I 

117TH CONGRESS 

2D SESSION H. R. 7104 

To amend the Internal Revenue Code of 1986 to establish the semiconductor 

manufacturing investment credit. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 16, 2022 

Mr. MCCAUL (for himself, Ms. MATSUI, Mr. KELLY of Pennsylvania, Ms. 

DELBENE, Ms. STEFANIK, Mr. KILDEE, Mr. KATKO, Ms. SLOTKIN, and 

Mr. MEIJER) introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to establish 

the semiconductor manufacturing investment credit. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Facilitating American5 Built Semiconductors Act’’ or the ‘‘FABS Act’’. 

6 SEC. 2. SEMICONDUCTOR MANUFACTURING INVESTMENT 

7 CREDIT. 

8 (a) IN GENERAL.—Subpart E of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of 


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1 1986 is amended by inserting after section 48C the fol2 lowing new section: 

3 ‘‘SEC. 48D. SEMICONDUCTOR MANUFACTURING INVEST4 MENT CREDIT. 

5 ‘‘(a) IN GENERAL.—For purposes of section 46, the 

6 semiconductor manufacturing investment credit for any 

7 taxable year is an amount equal to the sum of— 

8 ‘‘(1) 25 percent of the qualified investment for 

9 such taxable year with respect to any semiconductor 

10 manufacturing facility property, and 

11 ‘‘(2) 25 percent of the qualified semiconductor 

12 design expenditures paid or incurred during the tax13 able year. 

14 ‘‘(b) QUALIFIED INVESTMENT WITH RESPECT TO

15 SEMICONDUCTOR MANUFACTURING FACILITY PROP16 ERTY.— 

17 ‘‘(1) IN GENERAL.—For purposes of subsection 

18 (a)(1), the qualified investment with respect to any 

19 semiconductor manufacturing facility property for 

20 any taxable year is the basis of any qualified prop21 erty placed in service by the taxpayer during such 

22 taxable year which is part of any semiconductor 

23 manufacturing facility property. 


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1 ‘‘(2) QUALIFIED PROPERTY.—For purposes of 

2 this subsection, the term ‘qualified property’ means 

3 property— 

4 ‘‘(A) which is tangible property (including 

5 a building or its structural components) which 

6 is an integral part of any semiconductor manu7 facturing facility property, 

8 ‘‘(B) with respect to which depreciation (or 

9 amortization in lieu of depreciation) is allow10 able, 

11 ‘‘(C) which is— 

12 ‘‘(i) constructed, reconstructed, or 

13 erected by the taxpayer, or 

14 ‘‘(ii) acquired by the taxpayer if the 

15 original use of such property commences 

16 with the taxpayer, and 

17 ‘‘(D) the primary purpose of which is to 

18 manufacture or process, or perform research 

19 with respect to, semiconductors or semicon20 ductor tooling equipment. 

21 ‘‘(3) SEMICONDUCTOR MANUFACTURING FACIL22 ITY PROPERTY.—For purposes of this subpart, the 

23 term ‘semiconductor manufacturing facility property’ 

24 means a facility for which the primary purpose is 

25 the fabrication, assembly, testing and packaging of 


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1 semiconductor chips; semiconductor manufacturing 

2 equipment used in these and related processes such 

3 as material-handling and photomasking; or associ4 ated metrology, material-handling and other related 

5 tools. 

6 ‘‘(4) COORDINATION WITH REHABILITATION

7 CREDIT.—The qualified investment with respect to 

8 any semiconductor manufacturing facility property 

9 for any taxable year shall not include that portion 

10 of the basis of any property which is attributable to 

11 qualified rehabilitation expenditures (as defined in 

12 section 47(c)(2)). 

13 ‘‘(c) QUALIFIED SEMICONDUCTOR DESIGN EXPENDI14 TURES.—For purposes of this section— 

15 ‘‘(1) IN GENERAL.—Except as otherwise pro16 vided in this subsection, the term ‘qualified semicon17 ductor design expenditures’ means the amounts 

18 which are paid or incurred by the taxpayer during 

19 the taxable year which would be described in sub20 section (b) of section 41 if such subsection were ap21 plied with the modifications set forth in paragraph 

22 (3). 

