Rare Earth Magnet Manufacturing Production Tax Credit Act of 2021
Bill: H.R.5033 | Sponsor: Rep. Swalwell, Eric (D-CA)
Policy area: Taxation

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.

To amend the Internal Revenue Code of 1986 to establish a credit for 
 the domestic production of rare earth 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 ``Rare Earth Magnet Manufacturing 
Production Tax Credit Act of 2021''.

SEC. 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:

``SEC. 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' 
        means a permanent magnet comprised of--
                    ``(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' means neodymium, praseodymium, dysprosium, 
        terbium, samarium, gadolinium, and cobalt.
            ``(3) United states and possession of the united states.--
        The terms `United States' and `possession of the United States' 
        have the meaning given such terms in section 638.
            ``(4) Manufactured.--The term `manufactured' means the 
        manufacturing of a rare earth magnet, including the alloying, 
        reduction, strip casting, and metallization of component rare 
        earth material.
            ``(5) Non-allied foreign nation.--The term `non-allied 
        foreign nation' has the meaning given to the term `covered 
        nation' in section 2533c(d) of title 10, United States Code.
    ``(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'' at the end of paragraph (32), 
by striking the period at the end of paragraph (33) and inserting ``, 
plus'', and 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 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.
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