US finalises 25% tax credit for semiconductor manufacturing under CHIPS Act

The final rules have been announced for the Advanced Manufacturing Investment Credit (CHIPS ITC) under the CHIPS and Science Act, which provides a 25% credit for qualified property in eligible facilities.

Announced by the US Department of the Treasury (Treasury) and the Internal Revenue Service (IRS), the rules support President Biden’s agenda to usher in a new era of semiconductor manufacturing in the US.

Finalised rules state that the ITC is typically 25% of the cost of qualified property in an eligible taxpayer’s advanced manufacturing facility, as long as the property is put into use after 31^st December 2022 and the construction started after the CHIPS and Science Act was passed on 9^th August 2022.

Read more: President Biden signs $52bn CHIPS Act into law 

US Secretary of Commerce Gina Raimondo said the news marked an important milestone in the implementation of the CHIPS and Science Act.

“The Advanced Manufacturing ITC, when paired with CHIPS direct funding and loans, provides a comprehensive set of federal incentives to drive the significant investment in semiconductor manufacturing capacity occurring in the US important to meeting our national and economic security needs.”

Treasury and the IRS coordinated with Commerce and the Department of Defence to align the final rules in a way that is consistent with Commerce’s national security guardrails rule for CHIPS for America funding.

The CHIPS ITC final rules are largely in line with proposed regulations released in March 2023. The Treasury has said that they provide certain modifications to the proposed rules to give taxpayers clarity and certainty.

National Economic Advisor Lael Brainard said, “The final guidance provides critical certainty for semiconductor and solar manufacturers to make generational investments in communities across the country.”

The CHIPS and Science Act has allocated over $36bn in proposed funding across 20 states and proposed to invest billions more in research and innovation, which is expected to create over 125,000 jobs.

Since the beginning of the Biden-Harris Administration, semiconductor and electronics companies have announced over $400bn in private investments, catalysed in large part by public investment.

Multiple companies have already signed agreements and are set to benefit from funding under the CHIPS Act. Intel, TSMC, Micron and GlobalFoundries are a few.

Earlier this week, the government also announced an up to $325m investment to commission a new semiconductor-grade polysilicon manufacturing facility at Hemlock Semiconductor’s campus in Michigan.

Read more: US invests $325m in Hemlock Semiconductor polysilicon plant under CHIPS Act 

Announced with a signed memorandum of terms between the US Department of Commerce and Hemlock Semiconductor, the effort hopes to solidify the US’ leadership in semiconductor-grade polysilicon manufacturing.