II 

117TH CONGRESS 

2D SESSION S. 4680 

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 SENATE OF THE UNITED STATES 

JULY 28, 2022 

Ms. CORTEZ MASTO 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 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Rare Earth Magnet 

5 Manufacturing Production Tax Credit Act of 2022’’. 

6 SEC. 2. CREDIT FOR PRODUCTION OF RARE EARTH 

7 MAGNETS. 

8 (a) IN GENERAL.—Subpart D of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of 


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1 1986 is amended by adding at the end the following new 

2 section: 

3 ‘‘SEC. 45U. CREDIT FOR PRODUCTION OF RARE EARTH 

4 MAGNETS. 

5 ‘‘(a) IN GENERAL.—For the purposes of section 38, 

6 the credit for production of rare earth magnets determined 

7 under this section for any taxable year is an amount equal 

8 to the sum of— 

9 ‘‘(1) $20 per kilogram of rare earth magnets 

10 manufactured in the United States by the taxpayer 

11 during the taxable year which are not described in 

12 paragraph (2), plus 

13 ‘‘(2) $30 per kilogram of rare earth magnets 

14 manufactured in the United States by the taxpayer 

15 during the taxable year if not less than 90 percent 

16 of the component rare earth material of such 

17 magnets are manufactured within the United States. 

18 ‘‘(b) PHASE-OUT.— 

19 ‘‘(1) IN GENERAL.—In the case of any rare 

20 earth magnet manufactured after December 31, 

21 2030, the amount determined under this section 

22 with respect to such rare earth magnet shall be 

23 equal to the product of— 

24 ‘‘(A) the amount determined under sub25 section (a) with respect to such rare earth magVerDate Sep 11 2014 02:10 Aug 05, 2022 Jkt 029200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4680.IS S4680

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1 net, as determined without regard to this sub2 section, multiplied by 

3 ‘‘(B) the phase-out percentage described in 

4 paragraph (2). 

5 ‘‘(2) PHASE-OUT PERCENTAGE.—The phase-out 

6 percentage described in this paragraph is— 

7 ‘‘(A) in the case of any rare earth magnet 

8 manufactured in calendar year 2031, 70 per9 cent, 

10 ‘‘(B) in the case of any rare earth magnet 

11 manufactured in calendar year 2032, 35 per12 cent, and 

13 ‘‘(C) in the case of any rare earth magnet 

14 manufactured after December 31, 2033, 0 per15 cent. 

16 ‘‘(c) RESTRICTION ON COMPONENT SOURCING.—The 

17 credit determined under subsection (a) shall not apply 

18 with respect to any rare earth magnet if any component 

19 rare earth material used to manufacture such magnet was 

20 manufactured in a non-allied foreign nation. 

21 ‘‘(d) DEFINITIONS.—For the purposes of this sec22 tion— 

23 ‘‘(1) RARE EARTH MAGNET.—The term ‘rare 

24 earth magnet’ means a permanent magnet com25 prised of— 


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1 ‘‘(A) an alloy of neodymium, iron, and 

2 boron, which may also include praseodymium, 

3 terbium, or dysprosium, or 

4 ‘‘(B) an alloy of samarium and cobalt, 

5 which may also include gadolinium or any asso6 ciated host mineral of a component rare earth 

7 material. 

8 ‘‘(2) COMPONENT RARE EARTH MATERIAL.— 

9 The term ‘component rare earth material’ means ne10 odymium, praseodymium, dysprosium, terbium, sa11 marium, gadolinium, or cobalt. 

12 ‘‘(3) UNITED STATES AND POSSESSION OF THE

13 UNITED STATES.—The terms ‘United States’ and 

14 ‘possession of the United States’ have the meaning 

15 given such terms in section 638. 

16 ‘‘(4) MANUFACTURED.—The term ‘manufac17 tured’ means the manufacturing of a rare earth 

18 magnet, including the alloying, reduction, strip cast19 ing, and metallization of component rare earth mate20 rial. 

21 ‘‘(5) NON-ALLIED FOREIGN NATION.—The term 

22 ‘non-allied foreign nation’ has the meaning given to 

23 the term ‘covered nation’ in section 4872(d)(2) of 

24 title 10, United States Code. 


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1 ‘‘(e) TRADE OR BUSINESS REQUIREMENT.—No cred2 it shall be allowed under this section with respect to any 

3 property unless such property is manufactured in the ordi4 nary course of a trade or business of the taxpayer. 

5 ‘‘(f) ELECTION FOR DIRECT PAYMENT.— 

6 ‘‘(1) IN GENERAL.—In the case of any rare 

7 earth magnets manufactured in the United States by 

8 the taxpayer during the taxable year, the amount of 

9 any credit determined under subsection (a) with re10 spect to such property for such taxable year shall, 

11 at the election of the taxpayer, be treated as a pay12 ment equal to such amount which is made by the 

13 taxpayer against the tax imposed by chapter 1 for 

14 such taxable year (regardless of whether such tax 

15 would have been on such taxpayer). 

16 ‘‘(2) FORM AND EFFECT OF ELECTION.—An 

17 election under paragraph (1) shall be made at such 

18 time and in such manner as the Secretary may pre19 scribe. Such election, once made, shall— 

20 ‘‘(A) be irrevocable with respect to the 

21 property to which such election applies, and 

22 ‘‘(B) reduce the amount of the credit 

23 which would (but for this subsection) be allow24 able under this section with respect to such 


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1 property for the taxable year in which such 

2 property is manufactured to zero. 

3 ‘‘(3) APPLICATION TO PARTNERSHIPS AND S

4 CORPORATIONS.—In the case of a partnership or S 

5 corporation which makes an election under para6 graph (1)— 

7 ‘‘(A) such paragraph shall apply with re8 spect to such partnership or corporation with9 out regard to the fact that no tax is imposed 

10 by chapter 1 on such partnership or corpora11 tion, and 

12 ‘‘(B)(i) in the case of a partnership, each 

13 partner’s distributive share of the credit deter14 mined under subsection (a) with respect to the 

15 rare earth magnets shall be deemed to be zero, 

16 and 

17 ‘‘(ii) in the case of an S corporation, each 

18 shareholder’s pro rata share of the credit deter19 mined under subsection (a) with respect to such 

20 property shall be deemed to be zero.’’. 

21 (b) CREDIT TO BE PART OF GENERAL BUSINESS

22 CREDIT.—Section 38(b) of the Internal Revenue Code of 

23 1986 is amended— 

24 (1) by striking ‘‘plus’’ at the end of paragraph 

25 (32), 


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1 (2) by striking the period at the end of para2 graph (33) and inserting ‘‘, plus’’, and 

3 (3) by adding at the end the following new 

4 paragraph: 

5 ‘‘(34) the credit for production of rare earth 

6 magnets determined under section 45U(a).’’. 

7 (c) CONFORMING AMENDMENT.—The table of sec8 tions for subpart D of part IV of subchapter A of chapter 

9 1 of the Internal Revenue Code of 1986 is amended by 

10 adding at the end the following new item: 

‘‘Sec. 45U. Credit for production of rare earth magnets.’’. 

11 (d) EFFECTIVE DATE.—The amendments made by 

12 this Act shall apply to taxable years beginning after De13 cember 31, 2021. 

Æ 


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