H.R. 9227

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9227 Introduced in House (IH)]

<DOC>

119th CONGRESS
2d Session
H. R. 9227

To amend the Internal Revenue Code of 1986 to incentivize the domestic 
production and use of permanent magnets, and for other purposes.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

June 9, 2026

Mr. Moolenaar (for himself and Mr. Khanna) 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 incentivize the domestic 
production and use of permanent 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 ``Magnets Value Chain Support Act of 
2026''.

SEC. 2. CONGRESSIONAL FINDINGS.

Congress finds the following:
(1) The United States is strategically dependent on foreign 
sources--principally the People's Republic of China--for magnet 
metals and permanent magnets used in electric motors, 
generators, robotics, industrial machinery, advanced 
electronics, and national defense systems.
(2) In 2025, a Select Committee on China investigation 
found that the PRC government engaged in a decades-long 
strategy to dominate the rare earth supply chain.
(3) Domestic metallization and magnet-manufacturing 
capabilities have atrophied and require targeted, market-
oriented incentives to restore competitive production and 
reduce foreign dependence.
(4) Motors, generators, robotics, and high-performance 
electronics constitute the majority of global permanent magnet 
demand and are essential to the economic and national security 
of the United States.
(5) Reshoring the magnet supply chain requires both 
upstream incentives for magnet metal and permanent magnet 
production, and downstream incentives for the adoption of such 
materials by industrial, energy, automotive, aerospace, and 
electronics manufacturers.
(6) Competitive market incentives are necessary to counter 
non-market foreign production and to strengthen the domestic 
industrial base.

SEC. 3. ESTABLISHMENT OF MAGNET VALUE CHAIN SUPPORT CREDIT.

(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 at the end 
the following new section:

``SEC. 45BB. MAGNET VALUE CHAIN SUPPORT CREDIT.

