Securing America's Supply Chain: Understanding H.R. 1496

Overview of H.R. 1496

H.R. 1496 proposes amendments to the Internal Revenue Code of 1986 to introduce tax incentives aimed at increasing domestic production of high-performance rare earth magnets. The bill includes:

• A $20 per kilogram tax credit for magnets manufactured within the United States.
• An enhanced $30 per kilogram credit for magnets made using at least 90% domestically sourced rare earth materials.

These credits are designed to encourage investment in the U.S. rare earth magnet industry, reduce dependence on foreign supply chains—especially from China—and build a resilient manufacturing base. The credits are scheduled to phase out by the end of 2037, reflecting a long-term strategy to achieve domestic self-reliance.

The Geopolitical Backdrop

The urgency behind this bill is amplified by China's recent actions to tighten control over rare earth exports. In 2024, China imposed export restrictions on seven key rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. These elements are crucial for producing components used in defense, electronics, and renewable energy technologies.

The restrictions require special licenses for export, creating uncertainty and supply chain disruption for global manufacturers. Although there have been discussions about relaxing some of these curbs for select companies, China's broader strategy suggests a long-term effort to consolidate control over these strategic resources.

Implications for the United States

The United States currently relies heavily on China for the supply of rare earth elements. This dependence poses significant risks, particularly for national security and critical industries such as defense and renewable energy. H.R. 1496 is a proactive effort to mitigate these risks by promoting domestic production and reducing foreign dependence.

However, developing a self-sufficient supply chain will be a complex challenge. It will require not only financial incentives like those proposed in the bill but also investments in mining, refining, environmental protection, workforce training, and technological innovation.

Conclusion

H.R. 1496 represents more than just a tax policy shift; it is a strategic initiative aimed at protecting national interests and securing critical supply chains. By incentivizing the domestic production of rare earth magnets, the bill helps the U.S. build industrial resilience and reduce exposure to global political fluctuations.

As the legislation moves forward, success will depend on collaboration between government, industry, and research institutions. If implemented effectively, it could lay the foundation for a robust and sustainable domestic supply chain for critical materials vital to America's economic and national security.

Amazing Magnets supports HR1496 as it helps our US producers of rare earth magnets, as they ramp up production.  We will follow progress of this bill as it progresses through the system.

Legislative Progress

For the full legislative text of H.R. 1496, visit Congress.gov.