June 21, 2023

The Internal Revenue Service published a proposed rule and announced a related August 24, 2023 hearing regarding its implementation of the elective payment election for the advanced manufacturing investment credit established by section 48D of the SWACCA-supported CHIPS Act to incentivize the manufacture of semiconductors and semiconductor manufacturing equipment within the U.S.

The advanced manufacturing tax credit allows taxpayers (other than partnerships and S corporations) to elect to treat the amount of the credit as a payment against their federal income tax liabilities and applies to: (1) qualified property placed in service after December 31, 2022; and (2) for any property the construction of which began prior to January 1, 2023, only to the extent of the basis attributable to the construction, reconstruction, or erection of such qualified property after August 9, 2022 (the date of enactment of the CHIPS Act).  

Through this proposed rule, the IRS is revising its March 2023 proposal to clarify that an elective payment election: (1) may only be made on an original return of tax filed not later than the due date (including extensions) of the return for the taxable year in which the section 48D credit is determined; (2) must include any required completed source credit form(s) with respect to the qualified property; (3) a completed Form 3800 (“General Business Credit”); and (4) any additional information, including supporting calculations, required in instructions to the relevant forms. The proposed rule also revises the March 2023 proposal by explaining the application of the section 48D(d)(3) denial of a “double benefit” rule and addressing the methodology for determining the amount of an elective payment, reducing the section 48D credit amount to zero, and treating the section 48D credit as a credit allowed for the taxable year for all other purposes of the Internal Revenue Code (IRC) with respect to taxpayers other than partnerships or S corporations.

Comments are due by August 14, 2023 and can be submitted here identified using REG-105595-23. The IRS will hold a public hearing on the proposed rule at 10am ET on August 24, 2023 in the Auditorium at the Internal Revenue Building, 1111 Constitution Avenue NW, Washington, DC.  Those interested in participating must register by email to publichearings@irs.gov by 5pm ET on August 22, 2023 including REG-105595-23 and the language “ATTEND In Person” in the subject line.

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