Rare Earth Magnet Manufacturing Production Tax Credit Act of 2023

I 118TH CONGRESS 1ST SESSION H. R. 2849 To amend the Internal Revenue Code of 1986 to establish a credit for the domestic production of rare earth magnets, and for other purposes. IN THE HOUSE OF REPRESENTATIVES APRIL 25, 2023 Mr. RESCHENTHALER (for himself and Mr. SWALWELL) introduced the following bill; which was referred to the Committee on Ways and Means 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. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Rare Earth Magnet 4 Manufacturing Production Tax Credit Act of 2023’’. 5 SEC. 2. CREDIT FOR PRODUCTION OF RARE EARTH 6 MAGNETS. 7 (a) IN GENERAL.—The Internal Revenue Code of 8 1986 is amended by inserting the following new section 9 after section 45AA: 10 VerDate Sep 11 2014 23:00 May 01, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2849.IH H2849 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 2849 IH ‘‘SEC. 45BB. CREDIT FOR PRODUCTION OF RARE EARTH 1 MAGNETS. 2 ‘‘(a) IN GENERAL.— 3 ‘‘(1) ALLOWANCE OF CREDIT.—For purposes of 4 section 38, the credit for production of rare earth 5 magnets determined under this section for any tax- 6 able year is an amount equal to the sum of the cred- 7 it amounts determined under subsection (b) with re- 8 spect to rare earth magnets which are— 9 ‘‘(A) manufactured or produced by the tax- 10 payer, and 11 ‘‘(B) sold by such taxpayer to an unrelated 12 person during the taxable year. 13 ‘‘(2) UNRELATED PERSON.— 14 ‘‘(A) IN GENERAL.—For purposes of this 15 subsection, a taxpayer shall be treated as selling 16 rare earth magnets to an unrelated person if 17 such magnet is sold to such person by a person 18 related to the taxpayer. 19 ‘‘(B) ELECTION.— 20 ‘‘(i) IN GENERAL.—At the election of 21 the taxpayer (in such form and manner as 22 the Secretary may prescribe), a sale of rare 23 earth magnets by such taxpayer to a re- 24 lated person shall be deemed to have been 25 made to an unrelated person. 26 VerDate Sep 11 2014 23:00 May 01, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2849.IH H2849 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 2849 IH ‘‘(ii) REQUIREMENT.—As a condition 1 of, and prior to, any election described in 2 clause (i), the Secretary may require such 3 information or registration as the Sec- 4 retary deems necessary for purposes of 5 preventing duplication, fraud, or any im- 6 proper or excessive amount determined 7 under paragraph (1). 8 ‘‘(b) CREDIT AMOUNT.— 9 ‘‘(1) IN GENERAL.—The amount determined 10 under this subsection is— 11 ‘‘(A) $20 per kilogram of rare earth 12 magnets manufactured or produced in the 13 United States by the taxpayer during the tax- 14 able year, and 15 ‘‘(B) $30 per kilogram of rare earth 16 magnets manufactured or produced in the 17 United States by the taxpayer during the tax- 18 able year if not less than 90 percent of the com- 19 ponent rare earth materials of such magnets 20 are produced within the United States. 21 ‘‘(2) PHASE-OUT.— 22 ‘‘(A) IN GENERAL.—In the case of any 23 rare earth magnet manufactured or produced 24 after December 31, 2032, the amount deter- 25 VerDate Sep 11 2014 23:00 May 01, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2849.IH H2849 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 2849 IH mined under this section with respect to such 1 rare earth magnet shall be equal to the product 2 of— 3 ‘‘(i) the amount determined under 4 paragraph (1) with respect to such rare 5 earth magnet, as determined without re- 6 gard to this subsection, multiplied by 7 ‘‘(ii) the phase-out percentage de- 8 scribed in subparagraph (B). 9 ‘‘(B) PHASE-OUT PERCENTAGE.—The 10 phase-out percentage described in this para- 11 graph is— 12 ‘‘(i) in the case of any rare earth 13 magnet manufactured or produced in cal- 14 endar year 2033, 70 percent, 15 ‘‘(ii) in the case of any rare earth 16 magnet manufactured or produced in cal- 17 endar year 2034 or 2035, 35 percent, or 18 ‘‘(iii) in the case of any rare earth 19 magnet manufactured or produced after 20 December 31, 2035, 0 percent. 