Rare Earth Magnet Manufacturing Production Tax Credit Act of 2022
Bill: S.4680 | Sponsor: Sen. Cortez Masto, Catherine (D-NV)
Policy area: Taxation

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.

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 2022''.

SEC. 2. CREDIT FOR PRODUCTION OF RARE EARTH MAGNETS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``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 
        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' 
        means a permanent magnet comprised of--
                    ``(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' means neodymium, praseodymium, dysprosium, 
        terbium, samarium, gadolinium, or 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 4872(d)(2) 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) 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) of 
the Internal Revenue Code of 1986 is amended--
            (1) by striking ``plus'' at the end of paragraph (32),
            (2) by striking the period at the end of paragraph (33) and 
        inserting ``, plus'', and
            (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 of the Internal Revenue Code of 
1986 is amended by adding at the end 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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