CHARLESTON — A committee of the House of Delegates is proposing another tax relief bill intended to spur interest in the mining of rare earth elements from the hills of West Virginia.
The House Finance Committee recommended passage of House Bill 4657 on Monday afternoon after the House Select Committee on Tourism and Economic Diversification recommended the bill last week. The full House will consider the bill this week.
HB 4657 creates the Critical Minerals Investment Tax Credit Act of 2022. The bill would provide net or personal income tax relief for rare earth elements, critical minerals and carbon-based products.
The tax relief would be based on the cost of the qualifying investment property and the number of new jobs created by the project over a 10-year period, corresponding to one tenth of the amount of tax relief per year. The credit would be applied to 80% of the tax payable due to the qualified investment, although if the employees’ median salary is higher than the state average salary, the amount would increase to 100%.
The tax relief would only apply to property that does not qualify for other tax credits. The tax credit would be available from 2023.
The tax relief would apply specifically to qualified investment property used to produce rare earth elements, the mining of critical minerals, and processing and manufacturing facilities that use rare earth elements or critical minerals. The bill also creates legal property rights in chemical compounds, elements and substances obtained through the treatment of acid mine drainage.
Rare earth elements, also known as rare earth minerals, are used in most modern technologies such as cell phones, televisions, electric vehicles, medical devices, and defense technology. According to the University of West Virginia, the United States uses approximately 15,000 tons of rare earth elements per year.
Critical minerals are classified as minerals critical to the US economy whose supply may be disrupted. A WVU report indicates that 80% of rare earth elements are produced by China. U.S. reliance on China and other foreign countries for rare earth elements creates potential supply chain and security issues, says International Energy Agency report national.
“The prospect of a rapid increase in demand for critical minerals – in most cases well above anything seen before – raises huge questions about the availability and reliability of supply,” says the IEA report. “In the past, tensions over the balance between supply and demand for different minerals have prompted additional investment as well as measures to moderate or replace demand, but these responses have come with delays and are accompanied by considerable price volatility…this is a possibility that the world can ill afford.
HB 4657 is one of several bills aimed at encouraging companies to discover and develop rare earth elements in West Virginia. Last week, the House passed Bill 4025, exempting rare earth elements and other critical elements mined in the state from severance taxes. The bill is pending before the Senate Finance Committee.