``(a) Allowance of Credit.--For purposes of section 38, the magnet 
value chain support credit for any taxable year is an amount equal to 
the sum of--
``(1) the permanent magnet production credit,
``(2) the magnet metal production credit, plus
``(3) the rare earth oxide production credit.
``(b) Permanent Magnet Production Credit; Magnet Metal Production 
Credit; Rare Earth Oxide Production Credit.--For purposes of this 
section--
``(1) Permanent magnet production credit.--
``(A) In general.--The permanent magnet production 
credit with respect to any eligible taxpayer for any 
taxable year is the applicable amount with respect to 
each kilogram of qualified permanent magnet--
``(i) manufactured by such taxpayer during 
such taxable year in the United States, and
``(ii) sold by such taxpayer to an 
unrelated person during such taxable year.
``(B) Applicable amount.--For purposes of 
subparagraph (A), the term `applicable amount' means, 
with respect to each kilogram of qualified permanent 
magnet--
``(i) $20 per kilogram, if--
``(I) such permanent magnet is a 
rare earth-free permanent magnet, and
``(II) none of the magnet metal 
inputs incorporated within such 
permanent magnet were produced by a 
prohibited foreign entity,
``(ii) $20 per kilogram, if--
``(I) such permanent magnet is a 
high-performance permanent magnet,
``(II) at least 75 percent of the 
magnet metal inputs (by weight) 
incorporated within such permanent 
magnet were produced in the United 
States or in a partner country, and
``(III) none of the magnet metal 
inputs incorporated within such 
permanent magnet were produced by a 
prohibited foreign entity,
``(iii) $30 per kilogram, if--
``(I) such permanent magnet is a 
high-performance permanent magnet,
``(II) at least 90 percent of the 
magnet metal inputs (by weight) 
incorporated within such permanent 
magnet were produced in the United 
States or in a partner country, and
``(III) none of the magnet metal 
inputs incorporated within such 
permanent magnet were produced by a 
prohibited foreign entity,
``(iv) $33 per kilogram, if--
``(I) such permanent magnet is an 
advanced high-performance permanent 
magnet,
``(II) at least 75 percent of the 
magnet metal inputs (by weight) 
incorporated within such permanent 
magnet were produced in the United 
States or in a partner country, and
``(III) none of the magnet metal 
inputs incorporated within such 
permanent magnet were produced by a 
prohibited foreign entity, and
``(v) $40 per kilogram, if--
``(I) such permanent magnet is an 
advanced high-performance permanent 
magnet,
``(II) at least 90 percent of the 
magnet metal inputs (by weight) 
incorporated within such permanent 
magnet were produced in the United 
States or in a partner country, and
``(III) none of the magnet metal 
inputs incorporated within such 
permanent magnet were produced by a 
prohibited foreign entity.
``(C) Eligible taxpayer.--For purposes of 
subparagraph (A), the term `eligible taxpayer' means 
any taxpayer who certifies to the Secretary (at such 
time and in such manner as the Secretary may prescribe) 
that at least 3 percent of such taxpayer's annual 
domestic production capacity of qualified permanent 
magnets has been maintained in an available and 
unencumbered state, capable of accepting and fulfilling 
orders placed pursuant to--
``(i) a priority rating under the Defense 
Priorities and Allocations System, as 
established by the Defense Production Act of 
1950, or
``(ii) a contract entered into under 
chapter 137 of title 10, United States Code.
The Secretary may waive the requirement of the preceding 
sentence with respect to any taxpayer if the Secretary 
determines that such requirement would impose an undue burden 
given the taxpayer's production scale or stage of development. 
In the case of a taxpayer who otherwise fails to comply with 
such requirements, any credit allowed under this section shall 
be recaptured in such manner as the Secretary determines 
appropriate.
``(2) Magnet metal production credit.--
``(A) In general.--The magnet metal production 
credit with respect to any taxpayer for any taxable 
year is the applicable amount with respect to each 
kilogram of magnet metal--
``(i) produced by such taxpayer during such 
taxable year in the United States, and
``(ii) either--
``(I) sold by such taxpayer to an 
unrelated person during such taxable 
year for use in an eligible production 
step, or
``(II) used by such taxpayer for an 
eligible production step during such 
taxable year.
``(B) Applicable amount.--For purposes of 
subparagraph (A), the term `applicable amount' means, 
with respect to each kilogram of magnet metal--
