On August 9th, President Biden signed into law the CHIPS Act of 2022 offering billions of dollars in grants and a generous income tax credit to jump-start semiconductor manufacturing within the United States. The CHIPS Act passed with strong bi-partisan support as a vehicle to bolster semiconductor manufacturing activities within the United States.
The CHIPS Act introduced I.R.C. Sec. 48D, the new manufacturing tax credit program into the Internal Revenue Code. This tax incentive provides a tax credit of 25% of qualified investment in a facility that manufactures semiconductors or the equipment to manufacture semiconductors.
The scope of the tax credit program applies to qualified property placed in service after December 31, 2022, for which construction begins before January 1, 2027. For property where construction begins after August 9th of 2022 through December 31st of 2022, the credit applies only to the basis of the property attributable to construction, reconstruction, or erection of the property to manufacture semiconductors.
The CHIPS Act also establishes a Creating Helpful Incentives to Produce Semiconductors for America Fund as well as a Creating Helpful Incentives to Produce Semiconductors for America Defense Fund to implement provisions of the William M. Thornberry National Defense Authorization Act for fiscal year 2021. The NDAA authorized financial assistance for establishing facilities in the United States to manufacture semiconductors but did not include appropriations. The CHIPS Act appropriates funds for grants and loans for this purpose.
Veritax Advisors Insights: Taxpayers considering constructing or purchasing a semiconductor manufacturing facility within the United States should contact us today to determine if your fact pattern aligns with the scope of the federal program requirements to capture this valuable tax credit.