Rare Earth Magnet Manufacturing Production Tax Credit Act of 2022

“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.”