``(i) $15 per kilogram, if--
``(I) at least 75 percent of any 
rare earth oxides or metallic 
precursors (by weight) used in the 
production of such magnet metal were 
produced or refined in the United 
States or in a partner country, and
``(II) none of the magnet metal 
inputs were produced by a prohibited 
foreign entity, and
``(ii) $25 per kilogram, if--
``(I) at least 90 percent of any 
rare earth oxides or metallic 
precursors (by weight) used in the 
production of such magnet metal were 
produced or refined in the United 
States, and
``(II) none of the magnet metal 
inputs were produced by a prohibited 
foreign entity.
``(C) Denial of credit.--No credit shall be allowed 
under this section for any magnet metal with respect to 
which a credit has been allowed under section 45X for 
the same taxable year. The taxpayer shall elect, prior 
to claiming a credit under this section, whether to 
claim such credit under this section or under section 
45X, and such election shall be irrevocable for the 
taxable year.
``(3) Rare earth oxide production credit.--
``(A) In general.--The rare earth oxide production 
credit with respect to any taxpayer for any taxable 
year is $5 per kilogram of any qualified rare earth 
oxide--
``(i) produced by such taxpayer during such 
taxable year in the United States, and
``(ii) either--
``(I) sold by such taxpayer to an 
unrelated person during such taxable 
year for use in an eligible production 
step, or
``(II) used by such taxpayer for an 
eligible production step during such 
taxable year.
``(B) Denial of credit.--No credit shall be allowed 
under this section for any qualified rare earth oxide 
with respect to which a credit has been allowed under 
section 45X for the same taxable year. The taxpayer 
shall elect, prior to claiming a credit under this 
section, whether to claim such credit under this 
section or under section 45X, and such election shall 
be irrevocable for the taxable year.
``(c) Definitions.--For purposes of this section--
``(1) Qualified permanent magnet.--
``(A) In general.--The term `qualified permanent 
magnet' means any permanent magnet--
``(i) which is comprised entirely of 
eligible materials, and
``(ii) which is--
``(I) a rare earth-free permanent 
magnet,
``(II) a high-performance permanent 
magnet,
``(III) an advanced high-
performance permanent magnet, or
``(IV) a specified permanent 
magnet.
``(B) Rare earth-free permanent magnet.--The term 
`rare earth-free permanent magnet' means any permanent 
magnet--
``(i) within which no rare earth elemental 
constituents are incorporated,
``(ii) which has an intrinsic coercivity 
(HCj) of at least 2 kilooersteds at 302 degrees 
Fahrenheit (150 degrees Celsius), and
``(iii) which has a magnetic remanence (Br) 
of at least 8 kilogauss (0.8 Tesla) at 68 
degrees Fahrenheit (20 degrees Celsius).
For purposes of the preceding sentence, the intrinsic 
coercivity and remanence requirements shall be 
determined on the permanent magnet final product and 
may not be satisfied through measurements conducted on 
powders, flakes, compacts, billets, or other 
intermediate precursor forms.
``(C) High-performance permanent magnet.--The term 
`high-performance permanent magnet' means any permanent 
magnet with an intrinsic coercivity (HCj) of at least 
10 kilooersteds at 68 degrees Fahrenheit (20 degrees 
Celsius). For purposes of the preceding sentence, the 
intrinsic coercivity requirement shall be determined on 
the permanent magnet final product and may not be 
satisfied through measurements conducted on powders, 
flakes, compacts, billets, or other intermediate 
precursor forms.
``(D) Advanced high-performance permanent magnet.--
The term `advanced high-performance permanent magnet' 
means any permanent magnet--
``(i) with an intrinsic coercivity (HCj) of 
at least 20 kilooersteds at 68 degrees 
Fahrenheit (20 degrees Celsius), and
``(ii) with a magnetic remanence (Br) of at 
least 12 kilogauss (1.2 Tesla) at 68 degrees 
Fahrenheit (20 degrees Celsius).
For purposes of the preceding sentence, the intrinsic 
coercivity and magnetic remanence requirements shall be 
determined on the permanent magnet final product and 
may not be satisfied through measurements conducted on 
powders, flakes, compacts, billets, or other 
intermediate precursor forms.
``(E) Specified permanent magnet.--
``(i) In general.--The term `specified 
permanent magnet' means any permanent magnet--
``(I) within which no rare earth 
elemental constituents are 
incorporated, and
``(II) which is manufactured in the 
United States--
``(aa) pursuant to a grant 
from, or contract with, the 
Department of Defense or the 
Department of Energy--

