The US Department of the Treasury and the Internal Revenue Service (IRS) announced in the IR-2024-275, on 22 October 2024, the final regulations that provide guidance regarding the implementation of the Advanced Manufacturing Investment Credit, established by the CHIPS Act of 2022.

The final regulations provide the eligibility requirements for the credit and provide clarity on the amended investment credit recapture provisions.

The final regulations adopt with certain modifications rules proposed in the first of two notices of proposed rulemaking to implement the credit, other than proposed rules regarding the elective payment election that were addressed in the final rule adopted in connection with the second notice of proposed rulemaking.

The final regulations provide the eligibility requirements for the credit and a special 10-year credit recapture rule that applies if there is a significant transaction involving the material expansion of semiconductor manufacturing capacity in a foreign country of concern. The final regulations affect taxpayers who claim the advanced manufacturing investment credit.

This credit will incentivise the manufacturing of semiconductors and semiconductor manufacturing equipment within the United States. The credit is available to taxpayers that meet certain eligibility requirements, and there is the ability for taxpayers to make an elective payment election to be treated as making a refundable payment against the tax 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 21 December 2022.