On August 9, 2022, President Biden signed the CHIPS and Science Act (Pub. L. 117-167), which seeks to bolster the US semiconductor provide chain and promote analysis and growth of superior applied sciences within the U.S.
Included within the Act is IRC Sec. 48D, which creates a brand new “superior manufacturing funding credit score.” This credit score for any taxable yr is an quantity equal to 25% of the certified funding for that yr in a facility for which the first goal is the manufacturing of semiconductors or semiconductor manufacturing tools.
The certified funding for any taxable yr is the taxpayer’s foundation in “certified property” positioned in service by the taxpayer throughout that taxable yr, which is –
- Tangible depreciable or amortizable property;
- Both constructed, reconstructed or erected by the taxpayer or property acquired by the taxpayer the place unique use commences with the taxpayer; and
- Integral to the operation of the superior manufacturing facility.
The credit score is allowed for property positioned in service after December 31, 2022. As well as, the credit score can be out there for any property underneath building previous to January 1, 2023, solely to the extent of the idea attributable to building, reconstruction or erection after August 9, 2022, the date of enactment of the Act. The credit score won’t apply to property the development of which begins after December 31, 2026.
Reasonably than claiming the credit score as an offset towards tax legal responsibility on a tax return, the taxpayer might elect to deal with the complete quantity of the credit score as a cost of tax for the taxable yr with respect to which the credit score was decided. The extra cost of tax could also be refunded. Partnerships and S companies can also be eligible for this election, which might end in a cost being made on to the partnership or S company (and to not companions or shareholders taking the credit score on their returns).
Over a ten-year interval starting on the date a taxpayer locations in service property eligible for this IRC Sec. 48D credit score, if a taxpayer has a fabric growth of semiconductor manufacturing capability in China or a international “nation of concern,” the tax for that yr will usually be elevated by the quantity of the combination IRC Sec. 48D credit taken.
Vital rules may be anticipated to implement this new credit score.
