IRS Proposes Regulations for the Elective Payment Provisions of the Advanced Manufacturing Investment Credit

On June 21, 2023, the Internal Revenue Service (IRS) published proposed regulations that provide guidance regarding the implementation of the elective payment provisions of the advanced manufacturing investment credit. The credit was added to the Internal Revenue Code (Code) under the CHIPS Act of 2022 (Pub. L. 117-167) to incentivize semiconductor and semiconductor equipment manufacturing in the United States.

The advanced manufacturing investment credit is generally equal to 25% of an eligible taxpayer’s qualified investment in an “advanced manufacturing facility.” An advanced manufacturing facility is one where the primary purpose is manufacturing semiconductors or semiconductor manufacturing equipment. Section 48D(d)(1) of the Code allows taxpayers to elect to receive the credit as a payment of federal income tax equal to the amount of the credit.

The proposed regulations describe how an entity can choose to make an elective payment. The proposal includes special rules applicable to partnerships and S corporations, repayment of excessive payments, and basis reduction and recapture. The proposed regulations also provide rules related to a required IRS pre-filing registration process. IRS has certified that the proposed regulations will not have a significant economic impact on a substantial number of small entities.

Written comments are due by August 14, 2023. IRS has scheduled a public hearing on the proposed regulations to be held on August 24, 2023, at 10 a.m. ET. Requests to speak at the public hearing and an outline of the topics to be discussed must be received by August 14, 2023.