Rare Earth Magnet Manufacturing Production Tax Credit Act of 2022

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 2022 2. Credit for production of rare earth magnets (a) In general Subpart D of part IV of subchapter A of chapter 1 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 which are not described in paragraph (2), plus (2) $30 per kilogram of rare earth magnets manufactured in the United States by the taxpayer during the taxable year if not less than 90 percent of the component rare earth material of such magnets are manufactured within the United States. (b) Phase-Out (1) In general In the case of any rare earth magnet manufactured 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 manufactured in calendar year 2031, 70 percent, (B) in the case of any rare earth magnet manufactured in calendar year 2032, 35 percent, and (C) in the case of any rare earth magnet manufactured after December 31, 2033, 0 percent. (c) Restriction on component sourcing The credit determined under subsection (a) shall not apply with respect to any rare earth magnet if any component rare earth material used to manufacture such magnet was manufactured 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, iron, and boron, which may also include praseodymium, terbium, or dysprosium, or (B) 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 (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) Election for direct payment (1) In general In the case of any rare earth magnets manufactured in the United States by the taxpayer during the taxable year, the amount of any credit determined under subsection (a) with respect to such property for such taxable year shall, at the election of the taxpayer, be treated as a payment equal to such amount which is made by the taxpayer against the tax imposed by chapter 1 for such taxable year (regardless of whether such tax would have been on such taxpayer). (2) Form and effect of election An election under paragraph (1) shall be made at such time and in such manner as the Secretary may prescribe. Such election, once made, shall— (A) be irrevocable with respect to the property to which such election applies, and (B) reduce the amount of the credit which would (but for this subsection) be allowable under this section with respect to such property for the taxable year in which such property is manufactured to zero. (3) Application to partnerships and S corporations In the case of a partnership or S corporation which makes an election under paragraph (1)— (A) such paragraph shall apply with respect to such partnership or corporation without regard to the fact that no tax is imposed by chapter 1 on such partnership or corporation, and (B) (i) in the case of a partnership, each partner's distributive share of the credit determined under subsection (a) with respect to the rare earth magnets shall be deemed to be zero, and (ii) in the case of an S corporation, each shareholder's pro rata share of the credit determined under subsection (a) with respect to such property shall be deemed to be zero. . (b) Credit To be part of general business credit Section 38(b) (1) by striking plus (2) by striking the period at the end of paragraph (33) and inserting , plus (3) by adding at the end the following new paragraph: (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 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 2022 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, iron, and boron, which may also include praseodymium, terbium, or dysprosium; or (2) an alloy of samarium and cobalt, which may also include gadolinium or any associated host mineral of a component rare earth material.