I
119THCONGRESS
1
STSESSION H. R. 1496
To amend the Internal Revenue Code of 1986 to establish a credit for
the domestic production of high-performance rare earth magnets, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY21, 2025
Mr. R
ESCHENTHALER (for himself, Mr. SWALWELL, Mr. HUDSON, Ms. LEE
of Nevada, Mr. C
ALVERT, Ms. CASTORof Florida, Mr. OBERNOLTE, Mr.
T
ONKO, Mr. MOOLENAAR, Mr. DELUZIO, Mr. MEUSER, Mr. PANETTA,
Mr. M
ILLS, and Ms. HOULAHAN) introduced the following bill; which was
referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to establish
a credit for the domestic production of high-performance
rare earth magnets, and for other purposes.
Be it enacted by the Senate and House of Representa-1
tives of the United States of America in Congress assembled, 2
SECTION 1. SHORT TITLE. 3
This Act may be cited as the ‘‘Rare Earth Magnet 4
Security Act of 2025’’. 5
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SEC. 2. CREDIT FOR PRODUCTION OF RARE EARTH 1
MAGNETS. 2
(a) I
NGENERAL.—The Internal Revenue Code of 3
1986 is amended by inserting the following new section 4
after section 45AA: 5
‘‘SEC. 45BB. CREDIT FOR PRODUCTION OF RARE EARTH 6
MAGNETS. 7
‘‘(a) I
NGENERAL.— 8
‘‘(1) A
LLOWANCE OF CREDIT .—For purposes of 9
section 38, the credit for production of rare earth 10
magnets determined under this section for any tax-11
able year is an amount equal to the sum of the cred-12
it amounts determined under subsection (b) with re-13
spect to rare earth magnets which are— 14
‘‘(A) manufactured or produced by the tax-15
payer, and 16
‘‘(B) sold by such taxpayer to an unrelated 17
person during the taxable year. 18
‘‘(2) U
NRELATED PERSON .— 19
‘‘(A) I
N GENERAL.—For purposes of this 20
subsection, a taxpayer shall be treated as selling 21
rare earth magnets to an unrelated person if 22
such magnet is sold to such person by a person 23
related to the taxpayer. 24
‘‘(B) E
LECTION.— 25
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‘‘(i) IN GENERAL.—At the election of 1
the taxpayer (in such form and manner as 2
the Secretary may prescribe), a sale of rare 3
earth magnets by such taxpayer to a re-4
lated person shall be deemed to have been 5
made to an unrelated person. 6
‘‘(ii) R
EQUIREMENT.—As a condition 7
of, and prior to, any election described in 8
clause (i), the Secretary may require such 9
information or registration as the Sec-10
retary deems necessary for purposes of 11
preventing duplication, fraud, or any im-12
proper or excessive amount determined 13
under paragraph (1). 14
‘‘(b) C
REDITAMOUNT.— 15
‘‘(1) I
N GENERAL.—The amount determined 16
under this subsection is— 17
‘‘(A) $20 per kilogram of rare earth 18
magnets manufactured or produced in the 19
United States by the taxpayer during the tax-20
able year which are not described in subpara-21
graph (B), and 22
‘‘(B) $30 per kilogram of rare earth 23
magnets manufactured or produced in the 24
United States by the taxpayer during the tax-25
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able year if not less than 90 percent by weight 1
of the component rare earth materials of such 2
magnets are produced within the United States. 3
‘‘(2) P
HASE-OUT.— 4
‘‘(A) I
N GENERAL.—In the case of any 5
rare earth magnet manufactured or produced 6
after December 31, 2034, the amount deter-7
mined under this section with respect to such 8
rare earth magnet shall be equal to the product 9
of— 10
‘‘(i) the amount determined under 11
paragraph (1) with respect to such rare 12
earth magnet, as determined without re-13
gard to this subsection, multiplied by 14
‘‘(ii) the phase-out percentage de-15
scribed in subparagraph (B). 16
‘‘(B) P
HASE-OUT PERCENTAGE .—The 17
phase-out percentage described in this para-18
graph is— 19
‘‘(i) in the case of any rare earth 20
magnet manufactured or produced in cal-21
endar year 2035, 70 percent, 22
‘‘(ii) in the case of any rare earth 23
magnet manufactured or produced in cal-24
endar year 2036 or 2037, 35 percent, or 25
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‘‘(iii) in the case of any rare earth 1
magnet manufactured or produced after 2
December 31, 2037, 0 percent. 3
‘‘(c) D
EFINITIONS.—For the purposes of this sec-4
tion— 5
‘‘(1) R
ARE EARTH MAGNET .—The term ‘rare 6
earth magnet’ means a permanent magnet— 7
‘‘(A) with an intrinsic coercivity (HCj) of 8
10 kOe or higher at 68°F (20°C), and 9
‘‘(B) comprised of— 10
