On June 14, 2023, the U.S. Department of Treasury and the Internal Revenue Service (IRS) released proposed regulations aimed at providing guidelines for the utilization of the Section 48D Advanced Manufacturing Investment Credit (CHIPS ITC). This tax credit, which amounts to 25% of an eligible taxpayer's qualified investments in semiconductor manufacturing facilities or equipment to manufacture semiconductors, is intended to encourage advanced semiconductor manufacturing in the United States. The proposed rules seek to provide better guidance for taxpayers looking to utilize the benefits of this credit, ensuring procedural certainty and promoting investment in the U.S. semiconductor manufacturing industry.
Clarifying Elective Payment Option
The proposed regulations seek to establish a procedural framework for taxpayers who wish to elect the full amount of the CHIPS ITC. They clarify the timing of payment elections, provide guidance on determining the credit and elective payment amounts, and outline procedural rules for electing taxpayers, including partnerships and S corporations. These regulations would apply to taxable years ending on or after their publication as final regulations in the Federal Register.
Public Comment Period
The proposed regulations are currently undergoing a 60-day public comment period, during which interested parties can provide feedback. A public hearing is scheduled for August 24, 2023, further enabling public participation in shaping the final rules that will govern the CHIPS ITC.
Temporary Regulations and Pre-Filing Registration Requirement
In conjunction with the proposed regulations, the IRS has released temporary regulations that mandate the pre-registration of taxpayers seeking to make direct payments under Section 48D. These regulations apply to tax years ending on or after June 21, 2023, the publication date in the Federal Register. Notably, taxpayers may rely on the proposed regulations for tax years ending before the final regulations' publication if they consistently apply the proposed rules in their entirety. Taxpayers are required to register for a Section 48D direct payment election through the IRS portal before making the election on their tax returns.
Navigating the Direct Payment Election Process
The direct payment election process under Section 48D involves multiple steps and compliance requirements. It is advisable to consult legal professionals for further guidance on eligibility and the procedures outlined in the proposed regulations. Please let your Calfee attorney or one of the authors know if Calfee can be of assistance.
Following the Guidelines
The proposed regulations surrounding the CHIPS ITC offer a crucial roadmap for taxpayers interested in capitalizing on the benefits of the Section 48D Advanced Manufacturing Investment Credit. By providing the guidelines, these regulations aim to drive investment in domestic semiconductor manufacturing, bolstering the country's resilience in this strategically important industry.
Subscribe
Please subscribe to the CHIPS and Science Act email list to receive related future legal alerts, government reports, and event invitations, and follow Calfee on social media for notifications on new blog posts.
Learn More
Learn more about Calfee's commitment to supporting businesses in Ohio: https://www.calfee.com/calfee-supports-businesses-ohio
Calfee Connections blogs, vlogs, and other educational content are intended to inform and educate readers about legal developments and are not intended as legal advice for any specific individual or specific situation. Please consult with your attorney regarding any legal questions you may have. With regard to all content including case studies or descriptions, past outcomes do not predict future results. The opinions expressed may not necessarily reflect the viewpoints of all attorneys and professionals of Calfee, Halter & Griswold LLP or its subsidiary, Calfee Strategic Solutions, LLC.
Non-legal business services are provided by Calfee Strategic Solutions, LLC, a wholly owned subsidiary of Calfee, Halter & Griswold. Calfee Strategic Solutions is not a law firm and does not provide legal services to clients. Although many of the professionals in Calfee’s Government Relations and Legislation group and Investment Management group are attorneys, the non-licensed professionals in this group are not authorized to engage in the practice of law. Accordingly, our non-licensed professionals’ advice should not be regarded as legal advice, and their services should not be considered the practice of law.
Updates related to all government assistance/incentive programs are provided with the most current information made available to Calfee at the time of publication. Clarifications and further guidance may be disseminated by government authorities on an ongoing basis. All information should be reaffirmed prior to the submission of any application and/or program participation.
Subscribe
Recent Posts
- Proposed Regulations Provide Guidelines for CHIPS ITC
- Calfee NOW: Ohio State Representative Sean Brennan
- Tax Credits Under the CHIPS and Science Act: Proposed Rules Rollout
- The Time Is Now: U.S. Dept. of Commerce Accepting Applications for CHIPS Act Incentives
- A Primer on Purchase Price Adjustments – Middle Market Deal Corner
- Calfee NOW: Congressman Mike Carey
- The Race to Secure CHIPS and Science Act Incentives: Are You Ready?
- A Variety Pack – Understanding The Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022
- How Tech Companies May Mitigate Risk When Expanding Operations in Ohio
- Calfee NOW: Ohio State Representative-Elect Steve Demetriou