II 

118TH CONGRESS 

1ST SESSION S. 3521 

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 

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 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 2023’’. 

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 after section 45AA the fol2 lowing: 

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

4 MAGNETS. 

5 ‘‘(a) IN GENERAL.— 

6 ‘‘(1) ALLOWANCE OF CREDIT.—For purposes of 

7 section 38, the credit for production of rare earth 

8 magnets determined under this section for any tax9 able year is an amount equal to the sum of the cred10 it amounts determined under subsection (b) with re11 spect to rare earth magnets which are— 

12 ‘‘(A) manufactured or produced by the tax13 payer, and 

14 ‘‘(B) sold by such taxpayer to an unrelated 

15 person during the taxable year. 

16 ‘‘(2) UNRELATED PERSON.— 

17 ‘‘(A) IN GENERAL.—For purposes of this 

18 subsection, a taxpayer shall be treated as selling 

19 rare earth magnets to an unrelated person if 

20 such magnet is sold to such person by a person 

21 related to the taxpayer. 

22 ‘‘(B) ELECTION.— 

23 ‘‘(i) IN GENERAL.—At the election of 

24 the taxpayer (in such form and manner as 

25 the Secretary may prescribe), a sale of rare 


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1 earth magnets by such taxpayer to a re2 lated person shall be deemed to have been 

3 made to an unrelated person. 

4 ‘‘(ii) REQUIREMENT.—As a condition 

5 of, and prior to, any election described in 

6 clause (i), the Secretary may require such 

7 information or registration as the Sec8 retary deems necessary for purposes of 

9 preventing duplication, fraud, or any im10 proper or excessive amount determined 

11 under paragraph (1). 

12 ‘‘(b) CREDIT AMOUNT.— 

13 ‘‘(1) IN GENERAL.—The amount determined 

14 under this subsection is— 

15 ‘‘(A) $20 per kilogram of rare earth 

16 magnets manufactured or produced in the 

17 United States by the taxpayer during the tax18 able year which are not described in subpara19 graph (B), and 

20 ‘‘(B) $30 per kilogram of rare earth 

21 magnets manufactured or produced in the 

22 United States by the taxpayer during the tax23 able year if not less than 90 percent of the com24 ponent rare earth materials of such magnets 

25 are produced within the United States. 


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1 ‘‘(2) PHASE-OUT.— 

2 ‘‘(A) IN GENERAL.—In the case of any 

3 rare earth magnet manufactured or produced 

4 after December 31, 2032, the amount deter5 mined under this subsection with respect to 

6 such rare earth magnet shall be equal to the 

7 product of— 

8 ‘‘(i) the amount determined under 

9 paragraph (1) with respect to such rare 

10 earth magnet, as determined without re11 gard to this subsection, multiplied by 

12 ‘‘(ii) the phase-out percentage de13 scribed in subparagraph (B). 

14 ‘‘(B) PHASE-OUT PERCENTAGE.—The 

15 phase-out percentage described in this para16 graph is— 

17 ‘‘(i) in the case of any rare earth 

18 magnet manufactured or produced in cal19 endar year 2033, 70 percent, 

20 ‘‘(ii) in the case of any rare earth 

21 magnet manufactured or produced in cal22 endar year 2034 or 2035, 35 percent, or 

23 ‘‘(iii) in the case of any rare earth 

24 magnet manufactured or produced after 

25 December 31, 2035, 0 percent. 


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1 ‘‘(c) DEFINITIONS.—For the purposes of this sec2 tion— 

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

4 earth magnet’ means a permanent magnet com5 prised of— 

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

7 boron, which may also include praseodymium, 

8 terbium, or dysprosium, or 

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

10 which may also include gadolinium or any asso11 ciated host mineral of a component rare earth 

12 material. 

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

14 The term ‘component rare earth material’ means ne15 odymium, praseodymium, dysprosium, terbium, sa16 marium, gadolinium, and cobalt. 

17 ‘‘(3) MANUFACTURED.—The term ‘manufac18 tured’ means the manufacturing of a rare earth 

19 magnet, including the alloying, reduction, strip cast20 ing, milling, sintering, recycling, pressing, and 

21 metallization of component rare earth material. 

22 ‘‘(4) NON-ALLIED FOREIGN NATION.—The term 

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

24 the term ‘covered nation’ in section 4872(d) of title 

25 10, United States Code. 


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1 ‘‘(5) UNITED STATES AND POSSESSION OF THE

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

3 ‘possession of the United States’ have the meaning 

4 given such terms in section 638. 

5 ‘‘(d) SPECIAL RULES.— 

6 ‘‘(1) RESTRICTION ON COMPONENT

7 SOURCING.—No credit shall be allowed under this 

8 section with respect to a rare earth magnet if any 

9 component rare earth material used to manufacture 

10 or produce such magnet is produced in a non-allied 

11 foreign nation. 

12 ‘‘(2) TRADE OR BUSINESS REQUIREMENT.—No 

13 credit shall be allowed under this section with re14 spect to a rare earth magnet unless such magnet is 

15 manufactured or produced in the ordinary course of 

16 a trade or business of the taxpayer. 

17 ‘‘(e) ELECTIVE PAYMENT FOR PRODUCTION OF

18 RARE EARTH MAGNETS.— 

19 ‘‘(1) IN GENERAL.—In the case of a taxpayer 

20 making an election (at such time and in such man21 ner as the Secretary may provide) under this sub22 section with respect to any portion of the credit al23 lowed under subsection (a), such taxpayer shall be 

24 treated as making a payment against the tax imVerDate Sep 11 2014 04:51 Dec 30, 2023 Jkt 049200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S3521.IS S3521

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1 posed by this subtitle for the taxable year equal to 

2 the amount of such portion of the credit. 

3 ‘‘(2) TIMING.—The payment described in para4 graph (1) shall be treated as made on the later of 

5 the due date of the return of tax for the taxable year 

6 or the date on which such return is filed.’’. 

7 (b) CREDIT TO BE PART OF GENERAL BUSINESS

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

9 1986 is amended by striking ‘‘plus’’ at the end of para10 graph (40), by striking the period at the end of paragraph 

11 (41) and inserting ‘‘, plus’’, and by adding at the end the 

12 following new paragraph: 

13 ‘‘(42) the credit for production of rare earth 

14 magnets determined under section 45BB(a).’’. 

15 (c) CONFORMING AMENDMENT.—The table of sec16 tions for subpart D of part IV of subchapter A of chapter 

17 1 of the Internal Revenue Code of 1986 is amended by 

18 inserting after the item relating to section 45AA the fol19 lowing new item: 

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

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

21 this Act shall apply to taxable years beginning after De22 cember 31, 2023. 

Æ 


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