The US Treasury Department has released its proposed regulations for the IRA-linked “45X” advanced manufacturing production credit, drawing some ire from the mining industry.

The 45X tax credit offers incentives for various US-made products, allowing critical mineral and electrode active material producers to write off 10% of their business expenses. However, Kallanish learns this latest guidance, published Thursday, draws a line between miners and processors.

Under the new regulations, mining companies will be ineligible for a 10% production tax credit for directly extracting raw materials. This includes companies mining for lithium, cobalt, nickel or any of the other 47 minerals designated as critical by the Department of Energy.

Some recycling companies will also be hit by these rules, as companies that extract raw materials from used batteries – such as Li-Cycle or Redwood Materials – will be unable to claim the incentive on material extraction. However, other business expenses will still count toward the tax credit, including electricity and overhead costs.

In its guidance, the Treasury justifies the decision by saying that “excluding material costs would… mitigate the risk of crediting the same costs multiple times.”

For instance, if Company X produces a critical mineral and sells it to Company Y to produce another critical mineral, the production costs would be credited twice. By separating the material and production costs, this situation is more easily avoided.

However, Rich Nolan, president of the National Mining Association, says the guidance fails to “uphold Congress’s intent to incentivise” the mineral supply chain.

“By restricting the benefits available to the front end of the supply chain – the mines and minerals that drive the clean energy economy – the incentives offer a pittance of what Congress intended to bolster domestic raw material supply and take on China,” Nolan says in a statement.

The Treasury will remain open to public comments on the guidance until 13 February 2024, with a public hearing scheduled for 22 February.