‘Big, beautiful’ US bill would end tax credit for critical minerals

[Redator]

Legislation moving through the United States Congress could eliminate a key tax credit aimed at supporting domestic production of critical minerals, raising concern among mining companies and investors about the future of American supply chain independence and the financing of new projects.

The so-called One Big Beautiful Bill, introduced earlier this year and passed by the House of Representatives in May, proposes phasing out the Section 45X advanced manufacturing production credit, which was introduced under the 2022 Inflation Reduction Act.

The credit provides a 10% tax incentive for the domestic extraction, processing and recycling of key battery and industrial minerals — including lithium, nickel, cobalt and rare earths. Under the current bill, the credit would gradually be reduced starting in 2031 and be fully eliminated by 2034. Other provisions of the program, including tax credits for wind energy and solar components, are scheduled to expire earlier.

On Tuesday, the Senate passed an amended version of the legislation by a 51–50 vote, with Vice-President J.D. Vance casting the tie-breaking vote. The bill now enters reconciliation between the House and Senate, with final wording expected later this summer.

Letter to Senate

Some 30 industry executives have warned in a letter to the Senate that removing the Section 45X credit could undermine efforts to finance and develop domestic mineral production, especially in the face of global competition from state-subsidized suppliers in China and elsewhere.

The May letter was authored by KaLeigh Long, founder and CEO of Westwin Elements, which is building the country’s first major nickel refinery. It was signed by companies such as global metals trader Traxys Group and processing startups Magrathea and Momentum Technologies.

“Nickel isn’t niche. It’s national security,” Westwin wrote in a LinkedIn post. “Let’s fix it. Let’s restore 45X.”

Several projects in the US had relied on the incentive as part of their long-term financial modelling, particularly in emerging markets such as magnesium and battery-grade lithium.

The proposed repeal also comes amid broader US efforts to secure critical mineral supply chains and reduce dependence on foreign-controlled refining capacity. Critics have said the budget proposal sends mixed signals about Washington’s commitment to reshoring strategic mineral production, despite earlier permitting reforms and subsidy announcements intended to encourage domestic investment.

Industry support

The National Mining Association (NMA) applauded the Senate’s July 1 passage of its version of the “One Big Beautiful Bill” and urging House action to send the bill to President Trump’s desk.

“We urge the House to quickly pass this bill,” NMA president and CEO Rich Nolan said in a statement. It “increases the competitiveness of the American mining industry and provides vital incentives, including funding to counter China’s mineral dominance.”

In December 2023, the NMA had criticized the then proposed 45X tax credit for excluding raw materials from the list of eligible production costs. The Biden administration then reversed course with rules passed in October 2024 that allowed direct and indirect material costs, including domestic extraction costs.

Canada impact

The repeal of the US credit could create a limited opening for Canadian companies to increase exports to US customers – particularly in lithium, nickel and rare earth elements. However, under current rules, many US incentives – including portions of the Section 45X program and electric vehicle tax credits – apply only to minerals that are extracted or processed in the US or in countries with a free trade agreement.

While Canada qualifies under the latter category, some Canadian firms may still face barriers if their operations do not meet the specific content or processing requirements under US law.

Analysts have noted that any relative advantage for Canadian miners would likely depend on their ability to scale up processing infrastructure or integrate into US-based value chains, particularly in refining and downstream component manufacturing. The repeal of the credit also adds new uncertainty to cross-border mineral cooperation efforts, which had gained momentum in recent years under bilateral critical mineral strategies.

The “One Big Beautiful Bill” will require further debate and a final vote before being sent to the White House. A timeline for implementation of the credit phase-out would depend on the final language of the reconciled bill.