On July 28th, the House of Representatives approved legislation on semiconductor production and economic competitiveness, including an investment tax credit for manufacturing facilities and equipment. The Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act includes more than $52 billion for U.S. companies that make computer chips as well as a tax credit for investment in chip manufacturing. The tax provision creates a 25% credit for investments in semiconductor manufacturing and includes incentives for production of chips as well as for manufacturing the specialized tooling equipment required to make chips. Taxpayers may elect to treat the credit as a payment against tax, or direct pay. The credit is provided for property that's placed in service after December 31, 2022, and for which construction begins before January 1, 2027.
What qualifies? The provision defines qualified property as any tangible property or building and its structural components that are constructed, reconstructed, or acquired by the taxpayer and is integral to the operation of the advanced manufacturing facility. However, all spaces used for office, administrative services, or functions unrelated to manufacturing are excluded. (HR4346 EAS2, 70)
Additionally, in the event it is determined a taxpayer has claimed more than accepted, the taxpayer will be penalized “the amount of such excessive payment, plus an amount equal to 20 percent of such excessive payment.” (HR4346 EAS2, 76)
A cost segregation will be essential to our clients in determining the value of the building and its components (structural, mechanical, electrical, and plumbing) that are directly related to the advanced manufacturing process to ensure they’re making the appropriate payment to prevent penalty.
The LaPete Yeates team has cumulative over 50 years of experience providing cost segregation, tax consulting and planning experience. Contact us for more information on how we can provide you service.
See the complete bill here.
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