Congress quietly subsidizes rare earth magnet makers with open-ended tax credits
S. 1979 — Rare Earth Magnet Security Act of 2025 · Filed by Catherine Cortez Masto (D-NV) · 2 cosponsors · Introduced Jun 5, 2025 · Referred to committee
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What it does
This bill creates a federal tax credit of $20–$30 per kilogram for companies that manufacture rare earth magnets in the United States, with a higher rate if 90% of component materials are also sourced domestically. The credit phases out after 2034 and includes restrictions on sourcing materials from non-allied foreign nations (with a temporary exemption through 2026 for certain materials). The bill is designed to incentivize domestic rare earth magnet production for national security and supply-chain resilience.
Why we flagged it
The bill's core mechanism is a direct per-unit tax credit for domestic rare earth magnet production, structured as an incentive to shift manufacturing from foreign to U.S. sources. This is functionally a production subsidy dressed in tax-code language.
What the text implies
- The 'elective payment' provision (allowing taxpayers to treat credits as direct payments against tax liability) may enable manufacturers to receive cash refunds even if they owe no federal income tax, effectively converting the credit into a direct subsidy.
- The temporary exemption for certain rare earth materials (dysprosium, terbium, samarium, gadolinium) until January 1, 2027 creates a two-year window during which manufacturers can source from non-allied nations without penalty, potentially locking in supply chains that the bill ostensibly aims to prevent.
The full analysis lists 4 implications of this text.
Who stands to gain
rare earth magnet manufacturers; defense contractors with DOD/DOE magnet contracts; domestic mining and processing companies (indirectly, through increased demand)