New guidance released on CHIPS tax credit for semiconductor manufacturing

The U.S. Department of the Treasury released new proposed regulations this week that, together with draft guidance published in March, define how semiconductor companies can take advantage of the advanced manufacturing investment tax credit created as part of the CHIPS & Science Act. This credit is equal to 25% of the capitalized costs of tangible property used to manufacture semiconductors or semiconductor manufacturing equipment placed in service after 2022, and the credit is refundable, meaning that companies posting a loss can still receive its full value. In evaluating the cost of the legislation, the Congressional Budget Office expected more than $24 billion in claims for the credit. The latest proposed guidance defines elective payment procedures, which are intended to help companies receive the credit’s financial benefits more quickly. Comments on the rule are due by August 14.