CHIPS Act Construction-Related Tax Credit

The IRS proposed rule clarifies what kinds of investment—including construction—qualify for the significant tax credit, among other things.

On March 23, the Internal Revenue issued proposed regulations to implement a construction-related tax credit for semiconductor manufacturing enacted by last year's CHIPS Act. The CHIPS Act includes a tax credit of 25 percent of qualified investment in a facility that manufactures semiconductors or the equipment to manufacture semiconductors. Established under Section 48D, the credit covers qualified property placed in service after 2022. Construction must begin before 2027.

The proposed rule provides clarification about which companies can claim the credit (“foreign entities of concern” are excluded from receiving the credit), and what kinds of investment qualify for the credit. For example, a project must have manufacturing of semiconductors or semiconductor-manufacturing equipment as its “primary purpose” but doesn’t set a defined percentage of a project’s revenue or production that would establish that project’s “primary purpose” as manufacturing those products or components. Additionally, the proposed rule clarifies which parts of a project/facility would be deemed essential “to the operation of an advanced manufacturing facility” to qualify for the credit; parking areas, outdoor lighting, outdoor advertising are specifically excluded.

AGC will evaluate these proposed regulations over the coming weeks and submit comments.  If you have any questions or concerns, please contact Matthew Turkstra at (202) 547-4733 or [email protected].

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