‘‘(i) an alloy of neodymium, iron, and 11
boron, which may also include praseo-12
dymium, terbium, or dysprosium, or 13
‘‘(ii) an alloy of samarium and cobalt, 14
which may also include gadolinium or any 15
associated host mineral of a component 16
rare earth material. 17
‘‘(2) C
OMPONENT RARE EARTH MATERIAL .— 18
The term ‘component rare earth material’ means ne-19
odymium, praseodymium, dysprosium, terbium, sa-20
marium, gadolinium, and cobalt. 21
‘‘(3) M
ANUFACTURED.—The term ‘manufac-22
tured’ means the manufacturing of a rare earth 23
magnet, including the milling, pressing, sintering, 24
and recycling of component rare earth material. 25
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‘‘(4) NON-ALLIED FOREIGN NATION .—The term 1
‘non-allied foreign nation’ has the meaning given to 2
the term ‘covered nation’ in section 4872(d) of title 3
10, United States Code. 4
‘‘(5) U
NITED STATES AND POSSESSION OF THE 5
UNITED STATES.—The terms ‘United States’ and 6
‘possession of the United States’ have the meaning 7
given such terms in section 638. 8
‘‘(d) S
PECIALRULES.— 9
‘‘(1) R
ESTRICTION ON COMPONENT 10
SOURCING.— 11
‘‘(A) I
N GENERAL.—Except as provided in 12
subparagraph (B), no credit shall be allowed 13
under this section with respect to a rare earth 14
magnet if any component rare earth material 15
used to manufacture or produce such magnet is 16
produced in a non-allied foreign nation. 17
‘‘(B) D
ELAYED RESTRICTION FOR CERTAIN 18
COMPONENT RARE EARTH MATERIALS .—In the 19
case of the rare earth materials dysprosium, 20
terbium, samarium, and gadolinium, the restric-21
tion under subparagraph (A) shall not apply to 22
magnets manufactured or produced using such 23
materials before January 1, 2027. 24
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‘‘(2) TRADE OR BUSINESS REQUIREMENT .—No 1
credit shall be allowed under this section with re-2
spect to a rare earth magnet unless such magnet is 3
manufactured or produced in the ordinary course of 4
a trade or business of the taxpayer. 5
‘‘(3) C
OERCIVITY REQUIREMENT EXCEPTION 6
FOR ELIGIBLE MANUFACTURERS .— 7
‘‘(A) I
N GENERAL.—The Secretary may 8
elect to treat a magnet which does not meet the 9
coercivity requirements of subsection (c)(1)(A) 10
as a rare earth magnet if such magnet is manu-11
factured by an eligible manufacturer. 12
‘‘(B) E
LIGIBLE MANUFACTURER .—For 13
purposes of subparagraph (A), the term ‘eligible 14
manufacturer’ means a manufacturer that— 15
‘‘(i) receives a grant from, or is con-16
tracted by, the Department of Energy or 17
the Department of Defense to produce a 18
magnet, and 19
‘‘(ii) commits to place in service a do-20
mestic manufacturing facility that pro-21
duces magnets that the Secretary deter-22
mines demonstrate technological, supply 23
chain, or national security merit. 24
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‘‘(e) ELECTIVEPAYMENT FOR PRODUCTION OF 1
R
AREEARTHMAGNETS.— 2
‘‘(1) I
N GENERAL.—In the case of a taxpayer 3
making an election (at such time and in such man-4
ner as the Secretary may provide) under this section 5
with respect to any portion of the credit allowed 6
under subsection (a), such taxpayer shall be treated 7
as making a payment against the tax imposed by 8
this subtitle for the taxable year equal to the amount 9
of such portion. 10
‘‘(2) T
IMING.—The payment described in para-11
graph (1) shall be treated as made on the later of 12
the due date of the return of tax for such taxable 13
year or the date on which such return is filed.’’. 14
(b) C
REDITTOBEPART OFGENERALBUSINESS 15
C
REDIT.—Section 38(b) of such Code is amended by strik-16
ing ‘‘plus’’ at the end of paragraph (40), by striking the 17
period at the end of paragraph (41) and inserting ‘‘, plus’’, 18
and by adding at the end the following new paragraph: 19
‘‘(42) the credit for production of rare earth 20
magnets determined under section 45BB(a).’’. 21
(c) C
ONFORMINGAMENDMENT.—The table of sec-22
tions for subpart D of part IV of subchapter A of chapter 23
1 of such Code is amended by inserting after the item 24
relating to section 45AA the following new item: 25
‘‘Sec. 45BB. Credit for production of rare earth magnets.’’.
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(d) EFFECTIVEDATE.—The amendments made by 1
this Act shall apply to taxable years beginning after De-2
cember 31, 2024. 3
Æ
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