In 2022, Congress passed legislation creating incentives for the onshore production of semiconductor chips and credits to speed the transition to renewable energies.

Congress passed legislation creating incentives for the onshore production of semiconductor chips, creating credit opportunities for more than chip manufacturers. In July 2022, Congress passed the CHIPS and Science Act of 2022 (CHIPS) to strengthen domestic semiconductor manufacturing, design and research, strengthen supply chains, the economy and national security, and counter China’s anti-competitive trade practices.

CHIPS addresses semiconductor shortages by increasing U.S. production and includes semiconductor manufacturing grants for investment and building manufacturing plants, research investments on the total cost of the manufacturing plant, and an investment tax credit for chip manufacturing. Notably, credits are available to not only chip manufacturers but also any company manufacturing parts used in a chip plant, such as a robotic arm used in the assembly of semiconductors.  

What it does

The U.S. production of semiconductors has eroded from 37% in 1990 to 12% today, due largely to the increased incentives other country governments have provided while the U.S. has not (SIA). CHIPS provides incentives to reverse the country’s decline in science and technology and enable U.S. manufacturers to become global leaders in the industry.  

CHIPS set aside over $54 billion for subsidies to build chip plants in the U.S. and support U.S. chip R&D. It provides a 25% tax credit for building and equipping U.S. chip plants, pumping more than $24 billion into the industry. CHIPS also increases authorizations for federal science and technology R&D programs. In all, the CHIPS invests nearly $250 billion over five years in semiconductor and scientific research and development (R&D).

The goal is to reduce U.S. reliance on overseas chip supply chains by providing subsidies to manufacture semiconductors in the U.S. and boost science and technology research through credits. If you are involved in or branching out into chip manufacturing, or design and build manufacturing components, like robotic arms, used in semiconductor plants, you may be eligible to receive additional benefits from this Act.

Inflation Reduction Act Credit Opportunities

The recently passed Inflation Reduction Act, H.R. 5376 (IRA), a scaled back version of the Build Back Better Plan, is a significant piece of legislation. IRA accelerates the transition to clean energy by pumping $369 billion into incentives for businesses investing in renewable technologies and clean energy. These investment benefits cover a range of industries and include tax credits on clean fuels, electricity, and vehicles. IRA also doubles the federal R&D credit payroll tax offset for qualified small businesses.

IRA offers wide-ranging opportunities for companies in the clean energy field to recoup costs. Companies that sell components for solar power or electric batteries can receive a credit for each component built. In addition, companies can monetize credits by selling credits to companies who can use them. If the company in a loss position, this can be a great way to receive cash value for these credits. 

IRA increases credits and addresses extensions and calculation changes in renewable energy credits for Production Tax and Investment Tax Credits; carbon capture, hydrogen, and nuclear credits; transportation and fuels credits; residential and energy-efficiency credits/deductions; and,  manufacturing credits.

Many of these credits are available through 2028, with a three-year extension available under the IRA. Credits are extended to any number of renewable energy components, including energy storage, biogas property, microgrid controllers, dynamic glass, linear generator assemblies, and qualified interconnection properties.

More Tax News