H.R. 3200: Critical Minerals and Manufacturing Support Act

This bill, known as the Critical Minerals and Manufacturing Support Act, aims to modify tax incentives related to the production of battery components through the Internal Revenue Code. Here’s a breakdown of its main provisions:

1. Increase in Manufacturing Credit

The bill proposes to increase the advanced manufacturing credit for producing electrode active materials used in batteries from 10 percent to 25 percent. This change is intended to encourage more production within the United States.

2. Production Costs Inclusion

It specifies that the production costs for electrode active materials can include not only direct manufacturing expenses but also the costs associated with raw materials extraction, whether from geological sources or recycling waste products.

3. Sourcing Requirements for Battery Components

The legislation introduces sourcing requirements for critical minerals and battery components:

• No tax credit can be claimed for qualifying battery components unless a certain percentage of their critical minerals is sourced:
  • Extracted or processed within the U.S. or in a country with which the U.S. has a free trade agreement.
  • Recycled and integrated into the supply chain in North America.
• The required sourcing percentage will be:
  • 70 percent for sales made in 2026,
  • 80 percent for sales made after 2026.

4. Qualifying Battery Components

Battery components must also have a significant portion of their materials—specifically the constituent elements—produced, manufactured, or assembled in North America. The required applicable percentages are:

• 70 percent for components sold in 2026,
• 80 percent in 2027,
• 90 percent in 2028,
• 100 percent after December 31, 2028.

5. Excluded Entities

The bill adds provisions that disqualify certain battery components from receiving credits if their critical minerals or constituent materials were sourced from foreign entities deemed a “foreign entity of concern.”

6. Modifications in Definitions

Changes to terminology include expanding the definition of electrode active materials to include new materials necessary for battery production, like:

• Electrode active precursor materials,
• Binders,
• Solid state electrolytes.

7. Inclusion of Silicon

Silicon used as an active material in battery anodes is explicitly recognized as a critical material under the new regulations.

8. Effective Date

These modifications will apply to components produced and sold after December 31, 2025.

Relevant Companies

• TSLA - Tesla, Inc.: Tesla is a significant player in battery production and electric vehicles. This bill could impact their production costs and sourcing strategies.
• ALB - Albemarle Corporation: Albemarle produces lithium, a critical mineral needed for batteries. Changes in sourcing requirements could affect their operations.
• SQMMF - Soma Gold Corp.: As a miner of materials relevant to battery production, the sourcing requirements may directly influence their business model and strategy.