The U.S. Department of the Treasury and the IRS want to boost semiconductor supply chain resilience with investment incentives.
The Treasury Department released a Notice of Proposed Rulemaking for the Advanced Manufacturing Investment Credit (CHIPS ITC) established by the CHIPS Act of 2022. By providing clear guidance for qualifying taxpayers, such as carriers, to use the CHIPS ITC, the Treasury Department and the IRS say they’re mobilizing key tax incentives for investments in facilities that manufacture smartphone chips, for example, or semiconductor manufacturing equipment.
The Treasury Department and the IRS are outlining detailed proposed rules that ensure the investment tax credit is appropriately tailored to the economic and technological realities of the semiconductor industry in order to cement U.S. leadership in critical semiconductor manufacturing, benefitting carriers and also tower owners. The proposed regulations also provide information on how to claim the credit.
The proposed regulations also define key terms for the credit, which is generally equal to 25 percent of an eligible taxpayer’s qualified investment in a facility with the primary purpose of manufacturing semiconductors or semiconductor manufacturing equipment, and are integral to the operation of the facility. The credit is generally available for qualified property that began construction after enactment of the CHIPS Act (August 9, 2022) and placed in service after December 31, 2022.
The funding provided by the bipartisan CHIPS and Science Act included clear guardrails to strengthen national security. So do the proposed regulations. The law prohibits recipients of CHIPS incentives funds from using the money in other countries.
The statute significantly restricts recipients of CHIPS incentives funds from investing in most semiconductor manufacturing in “foreign countries of concern” for 10 years after the date of award. The law enables the government to claw back the full value of the credit if, within 10 years, a taxpaying company “engages in a significant transaction that materially expands the semiconductor manufacturing capacity of the taxpayer in a foreign country of concern,” notes the IRS. It defines a significant transaction as being valued at $100,000 or above.
The proposed regulations define “a foreign entity of concern” and under what circumstances the IRS would claw back the credit.
By Leslie Stimson, Inside Towers Washington Bureau Chief
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