on the later of the due date of the return of tax for such taxable year or the date on which such return is filed.

(b)

Credit To be part of general business credit

Section 38(b) of such Code is amended by striking plus at the end of paragraph (40), by striking the period at the end of paragraph (41) and inserting , plus, and by adding at the end the following new paragraph:

(42)the credit for production of rare earth magnets determined under section 45BB(a).

(c)

Conforming amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 45AA the following new item:

Sec. 45BB. Credit for production of rare earth magnets.

(d)

Effective date

The amendments made by this Act shall apply to taxable years beginning after December 31, 2024.