August 9, 2022

The CHIPS Are Stacked

The CHIPS Are Stacked Research & Development Tax Credit

President Biden is expected to sign H.R. 4346 into law today, August 9, 2022, as a measure to galvanize the domestic chip manufacturing industry.

The Chips and Science Act of 2022 (the “CHIPS Act”) represents an effort to foster U.S. competitiveness in the global economy and encourage self-sufficiency in the U.S. manufacturing of semiconductor chips.

Major incentives included in the CHIPS Act include:

  • Approximately $53 billion in manufacturing subsidies, grants, and loans for the U.S. semiconductor industry.
  • A 25% “advanced manufacturing tax credit” for certain investments in semiconductor manufacturing. This credit is inclusive of the actual manufacturing of semiconductors and the specialized tools needed in the manufacturing process.
    • The advanced manufacturing tax credit is available for qualifying property placed in service after December 31, 2022, and construction beginning prior to January 1, 2027. Note there are special rules for the basis reduction of qualified property and limitations on certain transactions and entity eligibility.
  • Nearly $200 billion in funding for R&D programs and workforce development over 10 years. The allocation of this funding will be determined by Congress in future appropriations bills.

For questions concerning the implications of the CHIPS Act, please do not hesitate to contact your Marcum tax professional.