Rare Earth Magnet Manufacturing Production Tax Credit Act of 2021

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. Short title This Act may be cited as the Rare Earth Magnet Manufacturing Production Tax Credit Act of 2021 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 45T: 45U. Credit for production of rare earth magnets (a) In general For the 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— (1) $20 per kilogram of rare earth magnets manufactured in the United States by the taxpayer during the taxable year, or (2) $30 per kilogram of rare earth magnets manufactured in the United States by the taxpayer during the taxable year if all of the component rare earth material of such magnets are produced within the United States. (b) Phase-Out (1) In general In the case of any rare earth magnet produced after December 31, 2030, the amount determined under this section with respect to such rare earth magnet shall be equal to the product of— (A) the amount determined under subsection (a) with respect to such rare earth magnet, as determined without regard to this subsection, multiplied by (B) the phase-out percentage described in paragraph (2). (2) Phase-out percentage The phase-out percentage described in this paragraph is— (A) in the case of any rare earth magnet produced in calendar year 2031, 70 percent, (B) in the case of any rare earth magnet produced in calendar year 2032, 35 percent, or (C) in the case of any rare earth magnet produced after December 31, 2033, 0 percent. (c) Restriction on component sourcing A taxpayer is not eligible for the credit determined under subsection (a) with respect to a rare earth magnet if any component rare earth material used to produce such magnet was produced in a non-allied foreign nation. (d) Definitions For the purposes of this section— (1) Rare earth magnet The term rare earth magnet (A) an alloy of neodymium, praseodymium, iron, boron, terbium, or dysprosium, or (B) an alloy of samarium, gadolinium, and cobalt. (2) Component rare earth material The term component rare earth material (3) United States and possession of the United States The terms United States possession of the United States (4) Manufactured The term manufactured (5) Non-allied foreign nation The term non-allied foreign nation covered nation (e) Trade or business requirement No credit shall be allowed under this section with respect to any property unless such property is manufactured in the ordinary course of a trade or business of the taxpayer. (f) 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 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. (3) Exclusion from gross income Gross income of the taxpayer shall be determined without regard to this subsection. . (b) Credit To be part of general business credit Section 38(b) of such Code is amended by striking plus , plus (34) the credit for production of rare earth magnets determined under section 45U(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 45T the following new item: Sec. 45U. 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, 2021.

Summary: Rare Earth Magnet Manufacturing Production Tax Credit Act of 2021 This bill allows a new tax credit for the domestic production of rare earth magnets manufactured in the ordinary course of a taxpayer's trade or business. The bill defines rare earth magnet as a permanent magnet comprised of (1) an alloy of neodymium, praseodymium, iron, boron, terbium, or dysprosium; or (2) an alloy of samarium, gadolinium, and cobalt.