CHIPS and Science Act of 2022
Posted by Cory Van Deusen V on August 11, 2022
On Tuesday, August 9, President Biden signed into law the CHIPS and Science Act of 2022 (CHIPS Act).
The CHIPS Act provides $52.7 billion for American semiconductor research, development, manufacturing, and workforce development. Included in that total amount is $39 billion allocated for manufacturing incentives with $13.2 billion allocated to support R&D and workforce development. Also provided is a 25 percent investment tax credit for capital expenses for manufacturing of semiconductors and related equipment.
Property qualifies for the credit if it is integral to the operation of an advanced manufacturing facility whose primary purpose is for the manufacturing of semiconductors or equipment required in the semiconductor manufacturing process. Additionally, the credit will be available for qualifying property placed in service after December 31, 2022, and for which construction begins prior to January 1, 2027. Construction that has already begun prior to January 1, 2023 may qualify, but only the portion of construction commenced after enactment will be eligible. For facilities already under construction, it is important to determine when costs are incurred in order to determine if they are eligible for the credit.
Eligible taxpayers will be able to elect to treat the credit as a payment against tax owed (direct pay). Recipients of these funds will be required to demonstrate significant worker and community investments, ensuring equitable economic growth and development across all communities. Additionally, the CHIPS Act requires a recapture of the credit if a taxpayer who has claimed the credit enters into a transaction that leads to the expansion of manufacturing in the People’s Republic of China, or other countries of concern, within 10 years of claiming the credit.
While the passage of the CHIPS Act is a step forward to encourage investment in American manufacturing, the timing of when to use the credit and how it will apply to partnerships is still unknown. There are also billions of dollars of other incentives for advanced manufacturing support in the CHIPS Act that can support expansion efforts, but will require further explanation from the various federal, state, and local agencies tasked with administering the funds.
We will continue to update this article as new information comes in regarding the CHIPS and Science Act of 2022. If you have questions about the impact of The Act on your business, please contact us.
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Cory has over 20 years of experience providing tax and consulting services to commercial businesses and individuals. His expertise lies in the myriad of business development incentives offered by various federal, state, and local agencies to targeted industries such as Manufacturing, Software Development, Technology Companies and many other in order to encourage regional investment, spur job creation, and foster economic growth. The available incentives include refundable tax credits, tax abatements, grants, and forgivable loans. He has extensive knowledge of Start-Up NY, Opportunity Zones, the Excelsior Jobs Program, Qualified Emerging Technology Companies, and various local incentives such as Industrial Development Agency (IDA) benefits. Additionally, he spends his time providing services to Start-Up Companies ranging from a founder with an idea to multi-national tech companies that have raised hundreds of millions of dollars. Cory has experience in all areas of U.S. federal and NY State taxation. He has been with Lumsden McCormick since 2001, was named partner on January 1, 2015. He is a member of the Firm’s Executive Committee and is head of the commercial services group.