21 ‘‘(c) DEFINITIONS.—For the purposes of this sec- 22 tion— 23 VerDate Sep 11 2014 23:00 May 01, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2849.IH H2849 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 2849 IH ‘‘(1) RARE EARTH MAGNET.—The term ‘rare 1 earth magnet’ means a permanent magnet com- 2 prised of— 3 ‘‘(A) an alloy of neodymium, iron, and 4 boron, which may also include praseodymium, 5 terbium, or dysprosium, or 6 ‘‘(B) an alloy of samarium and cobalt, 7 which may also include gadolinium or any asso- 8 ciated host mineral of a component rare earth 9 material. 10 ‘‘(2) COMPONENT RARE EARTH MATERIAL.— 11 The term ‘component rare earth material’ means ne- 12 odymium, praseodymium, dysprosium, terbium, sa- 13 marium, gadolinium, and cobalt. 14 ‘‘(3) MANUFACTURED.—The term ‘manufac- 15 tured’ means the manufacturing of a rare earth 16 magnet, including the alloying, reduction, strip cast- 17 ing, milling, sintering, recycling, pressing, and 18 metallization of component rare earth material. 19 ‘‘(4) NON-ALLIED FOREIGN NATION.—The term 20 ‘non-allied foreign nation’ has the meaning given to 21 the term ‘covered nation’ in section 4872(d) of title 22 10, United States Code. 23 ‘‘(5) UNITED STATES AND POSSESSION OF THE 24 UNITED STATES.—The terms ‘United States’ and 25 VerDate Sep 11 2014 23:00 May 01, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2849.IH H2849 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 2849 IH ‘possession of the United States’ have the meaning 1 given such terms in section 638. 2 ‘‘(d) SPECIAL RULES.— 3 ‘‘(1) RESTRICTION ON COMPONENT 4 SOURCING.—No credit shall be allowed under this 5 section with respect to a rare earth magnet if any 6 component rare earth material used to manufacture 7 or produce such magnet is produced in a non-allied 8 foreign nation. 9 ‘‘(2) TRADE OR BUSINESS REQUIREMENT.—No 10 credit shall be allowed under this section with re- 11 spect to a rare earth magnet unless such magnet is 12 manufactured or produced in the ordinary course of 13 a trade or business of the taxpayer. 14 ‘‘(e) ELECTIVE PAYMENT FOR PRODUCTION OF 15 RARE EARTH MAGNETS.— 16 ‘‘(1) IN GENERAL.—In the case of a taxpayer 17 making an election (at such time and in such man- 18 ner as the Secretary may provide) under this section 19 with respect to any portion of the credit allowed 20 under subsection (a), such taxpayer shall be treated 21 as making a payment against the tax imposed by 22 this subtitle for the taxable year equal to the amount 23 of such portion. 24 VerDate Sep 11 2014 23:00 May 01, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2849.IH H2849 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 2849 IH ‘‘(2) TIMING.—The payment described in para- 1 graph (1) shall be treated as made on the later of 2 the due date of the return of tax for such taxable 3 year or the date on which such return is filed.’’. 4 (b) CREDIT TO BE PART OF GENERAL BUSINESS 5 CREDIT.—Section 38(b) of such Code is amended by strik- 6 ing ‘‘plus’’ at the end of paragraph (40), by striking the 7 period at the end of paragraph (41) and inserting ‘‘, plus’’, 8 and by adding at the end the following new paragraph: 9 ‘‘(42) the credit for production of rare earth 10 magnets determined under section 45BB(a).’’. 11 (c) CONFORMING AMENDMENT.—The table of sec- 12 tions for subpart D of part IV of subchapter A of chapter 13 1 of such Code is amended by inserting after the item 14 relating to section 45AA the following new item: 15 ‘‘Sec. 45BB. Credit for production of rare earth magnets.’’. (d) EFFECTIVE DATE.—The amendments made by 16 this Act shall apply to taxable years beginning after De- 17 cember 31, 2023. 18 Æ VerDate Sep 11 2014 23:00 May 01, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6301 E:\BILLS\H2849.IH H2849 kjohnson on DSK79L0C42PROD with BILLS