HB1496, titled the Rare Earth Magnet Security Act of 2025, would create a new federal tax credit for the domestic production of high-performance rare earth magnets. The credit would apply to magnets manufactured or produced in the United States and sold by the taxpayer to an unrelated person, with special rules allowing certain related-party sales to qualify if the taxpayer makes an election and meets anti-fraud registration requirements. The credit amount would generally be $20 per kilogram, or $30 per kilogram if at least 90% of the component rare earth materials by weight are produced in the United States.
The bill defines “rare earth magnet” to include high-coercivity permanent magnets made from neodymium-iron-boron or samarium-cobalt alloys, and it defines the relevant component materials to include neodymium, praseodymium, dysprosium, terbium, samarium, gadolinium, and cobalt. It also treats manufacturing broadly to include milling, pressing, sintering, and recycling. The credit would be part of the general business credit and could be taken as an elective payment, effectively allowing some taxpayers to receive the benefit as a direct payment against tax liability.
The bill would also restrict eligibility for magnets using component rare earth materials produced in a “non-allied foreign nation,” with a temporary delay for certain materials—dysprosium, terbium, samarium, and gadolinium—until January 1, 2027. In addition, the Secretary of the Treasury could treat some lower-coercivity magnets as qualifying if they are produced by an eligible manufacturer working under a Department of Energy or Department of Defense grant or contract and committing to a domestic manufacturing facility with technological, supply-chain, or national-security merit. The credit would phase down after 2034 and end for magnets produced after 2037.
The bill’s likely impact is to amend the Internal Revenue Code by adding a new section 45BB, expanding section 38’s general business credit, and applying the new rules to taxable years beginning after December 31, 2024. It is aimed at strengthening domestic supply chains for critical minerals and magnets used in defense, energy, electronics, and advanced manufacturing, while discouraging reliance on foreign sources, especially non-allied nations.
Because there are no committee transcripts or recorded votes provided, there is no documented debate or formal vote sentiment in the supplied materials. Based on the bipartisan list of sponsors, the bill appears to have broad cross-party support and a generally pro-manufacturing, pro-national-security framing. The main points of potential contention are the cost of the tax credit, the sourcing restrictions tied to non-allied foreign nations, and the administrative complexity of verifying material origin and preventing duplication or fraud.
HB1496 would add a new tax incentive to the Internal Revenue Code for domestic production of rare earth magnets, creating section 45BB and making the credit part of the general business credit under section 38. It would affect manufacturers, recyclers, and other businesses producing qualifying magnets in the United States, while imposing sourcing limits on component materials and allowing elective payment treatment for some taxpayers. The bill is designed to shift production and supply chains toward domestic and allied sources and away from non-allied foreign nations, with a phase-out beginning in 2035 and ending after 2037.
No committee discussion or vote record was provided, so there is no direct evidence of opposition or support from hearings or floor action. The sponsor list suggests bipartisan and cross-ideological interest in domestic industrial policy and national security, indicating generally favorable sentiment toward the bill’s goals. The measure is framed as a supply-chain security and manufacturing competitiveness bill rather than a partisan tax overhaul.
The most likely areas of contention are the fiscal cost of the new credit, the complexity of determining whether component rare earth materials were produced in approved countries, and the Treasury Department’s need to police related-party sales, elections, and anti-fraud safeguards. Another possible point of debate is the restriction on materials from non-allied foreign nations, which could raise concerns from manufacturers dependent on existing global supply chains. Some may also question the broad discretionary authority given to the Secretary to waive coercivity requirements for certain eligible manufacturers tied to DOE or DOD projects.