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HR 9227

Magnets Value Chain Support Act of 2026

119th Congress Introduced by Ro Khanna and 2 co-sponsors

The Act creates tax credits to boost domestic production of magnets, magnet metals, and rare earth oxides and to require use of U.S.-produced materials in key products.

Introduced in House
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WeVote Research Nonpartisan
Bill Summary · HR 9227

Overview

  • Bill: H.R. 9227, Magnets Value Chain Support Act of 2026
  • Session: 119th Congress
  • Purpose: Amend the Internal Revenue Code to incentivize domestic production and use of permanent magnets and related magnet materials, with a focus on reducing reliance on foreign sources (notably China) and strengthening the U.S. supply chain for critical magnets used in motors, generators, robotics, and high-tech/economic security sectors.
  • Key sponsors: Rep. Ro Khanna (co-sponsor), Rep. Michael Moolenaar (primary sponsor)
  • Effective date: Provisions apply to taxable years beginning after December 31, 2026 (with certain credits sunset after 2038)

Main purpose and intent

  • Promote reshoring and domestic, market-based incentives for magnet metals, rare earth oxides, and permanent magnets.
  • Support a secure, resilient U.S. magnet value chain by incentivizing production in the United States or in partner countries, and by encouraging purchase and use of domestically produced magnet materials in covered products.

Key provisions and changes

  1. Magnets Value Chain Support Credit (Section 45BB)

    • Establishes a new nonrefundable credit for eligible taxpayers, combining three component credits:
      • Permanent magnet production credit
      • Magnet metal production credit
      • Rare earth oxide production credit
    • Credit is determined per kilogram of qualifying material produced in the United States and sold to unrelated parties or used in eligible production steps.
    • Eligibility and credit amounts vary by magnet type and domestic/partner-country origin:
      • Permanent magnets (various tiers: rare earth-free, high-performance, advanced high-performance, specified) with tiered per-kilogram credits ranging from $20 to $40, contingent on domestic content and absence of inputs from prohibited foreign entities.
      • Magnet metals: $15 per kg (70–75%+ domestic content) or $25 per kg (90%+ domestic content), with restrictions on foreign inputs.
      • Rare earth oxides: $5 per kg, with similar domestic content and no prohibited-foreign-entity inputs.
    • Eligible taxpayers must certify that at least 3% of their annual domestic production capacity for qualified permanent magnets is available for priority national-security or defense contracts.
    • Provisions include prohibitions on double benefits, coordination to avoid duplication with other credits (e.g., 45X), and explicit rules about restricted inputs and entities.
    • Definitions cover qualified permanent magnets, rare earth oxides, magnet metals and inputs, eligible production steps, and partner countries (NATO members, Japan, Australia, Korea, Canada, Mexico).
    • Special rules for “specified permanent magnets” (military/defense-aligned, with potential designation by the Secretary of Defense and Energy; conclusive designation after 120 days if not objected).
    • Termination: Credit sunsets for taxable years beginning after December 31, 2031 unless extended.

  2. General Tax Credit Integration (Section 3)

    • The magnet value chain credit is treated as part of the general business credit (Sec. 38) and can be claimed as part of the overall tax credits.
    • Includes a transferability option (Sec. 6418) allowing the credit to be transferred as an allocation.

  3. Domestic Magnet Input Usage Credit (Section 45CC)

    • Establishes a separate credit for domestic magnet input expenditures (qualified domestic magnet expenditures) tied to the manufacture of covered products in the United States.
    • Applicable percentage scales: 15% (before 2035), 10% (2035–2036), 5% (2037–2038).
    • Qualified domestic magnet expenditures must be for magnets produced in the U.S., not sourced from prohibited foreign entities, and supported by documentation.
    • Anti-manipulation rules: purchases must reflect arm’s-length pricing; regulations will provide safe harbors.
    • Covered products include core powertrain/generation components and a range of high-tech/defense applications (with a list of excluded consumer or non-strategic products).
    • Prohibits double-dipping with other credits for the same materials and allows waivers in certain cases.
    • Prohibition on credits if inputs are from prohibited foreign entities; waivers limited to 90 days with reporting requirements.
    • Termination: sunsets after 2038.

Who/what would be affected

  • Eligible taxpayers involved in:
    • Production of permanent magnets, magnet metals, and rare earth oxides in the United States or through designated partner-country facilities.
    • Manufacturing of covered products that use domestically produced magnet materials.
  • Suppliers and downstream purchasers in the magnet supply chain, including manufacturers of motors, generators, robotics, and advanced electronics.
  • U.S. Department of Defense and energy-related programs (for designation of “specified” magnets).
  • Domestic magnet facilities and potential new facilities that meet criteria to be designated as partner-country facilities or that maintain domestic production capacity.

Procedural and timeline aspects

  • Enactment and applicability:
    • Provisions apply to tax years beginning after December 31, 2026 (with sunset provisions in 2038).
    • Some designations and regulatory implementations would occur through the Secretary of the Treasury (in consultation with relevant agencies) and Congress.
  • Compliance and reporting:
    • Requires certifications of domestic production capacity and sources, reporting on supply chains, parties involved, and pricing for materials used in eligible steps.
    • Confidential information protection provisions exist to guard sensitive business information.
  • Interaction with other credits:
    • Credit is designed to avoid double benefits with existing credits (notably 45X) and may be elected in a given year as either 45BB/45X credit, irrevocable for the year.
    • The magnet value chain credit is integrated into the general business credit framework and is transferable under existing transfer rules.

Summary assessment

  • The Magnets Value Chain Support Act of 2026 is a comprehensive tax-incentive package aimed at revitalizing the U.S. magnet supply chain by:
    • Encouraging domestic production of magnets, magnet metals, and rare earth oxides.
    • Promoting adoption of domestically produced magnet materials in high-value, defense-relevant products.
    • Reducing foreign dependency and enhancing national security through market-based incentives and supplier transparency.
  • It introduces tiered, material-specific credits with eligibility requirements tied to domestic content, partner-country sourcing, and prohibition on inputs from restricted foreign entities.
  • It also creates a separate domestic magnet input expenditure credit to encourage procurement of domestically produced magnets for covered products, with phased-down percentages and sunset in 2038.

Compiled from official sources — confirm details with the bill’s official record.

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