``(AA) valued at 
$5,000,000 or greater, 
and

``(BB) specifically 
for the production of 
permanent magnets at 
commercial or pilot-
production scale, and

``(bb) by a taxpayer who 
commits (in such manner as the 
Secretary may prescribe) to 
place in service within the 
United States a qualified 
permanent magnet manufacturing 
facility which meets such 
standards as the Secretary, in 
consultation with the Secretary 
of Defense and the Secretary of 
Energy, determines to 
demonstrate technological, 
supply chain, or national 
security merit.
A permanent magnet meeting the 
requirements of subclauses (I) and (II) 
shall be treated as a specified 
permanent magnet unless the Secretary, 
in consultation with the Secretary of 
Defense and the Secretary of Energy, 
determines within 120 days of receiving 
notification from the taxpayer (in such 
form and manner as the Secretary shall 
prescribe) that such magnet does not 
demonstrate technological, supply 
chain, or national security merit. If 
the Secretary does not make such a 
determination within 120 days, the 
magnet shall be conclusively treated as 
a specified permanent magnet for the 
taxable year and all subsequent taxable 
years until the Secretary makes a 
determination to the contrary upon 
review. The Secretary shall review each 
determination under this clause not 
less frequently than every 3 years.
``(ii) Termination.--No permanent magnet 
may be treated as a specified permanent magnet 
in any taxable year beginning after December 
31, 2031 unless such period is extended by the 
Secretary.
``(F) Eligible materials.--The term `eligible 
materials' means--
``(i) neodymium-iron-boron alloys,
``(ii) samarium-cobalt alloys,
``(iii) alnico alloys,
``(iv) ferrite alloys,
``(v) iron-nitride magnets,
``(vi) manganese-based permanent magnet 
alloys, and
``(vii) any other alloy, successor, or 
compound determined by the Secretary to--
``(I) be appropriate for the 
manufacture of a permanent magnet 
described in subparagraph (B), (C), 
(D), or (E), and
``(II) be essential for motors, 
generators, robotics, energy systems, 
or advanced electronic systems.
``(G) Manufactured.--The term `manufactured' means 
the processes necessary to form a sintered permanent 
magnet body, including alloy production, milling, 
pressing, and sintering. Such term includes sintered 
magnet blocks, whether or not subsequently machined, 
coated, or magnetized.
``(2) Qualified rare earth oxide.--The term `qualified rare 
earth oxide' means any separated rare earth oxide, including 
neodymium oxide, praseodymium oxide, neodymium-praseodymium 
oxide, samarium oxide, dysprosium oxide, terbium oxide, 
dysprosium-terbium oxide, and such other separated rare earth 
oxides as the Secretary determines are essential to the 
production of qualified permanent magnets, which--
``(A) is produced in the United States,
``(B) is not derived from, or processed using, any 
materials, technology, or services of a prohibited 
foreign entity, and
``(C) is produced pursuant to a binding offtake 
agreement for use in the production of rare earth 
metals, alloys, or permanent magnets in the United 
States or in a partner country.
``(3) Magnet metal.--The term `magnet metal' means 
neodymium, praseodymium, neodymium-praseodymium alloy, 
dysprosium, terbium, dysprosium-terbium alloy, samarium, 
gadolinium, cobalt, iron nitride, and any successor permanent 
magnet precursor materials.
``(4) Magnet metal input.--The term `magnet metal input' 
means, for purposes of calculating content threshold under this 
section, the rare earth elemental metallic constituents 
intentionally incorporated into a permanent magnet alloy to 
impart or enhance permanent magnetic properties, including 
neodymium, praseodymium, neodymium-praseodymium alloys, 
dysprosium, terbium, dysprosium-terbium alloy, samarium, 
gadolinium, and any other rare earth element listed as a magnet 
metal under paragraph (3), measured on a contained-metal basis. 
Permanent magnets that do not incorporate rare earth elemental 
constituents and that are described in subparagraph (B), (C), 
(D), or (E) of paragraph (1) shall be deemed to satisfy the 
magnet metal input requirements of clauses (i) through (v) of 
subsection (b)(1)(B) without further threshold calculation.
``(5) Eligible production step.--The term `eligible 
production step' means--
``(A) the manufacturing of qualified permanent 
magnets for purposes of the permanent magnet production 
credit,
``(B) the production of magnet metals for purposes 
of the magnet metal production credit, and
``(C) the production of qualified rare earth oxides 
for purposes of the rare earth oxide production credit.
``(6) Partner country.--
``(A) In general.--The term `partner country' 
means--
``(i) any member state of the North 
Atlantic Treaty Organization,
``(ii) Japan,
``(iii) Australia,
``(iv) South Korea,
``(v) Canada, and
``(vi) Mexico.
``(B) Facility designation.--The Secretary, in 
consultation with the Secretary of Defense, the 
Secretary of Commerce, and the United States Trade 
Representative, may designate a specific facility 
located in a non-partner country as a qualifying 
facility for purposes of this section if the Secretary 
determines that--
``(i) the facility is not owned, 
controlled, or influenced by a prohibited 
foreign entity,
``(ii) the facility operates under supply 
chain transparency, traceability, and export 
control practices consistent with those 
required of facilities located in partner 
countries, and
``(iii) such designation shall serve the 
national security and supply chain resilience 
objectives of this section.
Materials produced at a facility designated under the preceding 
sentence shall be treated as produced in a partner country for 
purposes of this section. The Secretary shall submit to 
Congress notification of any such designation not later than 30 
days before it takes effect, and shall review each designation 
not less frequently than every 3 years.
``(7) Prohibited foreign entity.--The term `prohibited 
foreign entity' has the meaning given such term in section 
