Magnets Value Chain Support Act of 2026

The bill aims to bolster U.S. economic and national security by reducing strategic dependence on foreign sources, particularly the People's Republic of China, for permanent magnets and their precursor materials. It seeks to restore domestic manufacturing capabilities for these critical components, which are essential for electric motors, generators, robotics, and defense systems. To achieve this, the legislation establishes two new refundable tax credits under the Internal Revenue Code.

The first, the Magnet Value Chain Support Credit, incentivizes the domestic production of permanent magnets, magnet metals, and rare earth oxides. Credit amounts are tiered, ranging from $5 to $40 per kilogram, based on the type of magnet or material, its performance characteristics, and the percentage of inputs sourced from the United States or partner countries. Crucially, no credit is allowed for materials produced by or incorporating inputs from prohibited foreign entities, ensuring a secure supply chain.

The second credit, the Domestic Magnet Input Usage Credit, encourages manufacturers to incorporate qualified domestically produced permanent magnets into specific "covered products." This credit offers a percentage of expenditures on these magnets, starting at 15% and gradually decreasing to 5% by 2037. Covered products include core powertrain components, high-performance electronics, and critical defense applications, while low-power consumer appliances are explicitly excluded.

Both credits include provisions to prevent double benefits and impose strict prohibited foreign entity restrictions throughout the supply chain, though the Secretary may grant temporary waivers under specific conditions. Taxpayers claiming these credits must also comply with comprehensive disclosure and reporting requirements regarding material origins, suppliers, and transaction details. These incentives are designed to terminate after December 31, 2038, aiming to establish a robust domestic magnet supply chain within this timeframe.