H.R. 1496

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1496 Introduced in House (IH)]

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119th CONGRESS
1st Session
H. R. 1496

To amend the Internal Revenue Code of 1986 to establish a credit for 
the domestic production of high-performance rare earth magnets, and for 
other purposes.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

February 21, 2025

Mr. Reschenthaler (for himself, Mr. Swalwell, Mr. Hudson, Ms. Lee of 
Nevada, Mr. Calvert, Ms. Castor of Florida, Mr. Obernolte, Mr. Tonko, 
Mr. Moolenaar, Mr. Deluzio, Mr. Meuser, Mr. Panetta, Mr. Mills, and Ms. 
Houlahan) 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 high-performance rare earth magnets, and for 
other purposes.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Rare Earth Magnet Security Act of 
2025''.

SEC. 2. 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:

``SEC. 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 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 68F (20C), 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(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.--
``(A) In general.--Except as provided in 
subparagraph (B), 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.
``(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 
demonstrate technological, supply chain, or 
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.
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