7701(a)(51)(A).
``(d) Special Rules.--For purposes of this section--
``(1) Election required.--This section shall not apply 
unless the taxpayer has elected (at such time and in such 
manner as the Secretary may prescribe) the application of this 
section. Such election shall apply to the taxable year for 
which it is made and all subsequent taxable years and may not 
be revoked.
``(2) Denial of double benefit.--No credit shall be allowed 
under this section with respect to any material for which a 
credit is granted under section 45X.
``(3) Prohibited foreign entity restriction.--
``(A) In general.--No credit shall be allowed under 
this section for any material--
``(i) metallized, alloyed, or refined by a 
prohibited foreign entity,
``(ii) manufactured as a permanent magnet 
by a prohibited foreign entity,
``(iii) which incorporates magnet metals 
sourced from a prohibited foreign entity, or
``(iv) sold or transferred by the taxpayer 
to a prohibited foreign entity.
``(B) Waivers; reports.--The Secretary may provide 
waivers for periods of no longer than 90 days at a time 
if no commercially reasonable non-prohibited foreign 
entity alternative is available. Not later than 30 days 
after granting any waiver under this subparagraph, the 
Secretary shall submit to the Committee on Ways and 
Means of the House of Representatives and the Committee 
on Finance of the Senate a report describing--
``(i) the identity of the recipient,
``(ii) the specific prohibited foreign 
entity material or input for which the waiver 
was granted,
``(iii) the duration of the waiver, and
``(iv) the basis for the Secretary's 
determination that no commercially reasonable 
non-prohibited foreign entity alternative was 
available.
``(4) Tiered application of credits.--
``(A) In general.--A separate credit shall be 
allowed under this section for each eligible production 
step performed by the taxpayer in the United States, 
provided that no more than one credit shall be allowed 
per eligible production step with respect to the same 
quantity of material.
``(B) No double counting.--A credit shall not be 
allowed under this section for any quantity of material 
for which a credit has already been claimed under the 
same eligible production step by any taxpayer.
``(C) Coordination rule.--The Secretary shall 
prescribe regulations to prevent duplication of credits 
under this section and any successor provision with 
respect to the same quantity of material.
``(5) Ineligible materials.--No credit shall be allowed 
under this section with respect to--
``(A) any rare earth oxide, including a qualified 
rare earth oxide, unless such oxide is produced 
pursuant to a binding offtake agreement for use in the 
production of an eligible rare earth metal, alloy, or 
permanent magnet for which a credit is allowable under 
this section,
``(B) any rare earth oxide, metal, alloy, or 
permanent magnet that is produced for stockpiling, 
resale, or export, except that a rare earth oxide, 
metal, alloy, or permanent magnet--
``(i) which is exported to a partner 
country pursuant to a binding offtake agreement 
for use in an eligible production step that 
would qualify under this section if performed 
in the United States shall not be treated as 
export for purposes of this subparagraph, as 
certified by the taxpayer in such form and 
manner as the Secretary shall prescribe, and
``(ii) which is sold to the United States 
Government, pursuant to a program or authority 
established for national security, defense 
readiness, or strategic materials reserve 
purposes shall not be treated as stockpiling 
for purposes of this subparagraph, or
``(C) any material with respect to which a credit 
has previously been allowed under this section or any 
successor provision for the same quantity of material.
``(6) Disclosure and reporting requirements.--
``(A) In general.--No credit shall be allowed under 
this section unless the taxpayer submits, at such time 
and in such manner as the Secretary may prescribe, 
information regarding--
``(i) the origin and processing locations 
of any rare earth oxides, metals, alloys, and 
permanent magnets used in any eligible 
production step,
``(ii) the identification of all material 
suppliers and downstream purchasers associated 
with any eligible production step,
``(iii) the volume of eligible materials 
produced, sold, or transferred,
``(iv) the existence and duration of any 
binding offtake agreements relevant to such 
materials,
``(v) transaction prices, price formulas, 
or indexed pricing terms for the sale or 
transfer of rare earth oxides, metals, alloys, 
permanent magnets, and covered downstream 
products associated with any eligible 
production step, including identification of 
any benchmark or reference index used, and
``(vi) such other information as the 
Secretary determines appropriate.
``(B) Use of information; confidentiality.--Any 
information submitted to the Secretary under 
subparagraph (A) may be used for supply chain risk 
assessment, market monitoring, and other purposes 
determined appropriate by the Secretary for the 
administration of this section. The Secretary shall 
protect from public disclosure any information 
submitted under subparagraph (A) that constitutes 
confidential business information, trade secrets, or 
proprietary commercial data, consistent with applicable 
law.
``(e) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary or appropriate to carry out the 
purposes of this section.
``(f) Termination.--This section shall not apply to any taxable 
year beginning after December 31, 2038.''.
(b) Credit Allowed as 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 magnet value chain support credit determined 
under section 45BB(a).''.
(c) Credit Transferable.--Section 6418(f)(1)(A) of such Code is 
amended by adding at the end the following new clause:
``(xiii) The magnet value chain support 
credit determined under section 45BB(a).''.
(d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
after the item relating to section 45AA the following new item:

