Friday, October 25, 2024, 9:30 a.m.
Molly O’Leary, Director of Government Affairs
On Tuesday, the U.S. Treasury Department and the Internal Revenue Service (IRS) issued long-awaited final regulations for the Advanced Manufacturing Investment Credit (AMIC), a 25% investment tax credit established by the CHIPS and Science Act (CHIPS Act). . . Codified in Section 48D of the Tax Code, this credit is a core element of the landmark law and has already proven to be a powerful driver of private investment in the U.S. semiconductor ecosystem. SIA welcomes the issuance of the final regulations and commends the Treasury Department and IRS for providing a clear path for manufacturers to navigate this new incentive.
Technologically advanced semiconductor manufacturing processes and equipment require significant investments in facilities and equipment due to the complexity of the technology and the rigorous and exacting standards required for construction, equipment and infrastructure. The final regulations recognize this complexity by taking a comprehensive approach to tax credit implementation and allowing a wide range of eligible investments required to manufacture semiconductors and semiconductor manufacturing equipment. This credit applies not only to the cleanroom where manufacturing takes place, but also to the ancillary equipment and infrastructure needed to make the process work.
The regulations also provide necessary safe harbors governing credit eligibility for projects whose construction begins before the credit expiration date and continues thereafter. This is an important provision because many projects take years to complete and can face uncontrollable construction disruptions. In establishing a flexible schedule that allows tax credits to cover eligible costs over the long term of facility construction and equipment, the Treasury recognizes the cyclical nature of the chip industry and the need to revitalize semiconductor manufacturing here. We recognize the large-scale initiatives that companies are undertaking. US.
The new rule also aligns the “capture” provisions with similar limitations under the Department of Commerce’s grant program in the CHIPS Act. These provisions restrict companies receiving incentives from engaging in certain transactions in China or other relevant countries. SIA commends the Departments of Commerce and Treasury for adjusting regulations, where applicable, to facilitate compliance with subsidy programs and credit restoration requirements and reduce administrative burden. This is especially important for businesses that participate in both subsidy programs and tax credits.
Certain aspects of regulation could be further improved. For example, SIA previously provided feedback on various technical aspects of the proposal, including clarifying the definition of the term “semiconductor” to include semiconductor-grade polysilicon, wafers, and compound semiconductors. While we commend the Treasury Department for clarifying the scope of the credit for wafer production, the credit also covers the production of semiconductor-grade polysilicon and similar compound materials, which are essential steps in the chip manufacturing process. We think it should have been interpreted.
Issuance of the Advanced Manufacturing Investment Credit final regulations is an important step forward in achieving the CHIPS Act’s goals of strengthening the domestic semiconductor ecosystem and strengthening the U.S. economy and national security. So far, the legislation’s manufacturing incentives have sparked unprecedented levels of private investment in U.S. semiconductor production. Since the introduction of the CHIPS Act, companies have announced 90 new projects across America, spurring $450 billion in private investment and creating more than 58,000 jobs in the chip industry and hundreds of thousands more across the economy. of American jobs.
With investments spurred by CHIPS Act incentives, the United States is on track to increase its world-leading semiconductor manufacturing capacity by 203% by 2032, according to a report from SIA and Boston Consulting Group. This figure is in stark contrast to the modest growth rate of 11%. The increase from the previous decade was minimal, resulting in the US ranking last among all major chip producing regions during this period.
As the semiconductor industry makes historic investments in the resiliency of U.S. chip production and supply chains, how can we foster future innovation and ensure the U.S. remains a competitive investment destination for companies? , it is essential to continue this momentum. It is also important for the United States to enhance its leadership in chip design by making our country a more competitive and attractive destination for research and design activities.
SIA continues to work with leaders in Washington to extend the credit beyond its 2026 expiration and expand it to cover other critical areas of the semiconductor ecosystem, such as chip design. We hope to build on our success. Doing so allows credit to maximize benefits for America’s economy, national security, and global competitiveness.
