Phase-out and restrictions on advanced manufacturing production credit

(a) Modification of provision relating to sale of integrated components Paragraph (4) of section 45X(d) is amended to read as follows: (4) Sale of integrated components (A) In general For purposes of this section, a person shall be treated as having sold an eligible component to an unrelated person if— (i) such component (referred to in this paragraph as the primary component) is integrated, incorporated, or assembled into another eligible component (referred to in this paragraph as the secondary component) produced within the same manufacturing facility as the primary component, and (ii) the secondary component is sold to an unrelated person. (B) Additional requirements Subparagraph (A) shall only apply with respect to a secondary component for which not less than 65 percent of the total direct material costs which are paid or incurred (within the meaning of section 461 and any regulations issued under section 263A) by the taxpayer to produce such secondary component are attributable to primary components which are mined, produced, or manufactured in the United States.. (b) Phase out and termination Section 45X(b)(3) is amended— (1) in the heading, by inserting and termination after Phase out, (2) in subparagraph (A), in the matter preceding clause (i), by striking subparagraph (C) and inserting subparagraphs (C) and (D), and (3) by striking subparagraph (C) and inserting the following: (C) Phase out for applicable critical minerals other than metallurgical coal (i) In general In the case of any applicable critical mineral (other than metallurgical coal) produced after December 31, 2030, the amount determined under this subsection with respect to such mineral shall be equal to the product of— (I) the amount determined under paragraph (1) with respect to such mineral, as determined without regard to this subparagraph, multiplied by (II) the phase out percentage under clause (ii). (ii) Phase out percentage for applicable critical minerals other than metallurgical coal The phase out percentage under this clause is equal to— (I) in the case of any applicable critical mineral produced during calendar year 2031, 75 percent, (II) in the case of any applicable critical mineral produced during calendar year 2032, 50 percent, (III) in the case of any applicable critical mineral produced during calendar year 2033, 25 percent, and (IV) in the case of any applicable critical mineral produced after December 31, 2033, 0 percent. (D) Termination for wind energy components This section shall not apply to any wind energy component produced and sold after December 31, 2027. (E) Termination for metallurgical coal This section shall not apply to any metallurgical coal produced after December 31, 2029.. (c) Restrictions relating to prohibited foreign entities Section 45X is amended— (1) in subsection (c)(1), by adding at the end the following new subparagraph: (C) Material assistance from prohibited foreign entities In the case of taxable years beginning after the date of enactment of this subparagraph, the term eligible component shall not include any property which includes any material assistance from a prohibited foreign entity (as defined in section 7701(a)(52), as applied by substituting used in a product sold before January 1, 2027 for used in a product sold before January 1, 2030 in subparagraph (D)(iv)(II)(bb) thereof)., and (2) in subsection (d), as amended by subsection (a) of this section, by adding at the end the following new paragraph: (4) Restrictions relating to prohibited foreign entities (A) In general No credit shall be determined under subsection (a) for any taxable year if the taxpayer is— (i) a specified foreign entity (as defined in section 7701(a)(51)(B)), or (ii) a foreign-influenced entity (as defined in section 7701(a)(51)(D), without regard to clause (i)(II) thereof). (B) Effective control In the case of a taxpayer for which section 7701(a)(51)(D)(i)(II) is determined to apply for any taxable year, no credit shall be determined under subsection (a) for such taxable year if such determination relates to an eligible component described in subsection (c)(1).. (d) Modification of definition of battery module Section 45X(c)(5)(B)(iii) is amended— (1) in subclause (I)(bb), by striking and at the end, (2) in subclause (II), by striking the period at the end and inserting, and, and (3) by adding at the end the following new subclause: (III) which is comprised of all other essential equipment needed for battery functionality, such as current collector assemblies and voltage sense harnesses, or any other essential energy collection equipment.. (e) Inclusion of metallurgical coal as an applicable critical mineral for purposes of the advanced manufacturing production credit (1) In general Section 45X(c)(6) is amended— (A) by redesignating subparagraphs (R) through (Z) as subparagraphs (S) through (AA), respectively, and (B) by inserting after subparagraph (Q) the following new subparagraph: (R) Metallurgical coal Metallurgical coal which is suitable for use in the production of steel (within the meaning of the notice published by the Department of Energy entitled ‘Critical Material List; Addition of Metallurgical Coal Used for Steelmaking’ (90 Fed. Reg. 22711 (May 29, 2025))), regardless of whether such production occurs inside or outside of the United States.. (2) Credit amount Section 45X(b)(1)(M) is amended by inserting (2.5 percent in the case of metallurgical coal) after 10 percent. (f) Effective dates (1) In general Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years beginning after the date of enactment of this Act. (2) Modification of provision relating to sale of integrated components The amendment made by subsection (a) shall apply to components sold during taxable years beginning after December 31, 2026.