US Treasury and US IRS released notice of proposed rulemaking for the Advanced manufacturing investment credit (CHIPS ITC) established by the CHIPS act, #146434.
To provide clear guidance for qualifying taxpayers to utilize CHIPS ITC, incentives for investments in facilities that manufacture semiconductors/manufacturing equipment.
Proposed Regulations
Rules to ensure the investment tax credit is appropriately tailored to the economic and technological realities of the semiconductor industry in order to cement US leadership.
Proposed regulations also provide information on how to claim the tax credit.
Defines key terms for credit, generally equal to 25% of an eligible taxpayer’s qualified investment in a facility with the primary purpose of manufacturing semiconductors.
Credit generally available for qualified property that began construction after enactment of CHIPS act on Aug. 9, 2022, and placed in service after Dec. 31, 2022.
Safeguards national security, prohibits foreign entities of concern from claiming credit.
Requirement that generally claws back full value of credit claimed in all prior years if within 10 years of claiming credit a taxpayer engages in a significant transaction.
That materially expands capacity of taxpayer in a foreign country of concern.
Consultation
Comment, request for public hearing due 60 days after publication in federal register.
Mar. 23, 2023 US IRS Federal Register
On Mar. 23, 2023, US IRS issued notice of proposed rulemaking in the federal register.
All written or electronic comments and requests for a public hearing by May 22, 2023.
Apr. 2023 US IRS Technical Corrections
On Apr. 17, 2023, US IRS published technical, language corrections on proposed rule.
Jun. 2023 US IRS Amendment
On Jun. 21, 2023, US IRS published amended proposal on CHIPS in federal register.
Includes proposed amendments to the Income Tax Regulations (26 CFR part 1) to implement the statutory provisions of section 48D(d) on elective payment election.
Revises the rules in proposed section 1.48D–6 of the Mar. 2023 proposed regulations.
Comments on proposal are due by Aug. 14, 2023; public hearing on Aug. 24, 2023.
Jun. 22, 2023 Fed Reg Notice of Hearing
On Jun. 22, 2023, US IRS published notice of public hearing, to be held Jul. 26, 2023.
Outlines of discussion topics due Jul. 7; if none received, hearing will be cancelled.
Mar. 5, 2024 US IRS Final Rule
On Mar. 5, 2024, US IRS issued final rule on the manufacturing investment credit.
Incentivizes the manufacturing of semiconductors and semiconductor equipment in US.
There is an ability for taxpayers to make an elective payment election to be treated as making a refundable payment against the tax equal to the amount of the credit.
Partnership or S corporation can make elective payment election to receive a payment.
The rule includes special rules for partnerships and S corporations making the election.
Regulations provide rules related to the mandatory pre-filing registration requirement.
Also provides guidance related to the mandatory IRS pre-filing registration process.
Registration process must be completed prior to making an elective payment election.
Mar. 11, 2024 Fed Reg Final Rule
On Mar. 11, 2024, US IRS, US Treasury published final regulations in federal register.
Set forth in 26 CFR 1.48D-6 retain basic approach and structure of Jun. 2023 proposal with certain revisions in response to comments received, effective on May 10, 2024.
Modified limitations for making an elective payment election, denial of double benefit rule, interim rule for determining partner's distributive share of tax exempt income.
In Mar. 2024, US IRS decision to remove Jun. 2023 temporary regulations, #176395.
Oct. 2024 US IRS Final Rule
On Oct. 23, 2024, US IRS published final rules to implement the CHIPS ITC, and provide eligibility requirements and clarity on amended investment credit recapture.
The final regulations will become effective on Dec. 23, 2024.
Nov. 2024 US IRS Corrections
On Nov. 25, 2024, US IRS made minor corrections to rule, effective Dec. 23, 2024.
