New Tax Break Boosts Domestic Mining: Rare Earths Get 22% Depletion Rate to Secure Supply Chain

The Critical Minerals Investment Tax Modernization Act of 2025 is a short, sharp piece of legislation focused squarely on the tax code, specifically aimed at encouraging more domestic mining of key materials. In plain English, this bill gives a significant tax incentive to companies that dig up rare earth minerals and scandium here in the U.S.

What the bill does is adjust the “percentage depletion rate” for these specific minerals. Think of percentage depletion as a tax break for companies that extract natural resources—it lets them deduct a percentage of their income from that property. Currently, many minerals get a lower rate, but this Act bumps rare earths and scandium up to the highest available rate: 22 percent. This change amends Section 613(b)(1)(B) of the Internal Revenue Code and kicks in for tax years starting after the law is enacted.

The 22% Discount: Why It Matters

Why should you care about a tax code tweak for mining companies? It comes down to securing the supply chain for materials essential to modern life. Rare earth minerals and scandium are vital ingredients in everything from your smartphone and electric vehicle batteries to advanced military technology and renewable energy components like wind turbines. Right now, the U.S. relies heavily on foreign sources for these materials.

By raising the tax deduction to 22%, the bill makes domestic mining operations significantly more profitable and attractive compared to the cost of importing. For a company that’s considering sinking billions into opening a new mine, this tax advantage is a huge financial signal, potentially lowering their operating costs and risk. The goal is to build out a more resilient, American-based supply chain, reducing our reliance on geopolitical rivals for these crucial tech components.

Who Benefits and Who Pays?

The immediate beneficiaries are the companies that mine and process rare earths and scandium. They get a reduced tax burden, which theoretically frees up capital for investment in new projects and job creation in the mining sector. This could lead to more stable pricing and availability for manufacturers who use these minerals, eventually trickling down to consumers through better supply of high-tech goods.

The cost, however, is borne by the U.S. Treasury. Every dollar a mining company deducts using this enhanced depletion rate is a dollar of tax revenue the government doesn't collect. While the focus here is on national security and supply chain stability, it’s a direct trade-off: tax revenue versus incentivized domestic production. Since the bill is very specific about which minerals qualify, the impact is highly targeted, aiming to solve a specific strategic problem without broadly changing the tax landscape for other industries.