# What This Bill Does: Tax Credits for Making Rare Earth Magnets in America

This bill creates a new tax credit to encourage companies to manufacture rare earth magnets inside the United States. Rare earth magnets are specialized materials used in everything from electric vehicle motors and wind turbines to military equipment and consumer electronics. Right now, most of these magnets are made overseas, particularly in China, which gives other countries significant control over a critical technology. This bill aims to change that by offering financial incentives to American manufacturers.

Here's how it works in practical terms: Any company that manufactures rare earth magnets in the U.S. and sells them gets a tax credit of $20 per kilogram of magnets produced. If a company goes the extra mile and sources at least 90 percent of the raw rare earth materials from within the U.S., they get a higher credit of $30 per kilogram instead. These credits reduce the company's tax bill dollar-for-dollar, making it more profitable to produce magnets domestically. The credits apply to magnets made starting in 2024 and continue through 2032, then gradually phase out over the next few years, ending completely after 2035.

There are important restrictions built into the bill to prevent abuse and ensure the credits actually support American production. Companies cannot claim the credit if any of the raw materials come from countries that aren't U.S. allies—this is designed to prevent companies from simply importing materials from adversarial nations and claiming the credit anyway. Additionally, companies can only claim credits for magnets they actually manufacture as part of their regular business operations, not one-off projects. The bill also includes an option for companies to convert part of their credit into a direct government payment rather than just a tax reduction, which helps smaller manufacturers that might not have enough tax liability to benefit from the full credit.

Rare Earth Magnet Manufacturing Production Tax Credit Act of 2023

Reschenthaler, Guy

Rare Earth Magnet Manufacturing Production Tax Credit Act of 2023 This bill allows a new tax credit for the domestic production of rare earth magnets. The magnets must be manufactured or produced in the ordinary course of the taxpayer's trade or business. The credit is disallowed if any component rare earth material used to produce such magnets is produced in a non-allied foreign nation. The bill defines rare earth magnet as a permanent magnet comprised of an alloy of neodymium, iron, and boron, or an alloy of samarium and cobalt, which may also include other material.