``Sec. 45BB. Magnet value chain support credit.''.
(e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2026.

SEC. 4. ESTABLISHMENT OF DOMESTIC MAGNET INPUT USAGE CREDIT.

(a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (as amended by section 3(a)) is 
amended by adding at the end the following new section:

``SEC. 45CC. DOMESTIC MAGNET INPUT USAGE CREDIT.

``(a) Allowance of Credit.--For purposes of section 38, the 
domestic magnet input usage credit for any taxable year is an amount 
equal to the applicable percentage of qualified domestic magnet 
expenditures paid or incurred by the taxpayer during such taxable year 
in connection with the manufacture of a covered product in the United 
States.
``(b) Applicable Percentage.--For purposes of this section, the 
applicable percentage with respect to any qualified domestic magnet 
expenditures paid or incurred during any taxable year is an amount 
equal to--
``(1) 15 percent, in the case of such expenditures being 
paid or incurred in taxable years beginning before January 1, 
2035,
``(2) 10 percent, in the case of such expenditures being 
paid or incurred in taxable years beginning after December 31, 
2034, and ending before January 1, 2037, and
``(3) 5 percent, in the case of such expenditures being 
paid or incurred in taxable years beginning after December 31, 
2036, and ending before January 1, 2039.
``(c) Qualified Domestic Magnet Expenditures.--
``(1) In general.--For purposes of this section, the term 
`qualified domestic magnet expenditures' means any amounts paid 
or incurred by the taxpayer to an unrelated person for 
qualified permanent magnets (as defined in section 
45BB(c)(1)(A)) which--
``(A) are manufactured (as defined in section 
45BB(c)(1)(G)) in the United States,
``(B) are not sourced from a prohibited foreign 
entity, and
``(C) are substantiated (by documentation 
maintained by the taxpayer to the extent sufficient to 
support the credit claimed under this section) with 
respect to purchase price, supplier identity, quantity, 
and country of production.
``(2) Anti-manipulation rule.--For purposes of paragraph 
(1), the purchase price used to calculate qualified domestic 
magnet expenditures shall not exceed the arm's-length price for 
qualified permanent magnets, as determined under principles 
consistent with section 482. The Secretary shall prescribe 
regulations establishing safe harbors for arm's-length pricing 
of domestic permanent magnets, including by reference to 
published benchmark prices where available.
``(d) Election and Non-Duplication.--A taxpayer shall not claim a 
credit under this section for any qualified domestic magnet expenditure 
for which a deduction has otherwise been taken under this chapter. The 
Secretary shall prescribe regulations to prevent any double recovery of 
the same cost under both credits with respect to the same quantity of 
magnet material.
``(e) Covered Products.--
``(1) In general.--For purposes of this section, and except 
as provided in paragraph (2), the term `covered products' 
means--
``(A) any core powertrain or generation component, 
including motors, generators, and rotating electrical 
machinery, used in any high-performance electronic 
device incorporating permanent magnets essential to 
cooling, actuation, data storage, robotics, or 
telecommunications, or
``(B) any core powertrain or generation component, 
including motors, generators, and rotating electrical 
machinery, used in power conversion, including server-
grade computers, telecommunications equipment, robotics 
systems, manned and unmanned aerial vehicles, manned 
and unmanned surface vessels, manned and unmanned 
underwater vehicles and submersibles, medical devices, 
precision munitions, attritable munitions, guided 
munitions, infrared tracking systems, gimbals and 
optics, and other critical defense applications.
``(2) Excluded products.--For purposes of paragraph (1), 
the term `covered products' does not include--
``(A) low-power consumer appliances or disposable 
devices, including toasters, blenders, basic kitchen 
appliances, handheld vacuums, hair dryers, consumer-
grade fans, toys, and novelty electronics, and
``(B) any other product that the Secretary 
determines, by regulation, to be non-strategic for 
purposes of this section, provided that such 
determination shall not apply to any product that the 
Secretary finds to be materially important to United 
States industrial capacity, technological leadership, 
supply-chain resilience, or national security.
``(f) Other Definitions.--Except as otherwise provided in this 
section, terms used in this section which are also used in section 45BB 
shall have the same meaning as when used in such section.
``(g) Prohibited Foreign Entity Restriction.--No credit shall be 
allowed under this section if any permanent magnet, magnet metal input, 
or precursor material input used in the covered product was 
manufactured by a prohibited foreign entity.
``(h) Termination.--This section shall not apply to any taxable 
year beginning after December 31, 2038.''.
(b) Credit Allowed as Part of General Business Credit.--Section 
38(b) of such Code (as amended by section 3(b)) is amended by striking 
``plus'' at the end of paragraph (41), by striking the period at the 
end of paragraph (42) and inserting ``, plus'', and by adding at the 
end the following new paragraph:
``(43) the domestic magnet input usage credit determined 
under section 45CC(a).''.
(c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code (as amended by 
section 3(d)) is amended by adding after the item relating to section 
45BB the following new item:

``Sec. 45CC. Domestic magnet input usage credit.''.
(d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2026.
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