Magnets Value Chain Support Act of 2026

This bill creates two new tax credits to encourage domestic production and use of permanent magnets and their inputs, aiming to reduce reliance on foreign sources. It amends the Internal Revenue Code to establish a Magnet Value Chain Support Credit and a Domestic Magnet Input Usage Credit.

Sec. 3, Establishment of Magnet Value Chain Support Credit: This section creates a new tax credit (Section 45BB) for taxpayers that produce qualified permanent magnets, magnet metals, or rare earth oxides in the United States. The credit amounts vary based on the type of magnet (rare earth-free, high-performance, or advanced high-performance) and the percentage of magnet metal inputs sourced from the U.S. or partner countries, with higher credits for higher domestic content. Credits are not allowed for materials produced by a prohibited foreign entity, and taxpayers must certify a portion of their production capacity is available for defense orders. Taxpayers must elect this credit over any other similar credit for the same material.

Sec. 4, Establishment of Domestic Magnet Input Usage Credit: This section creates a separate tax credit (Section 45CC) for taxpayers that purchase qualified permanent magnets manufactured in the U.S. for use in making covered products. The credit is a percentage of the purchase cost, phasing down from 15% to 5% over time and ending after 2038. Covered products include core components for motors, generators, and electronics used in defense, industrial, and high-tech applications, but exclude low-power consumer appliances. The credit cannot be claimed if any magnet input came from a prohibited foreign entity, and it applies to taxable years beginning after December 31, 2026.