The bill amends the Internal Revenue Code of 1986 to establish a new tax credit for the domestic production of high-performance rare earth magnets. This credit, designated as Section 45BB, aims to bolster the United States' supply chain for these critical materials by incentivizing their manufacture within the country. Taxpayers who manufacture or produce rare earth magnets in the U.S. and sell them to an unrelated person are eligible for the credit. The credit amount is $20 per kilogram for magnets generally, increasing to $30 per kilogram if at least 90 percent by weight of the component rare earth materials are also produced domestically. This tiered structure encourages a fully integrated domestic supply chain. A significant provision is the restriction on component sourcing , which disallows the credit if any component rare earth material used in the magnet is produced in a "non-allied foreign nation." However, a delayed restriction applies to specific materials like dysprosium and terbium until January 1, 2027, providing a transition period for certain supply chains. The bill also includes a phase-out schedule for the credit, beginning with a 70 percent reduction in 2035 and fully expiring after December 31, 2037. To further support domestic manufacturing, the Secretary may grant an exception to the magnet's coercivity requirements for "eligible manufacturers." These are manufacturers receiving grants from the Department of Energy or Defense who commit to establishing domestic facilities for magnets with technological, supply chain, or national security merit. Additionally, the bill allows taxpayers to elect for a direct payment of the credit, providing immediate financial support rather than just a tax reduction.