The IRS proposed regulations on Wednesday for the Advanced Manufacturing Investment Credit, which aims to incentivize the manufacture of semiconductors and semiconductor manufacturing equipment in the United States.
The proposed regulations provide guidance on the implementation of the elective payment provisions of the Advanced Manufacturing Investment Credit established by the 2022 law commonly called the CHIPS Act. The credit is available to taxpayers that meet certain eligibility requirements, and taxpayers can choose to receive the credit as an elective payment.
The regulations describe how an entity can choose to make an elective payment election, which will be treated as a payment against the tax liability that is equal to the amount of the credit. A partnership or S corporation can make an elective payment election to receive a payment instead of claiming the credit.
The advanced manufacturing investment credit for any taxable year is generally equal to 25% of an eligible taxpayer’s qualified investment in an advanced manufacturing facility. An eligible taxpayer’s qualified investment equals its basis in any qualified property placed in service during the taxable year. The qualified property must be integral to the operation of the advanced manufacturing facility.
The credit is generally available for qualified property placed in service after Dec. 31, 2022.
The proposed regulations include special rules applicable to partnerships and S corporations, repayment of excessive payments, and basis reduction and recapture. In addition, the proposed regulations set rules related to an IRS pre-filing registration process.
The Department of the Treasury and the IRS encourage public comments on the proposed regulations, which will be officially published in the Federal Register on June 21. Comments may be submitted online using the federal rulemaking portal. For details on how to submit comments, go here.
Public comments must be received by Aug. 14. The public hearing has been set for Aug. 24.
