Critical material production tax credit

(a) In general Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 45AA the following new section: 45BB. Critical material production credit (a) In general (1) Allowance of credit For purposes of section 38, the critical material production credit for any taxable year is an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each eligible material which is— (A) produced by the taxpayer in the United States, and (B) during the taxable year, sold by such taxpayer to an unrelated person. (2) Production and sale must be in trade or business Any eligible material produced and sold by the taxpayer shall be taken into account only if the production and sale described in paragraph (1) is in a trade or business of the taxpayer. (3) Unrelated person (A) In general For purposes of this subsection, a taxpayer shall be treated as selling eligible material to an unrelated person if such eligible material is sold to such person by a person related to the taxpayer. (B) Election (i) In general At the election of the taxpayer (in such form and manner as the Secretary may prescribe), a sale of eligible material by such taxpayer to a related person shall be deemed to have been made to an unrelated person. (ii) Requirement As a condition of, and prior to, any election described in clause (i), the Secretary may require such information or registration as the Secretary deems necessary for purposes of preventing duplication, fraud, or any improper or excessive amount determined under paragraph (1). (b) Credit amount (1) In general Subject to paragraph (2), the amount determined under this subsection with respect to any eligible material shall be equal to— (A) in the case of a taxpayer producing eligible material at the initial production stage, the eligible rate shall be equal to 15 percent of the taxpayer’s cost of production, or (B) in the case of an eligible material with respect to which each input eligible material is sourced— (i) domestically, 10 percent of the taxpayer’s cost of production, or (ii) domestically or from a country listed by the Secretary under subsection (d)(1), 7.5 percent of the taxpayer’s cost of production. (2) Increase in credit amount for meeting certain standards In the case of a taxpayer that meets 1 of the following criteria with respect to the eligible material with respect to which the amount is determined under paragraph (1), the amount determined under paragraph (1) (determined without regard to this paragraph) shall be increased by 10 percentage points: (A) Each employee, contractor, or subcontractor employed in relation to the production of the eligible material by the taxpayer during the taxable year was paid wages at rates not less than the prevailing rates for the applicable industry in the locality in which such production occurred as most recently determined by the Secretary of Labor, in accordance with subchapter IV of chapter 31 of title 40, United States Code, and the taxpayer fulfilled the apprenticeship requirements established by the Secretary under subsection (d)(2). (B) Produces— (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) Phase out (A) In general In the case of any eligible material sold after December 31, 2030, the amount determined under this subsection with respect to such material shall be equal to the product of— (i) the amount determined under paragraph (1) with respect to such material, as determined without regard to this paragraph, multiplied by (ii) the phase out percentage under subparagraph (B). (B) Phase out percentage The phase out percentage under this subparagraph is equal to— (i) in the case of an eligible material sold during calendar year 2031, 75 percent, (ii) in the case of an eligible material sold during calendar year 2032, 50 percent, (iii) in the case of an eligible material sold during calendar year 2033, 25 percent, (iv) in the case of an eligible material sold after December 31, 2034, 0 percent. (c) Special rules For purposes of this section— (1) Related persons Persons shall be treated as related to each other if such persons would be treated as a single employer under the regulations prescribed under section 52(b). (2) Pass-thru in the case of estates and trusts Under regulations prescribed by the Secretary, rules similar to the rules of subsection (d) of section 52 shall apply. (3) Sale of integrated components For purposes of this section, a person shall be treated as having sold an eligible material to an unrelated person if such material is integrated, incorporated, or assembled into a technology component which is sold to an unrelated person. (d) Regulations (1) Identification of safe acquisition sources Not later than 1 year after the date of the enactment of this section, the Secretary, in consultation with the Secretary of State, shall publish and maintain a list of countries that meet the following criteria: (A) The country has environmental protections with respect to the production of eligible materials which meet or exceed such protections in the United States. (B) No product of the country is prohibited for importation into the United States pursuant to section 307 of the Tariff Act of 1930. (C) The country has labor laws which ensure wage rates are determined by free bargaining between labor and management. (D) The country is not— (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 nonmarket economy country (as defined in section 771(18) of the Tariff Act of 1930). (2) Apprenticeship requirement The Secretary, in consultation with the Secretary of Labor, shall establish such apprenticeship requirements as are appropriate for each affected industry for purposes of subsection (b)(2)(A). (e) Limitation For the purposes of calculating the eligible credit amount for a taxpayer, the taxpayer shall be unable to claim an eligible credit under this section if the taxpayer has already claimed an eligible credit for production of an applicable critical mineral under section 45X for the current year in which this section is being claimed. (f) Definitions For the purpose of this section— (1) Terms used in section 48F The terms eligible material, qualified substitute, critical material, and technology component have the meanings given such terms in section 48F. (2) Initial production stage The term initial production stage means a stage of production in which the taxpayer produces an eligible material through— (A) extraction, (B) recycling, or (C) in the case of a qualified substitute, any means. (3) Taxpayer’s cost of production The term taxpayer’s cost of production means amounts paid or incurred by the taxpayer to produce an eligible material, excluding amounts paid or incurred— (A) for labor, (B) for transportation of any property, and (C) administrative expenses.. (b) Credit allowed as part of general business credit Section 38(b) of such Code is amended by striking plus at the end of paragraph (40), by striking the period at the end of paragraph (41) and inserting, plus, and by adding at the end the following new paragraph: (42) section 45BB (critical material production credit).. (c) Clerical amendment The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 45BB. Critical material production credit.. (d) Effective date The amendments made by this section shall apply to materials sold after the date of the enactment of this Act.