118 S3521 IS: Rare Earth Magnet Manufacturing Production Tax Credit Act of 2023
U.S. Senate
2023-12-14
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II
118th CONGRESS
1st Session
S. 3521
IN THE SENATE OF THE UNITED STATES
December 14, 2023
Ms. Cortez Masto (for herself and Mr. Mullin) introduced the following bill; which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to establish a credit for the domestic production of rare earth magnets, and for other purposes.
1.

Short title
This Act may be cited as the “Rare Earth Magnet Manufacturing Production Tax Credit Act of 2023”.
2.

Credit for production of rare earth magnets
(a)

In general
Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding after section 45AA the following:
“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 which are not described in subparagraph (B), 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 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, 2032, the amount determined under this subsection 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 2033, 70 percent,
(ii)
in the case of any rare earth magnet manufactured or produced in calendar year 2034 or 2035, 35 percent, or
(iii)
in the case of any rare earth magnet manufactured or produced after December 31, 2035, 0 percent.
(c)

Definitions
For the purposes of this section—
(1)

Rare earth magnet
The term “rare earth magnet” means a permanent magnet comprised of—
(A)
an alloy of neodymium, iron, and boron, which may also include praseodymium, terbium, or dysprosium, or
(B)
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 alloying, reduction, strip casting, milling, sintering, recycling, pressing, and metallization 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(d) 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
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.
(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.
(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 subsection 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 of the credit.
(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 the taxable year or the date on which such return is filed.”.
(b)

Credit To be part of general business credit
Section 38(b) of the Internal Revenue Code of 1986 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 the Internal Revenue Code of 1986 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, 2023.