Critical material investment tax credit

(a) In general Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 48E the following new section: 48F. Critical material investment credit (a) Establishment of credit (1) In general For purposes of section 46, the critical material investment credit for any taxable year is an amount equal to the applicable percentage of the qualified investment for such taxable year with respect to any critical material facility of an eligible taxpayer. (2) Applicable percentage (A) Base rate In the case of any critical material facility, the applicable percentage shall be 15 percent. (B) Alternative rate In the case of any critical material facility that meets either of the following criteria, the applicable percentage shall be 25 percent: (i) The critical material facility fulfills rules similar to the rules of section 45(b)(7). (ii) The primary purpose of the critical material facility is to produce— (I) a critical material that the Secretary, in consultation with the heads of other relevant Federal agencies and departments, determines has a supply which is significantly vulnerable to disruption (including restrictions associated with foreign political risk, abrupt demand growth, military conflict, violent unrest, anti-competitive or protectionist behaviors, and other risks throughout the supply chain), (II) a qualified substitute, or (III) a recycled critical material. (3) Definitions For the purpose of this section— (A) Critical material The term critical material has the meaning given such term in section 7002(a)(2) of the Energy Act of 2020. (B) Critical material facility The term critical material facility means a facility with respect to which the taxpayer makes an irrevocable election to have this subparagraph apply for which the primary purpose is— (i) extraction, processing, refining, or recycling of— (I) a critical material, or (II) a qualified substitute, (ii) converting a critical material into a magnet, an alloy, or a multicompound chemistry (in a solid, liquid, or gaseous state) that the Secretary, in consultation with the Secretary of Energy and the Secretary of the Interior, determines— (I) has a supply chain which is vulnerable to disruption (including restrictions associated with foreign political risk, abrupt demand growth, military conflict, violent unrest, anti-competitive or protectionist behaviors, and other risks throughout the supply chain); and (II) serves an essential function in the manufacturing of a product (including energy technology-, defense-, currency-, agriculture-, consumer electronics-, and health care-related applications), the absence of which would have significant consequences for the economic or national security of the United States, (iii) specialized manufacturing equipment used primarily to carry out a process described in clause (i) or (ii), or (iv) specialized equipment for research and development relating to a purpose described in clause (i), (ii), or (iii). (C) Qualified substitute The term qualified substitute means any material that the Secretary, in consultation with the Secretary of Energy and the Secretary of the Interior, determines is a verifiable alternative to a critical material that can carry out an essential function of such critical material in a technology component. (D) Technology component The term technology component means— (i) any manufactured component used to manufacture any item which is essential to national security, to energy independence, or to the economic competitiveness of the United States, or (ii) an eligible component (as defined in section 45X). (E) Eligible taxpayer The term eligible taxpayer means, with respect to a taxable year, any taxpayer which is not— (i) at any point during the taxable year, an entity under the influence, control, or ownership of— (I) a foreign entity of concern (as defined in section 9901 of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021), or (II) a firm domiciled in a non-market economy (as defined in section 771(18) of the Tariff Act of 1930), or (ii) subject to a covered trade action (as defined in section 108 of the Unearth America’s Future Act) at any point during the taxable year. (b) Qualified investment (1) In general For purposes of subsection (a), the qualified investment with respect to any critical material facility for any taxable year is the basis of any qualified property placed in service by the taxpayer during such taxable year which is part of such critical material facility. (2) Qualified property (A) In general For purposes of this subsection, the term qualified property means property— (i) which is tangible property, (ii) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, (iii) which is— (I) constructed, reconstructed, or erected by the taxpayer, or (II) acquired by the taxpayer if the original use of such property commences with the taxpayer, and (iv) which is integral to the operation of a critical material facility. (B) Building and structural components (i) In general The term qualified property includes any building or its structural components which otherwise satisfy the requirements of subparagraph (A). (ii) Exception Clause (i) shall not apply with respect to a building or portion of a building used for offices, administrative services, or other functions unrelated to manufacturing. (3) Coordination with rehabilitation credit The qualified investment with respect to any critical material facility shall not include that portion of the basis of any property which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)). (4) Certain progress expenditure rules made applicable Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a). (c) Elective payment (1) In general Except as otherwise provided in paragraph (2)(A), in the case of a taxpayer making an election (at such time and in such manner as the Secretary may provide) under this subsection with respect to the credit determined under subsection (a), such taxpayer shall be treated as making a payment against the tax imposed by subtitle A (for the taxable year with respect to which such credit was determined) equal to the amount of such credit. (2) Special rules Rules similar to the rules of section 48D(d)(2) shall apply with respect to an election under paragraph (1). (d) Denial of double benefit No credit shall be allowed under section 45X or under section 45BB for any taxable year with respect to any critical material facility with respect to a credit is allowed under this section. (e) Termination of credit The credit allowed under this section shall not apply to property the construction of which begins after December 31, 2029.. (b) Conforming amendments (1) Section 46 of such Code is amended by striking and at the end of paragraph (6), by striking the period at the end of paragraph (7) and inserting, and, and by adding at the end the following new paragraph: (8) The critical material investment credit.. (2) Section 49(a)(1)(C) of such Code is amended by striking and at the end of clause (vii), by striking the period at the end of clause (viii) and inserting, and, and by adding at the end the following new clause: (ix) the basis of any property which is part of a critical material facility under section 48F.. (3) Section 50(a)(2)(E) is amended by striking or 48E(e) and inserting 48E(e), or 48F(b)(4). (4) The table of sections for subpart E of part IV of subchapter A of chapter 1, as amended by section 107(d) of the CHIPS Act of 2022 (Public Law 117–167), is amended by inserting after the item relating to section 48E the following new item: Sec. 48F. Critical material investment credit.. (c) Effective date The amendments made by this section shall apply to property placed in service after the date of the enactment of this Act.