Proposed regulations: Investment tax credit for investments in semiconductor manufacturing
Proposed regulations to implement the advanced investment credit under section 48D
Investments in semiconductor manufacturing
The U.S. Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-120653-22) to implement the advanced investment credit under section 48D established by H.R. 4346, “The CHIPS and Science Act of 2022,” to incentivize the manufacture of semiconductors and semiconductor manufacturing equipment within the United States. Read TaxNewsFlash
The proposed regulations [PDF 291 KB] (16 pages as published in the Federal Register on March 23, 2023) provides guidance on various aspects of section 48D, including:
- The credit’s eligibility requirements, including definitions of “semiconductors” and “semiconductor manufacturing equipment”
- What portions of manufacturing processes and facilities are included as qualified property
- A special 10-year credit recapture rule that applies if there is a significant transaction involving the material expansion of semiconductor manufacturing capacity in a foreign country of concern
- Guidance for how to determine when construction has begun prior to 2027, including providing a 10-year “continuity safe harbor”
The proposed regulations are proposed to apply to tax years ending on or after the date the regulations are finalized. However, taxpayers may rely on the proposed regulations for property placed in service after December 31, 2022, provided the taxpayers follow the proposed regulations in their entirety and in a consistent manner.
Comments on the proposed regulations are requested, including on the definition of the term “semiconductor.” Comments and requests for a public hearing are due by May 22, 2023.
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