U.S. Rep. Adrian Smith Proposes Tax Relief to Boost Domestic Production of Rare Earth Materials and Scandium

Strategic Insights -

U.S. Rep. Adrian Smith, a Republican from Nebraska, has introduced legislation aimed at increasing domestic production of rare earth materials and scandium by offering tax relief to manufacturers. The proposal, co-sponsored by California Democratic Rep. Jimmy Panetta and Pennsylvania Republican Rep. Guy Reschenthaler, seeks to match the tax break enjoyed by producers of high-priority minerals by increasing the depletion allowance from 14% to 22%. This move is seen as crucial for the United States to reduce its dependence on China, which dominates the refining of these critical minerals.

Key Takeaways:

  • The proposed tax relief aims to increase the depletion allowance for producers of rare earth materials and scandium from 14% to 22%.
  • This move is intended to encourage domestic production of these critical minerals, which are used in a wide range of technologies, from smartphones to electric vehicles.
  • Nebraska has a rare-earth mine in the southeastern part of the state, which is home to the second-largest deposit of rare earth elements in the U.S.
  • China has cornered a near-monopoly on refining rare earth minerals, but the U.S. has been working to increase domestic production and reduce its reliance on Chinese imports.
  • The proposed legislation is supported by Rep. Adrian Smith, a senior member of the House's tax-writing Ways and Means Committee, and co-sponsored by Rep. Jimmy Panetta (D-CA) and Rep. Guy Reschenthaler (R-PA).
  • The U.S. has been involved in efforts to increase domestic production of critical minerals, including a deal signed with Ukraine in April to grant the U.S. a stake in Ukrainian mineral reserves in exchange for security guarantees.

Statistics:

  • 17 types of metals known as "rare earth" minerals are actually quite common and mined globally.[1]
  • China has cornered a near-monopoly on refining these rare earth minerals.[1]
  • Nebraska's rare-earth mine in the southeastern part of the state is home to the second-largest deposit of rare earth elements in the U.S.
  • 14% is the current depletion allowance for producers of rare earth materials and scandium.
  • 22% is the proposed depletion allowance to match the tax break enjoyed by producers of high-priority minerals.
  • April saw the signing of an agreement between Ukraine and the U.S. granting the U.S. a stake in Ukrainian mineral reserves in exchange for security guarantees.[2]

Sources:

[1] U.S. Geological Survey. (2024). Mineral Commodity Summaries. Pub. No. I 2800-H.

[2] The New York Times. (2025). Ukraine and U.S. Sign Deal on Minerals. April 30.