The U.S. Department of the Treasury has issued the final ruling on Section of the Inflation Reduction Act.

Key Chapter Title List

1. What is Section 45X of the Inflation Reduction Act?
2. How did industry and policymakers respond to the initial guidance?
3. What are the contents of the Treasury's final ruling and how does it differ from previous guidance?
4. What does the final rule mean for mineral processing companies, and how is it expected to impact industry investment?
5. What does the final ruling mean for mineral mining companies, and how is it expected to impact industry investment?
6. How might the final ruling affect mineral investment by U.S. strategic partners overseas?

Document Introduction

The 2022 Inflation Reduction Act (IRA) introduced a series of tax credits, subsidies, and incentives aimed at promoting the domestic manufacturing of U.S. clean energy technologies and their components. Among these, the Section 45X Advanced Manufacturing Production Tax Credit (PTC) is a core initiative. It covers the production of downstream technologies such as electric vehicle batteries and solar panels, while also supporting the development of the upstream critical minerals industry by subsidizing high production costs.

The proposed rule for Section 45X released by the Treasury Department in 2023 sparked strong opposition from industry and Congress because it did not include raw material costs and extraction costs within the tax credit calculation scope. Mining companies, labor unions, and Democratic senators pointed out that this rule weakened the incentive effect of the tax credit on the domestic critical minerals supply chain, with some mining projects facing operational difficulties due to a lack of policy support.

On October 24, 2024, the U.S. Treasury Department issued the final ruling for Section 45X. The core revision clarifies the definition of "production costs," explicitly including the raw material and extraction costs for critical minerals and electrode active materials within the credit calculation. However, this applies only to "eligible components" refined to specified purity levels and requires companies to have both extraction and processing operations to qualify for the benefits.

For mineral processing companies, the new rule significantly enhances the practical value of the tax credit, incentivizing the construction of midstream processing capacity in the United States. This is particularly beneficial for investments in areas like lithium processing and precursor cathode active material (pCAM). However, companies solely engaged in extraction activities remain ineligible for the credit, prompting calls from related industries for further targeted incentive policies.

At the international level, the final rule allows domestic processors to include the material costs of imported ores within their credit calculation, provided the final product processing is completed within the United States or its territories. This arrangement helps incentivize supply chain cooperation between the U.S. and resource-rich strategic partners, while also facing challenges posed by resource nationalism and export bans in some countries.

This final ruling provides stronger policy support for the U.S. domestic critical minerals industry, helping to enhance its competitiveness in the global market. However, the United States still needs to continue advancing reforms in areas such as capacity building and supply chain security to meet the mineral demands of the energy transition and national security.