New Tax Rules Provide Manufacturers a Clear Path Forward in Revitalizing U.S. Chip Production

by Molly O’Leary, Director of Government Affairs

On Tuesday, the U.S. Department of Treasury and the Internal Revenue Service (IRS) issued the much-anticipated final regulations for the Advanced Manufacturing Investment Credit (AMIC), the 25% investment tax credit enacted by the CHIPS and Science Act (CHIPS Act). The credit, codified in Section 48D of the tax code, is a core component of the landmark legislation and has already proven to be a powerful driver of private investment in the U.S. semiconductor ecosystem. SIA welcomes the issuance of final regulations and commends Treasury and the IRS for providing manufacturers with a clear path forward as they navigate this new incentive.

The technologically advanced processes of manufacturing semiconductors and semiconductor manufacturing equipment require high levels of investment in facilities and equipment due to the complexity of the technology and the rigorous and exacting standards needed for construction, equipment, and infrastructure. The final regulations acknowledge this complexity by adopting a holistic approach in implementing the tax credit and allowing for a wide range of qualified investments necessary to manufacture semiconductors and semiconductor manufacturing equipment. The credit applies not only to the clean room where fabrication is conducted, but also to the accompanying equipment and infrastructure needed to make the process work.

The regulations also provide a necessary safe harbor governing eligibility for the credit for projects that commence construction prior to the credit’s expiration but continue after that date. This is a critical provision because many projects will take years to complete and may face interruptions in construction outside of their control. In setting forth a flexible timeline to allow for the tax credit to cover eligible expenses throughout the lengthy period of construction and tooling of a facility, Treasury recognizes the cyclical nature of the chip industry and the massive endeavor companies are undertaking to revitalize semiconductor manufacturing here in the United States.

The new rules also align the “recapture” provisions with similar restrictions under the Commerce Department’s grant program in the CHIPS Act. These provisions restrict companies that receive incentives from engaging in certain transactions in countries of concern. SIA applauds Commerce and Treasury for aligning the rules, where applicable, to facilitate compliance with the grant program and credit recapture requirements and reduce administrative burdens. This is particularly important for companies participating in both the grant program and the tax credit.

Certain aspects of the regulations could be further improved. For example, SIA previously provided feedback on various technical aspects of the proposal, such as clarifying the definition of the term “semiconductor” to include semiconductor-grade polysilicon, wafers, and compound semiconductors. While we commend Treasury for clarifying the credit’s coverage of wafer production, we believe the credit should have been interpreted to cover the production of semiconductor-grade polysilicon and similar compound materials, which represent an integral step in the chip manufacturing process.

The issuance of final regulations for the Advanced Manufacturing Investment Credit marks an important step forward in achieving the CHIPS Act’s goals of bolstering the domestic semiconductor ecosystem and strengthening U.S. economic and national security. To date, the law’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 investments—which will create more than 58,000 jobs in the chip industry and support hundreds of thousands of additional U.S. jobs throughout the economy.

According to a report by SIA and Boston Consulting Group, investments facilitated by the CHIPS Act incentives have put the U.S. on track to have a world-leading 203% increase in semiconductor manufacturing capacity by 2032. That stands in stark contrast to the modest 11% increase from the previous decade—minimal growth that resulted in the U.S. being ranked last among all major chip-producing regions during this period.

At a time when the semiconductor industry is making historic investments in U.S. chip production and supply chain resiliency, it is imperative we continue this momentum to spur future innovation and ensure the U.S. remains a competitive destination for companies to invest. It is also critical for the U.S. to grow its leadership in chip design by making our country a more competitive and attractive destination for research and design activities.

SIA looks forward to continue working with leaders in Washington to build upon the credit’s success by extending its duration past its 2026 expiration and expanding the credit to cover other critical areas of the semiconductor ecosystem, such as chip design. Doing so will enable the credit to deliver the maximum benefits for America’s economy, national security, and global competitiveness.