23 ‘‘(2) EXCLUSION FOR AMOUNTS FUNDED BY

24 GRANTS, ETC.—The term ‘qualified semiconductor 

25 design expenditures’ shall not include any amount to 


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1 the extent such amount is funded by any grant, con2 tract, or otherwise by another person (or any gov3 ernmental entity). 

4 ‘‘(3) MODIFICATIONS.—For purposes of para5 graph (1), subsection (b) of section 41 shall be ap6 plied— 

7 ‘‘(A) by substituting ‘semiconductor re8 search’ for ‘qualified research’ each place it ap9 pears in paragraphs (2) and (3) of each sub10 section, 

11 ‘‘(B) by substituting ‘100 percent’ for ‘65 

12 percent’ in paragraph (3)(A) of such sub13 section, and 

14 ‘‘(C) by substituting ‘100 percent’ for ‘75 

15 percent’ in paragraph (3)(C)(i) of such sub16 section. 

17 ‘‘(4) SEMICONDUCTOR RESEARCH.—The term 

18 ‘semiconductor research’ means any research related 

19 to designing or developing a semiconductor product, 

20 including qualified semiconductor manufacturing 

21 property, that is at least one generation beyond the 

22 taxpayer’s most advanced commercially available 

23 product (or the first generation if no such product 

24 exists). 


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1 ‘‘(d) COORDINATION WITH CREDIT FOR INCREASING

2 RESEARCH EXPENDITURES.— 

3 ‘‘(1) IN GENERAL.—Except as provided in para4 graph (2), any qualified semiconductor design ex5 penditures for which a credit is allowed under this 

6 section shall not be taken into account for purposes 

7 of determining the credit allowable under section 41 

8 for such taxable year. 

9 ‘‘(2) EXPENDITURES INCLUDED IN DETER10 MINING INCREASE TO RESEARCH ACTIVITIES.—Any 

11 qualified semiconductor design expenditures for any 

12 taxable year which are qualified research expenses 

13 (within the meaning of section 41(b)) shall be taken 

14 into account in determining the base amount or the 

15 average qualified research expenses, whichever is ap16 plicable, for purposes of applying section 41 to sub17 sequent taxable years. Such qualified semiconductor 

18 design expenditures shall not be taken into account 

19 for purposes of section 41(f)(3). 

20 ‘‘(e) SPECIAL RULES.— 

21 ‘‘(1) CERTAIN PROGRESS EXPENDITURE RULES

22 MADE APPLICABLE.—Rules similar to the rules of 

23 subsections (c)(4) and (d) of section 46 (as in effect 

24 on the day before the date of the enactment of the 


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1 Revenue Reconciliation Act of 1990) shall apply for 

2 purposes of subsection (a). 

3 ‘‘(2) AGGREGATION AND ALLOCATION OF EX4 PENDITURES.—Rules similar to the rules of para5 graphs (1) and (2) of section 41(f) shall apply for 

6 purposes of this section. 

7 ‘‘(f) ELECTION FOR DIRECT PAYMENT.— 

8 ‘‘(1) IN GENERAL.—In the case of any qualified 

9 property or semiconductor manufacturing property 

10 placed in service during any taxable year (with the 

11 exception of any such property to which subsection 

12 (g)(1) applied)), or in the case of any qualified semi13 conductor design expenditures paid or incurred dur14 ing the taxable year, the amount of any credit deter15 mined under subsection (a) with respect to such 

16 property or such expenditures for such taxable year 

17 shall, at the election of the taxpayer, be treated as 

18 a payment equal to such amount which is made by 

19 the taxpayer against the tax imposed by chapter 1 

20 for such taxable year (regardless of whether such tax 

21 would have been on such taxpayer). 

22 ‘‘(2) FORM AND EFFECT OF ELECTION.—An 

23 election under paragraph (1) shall be made prior to 

24 the date on which the qualified property or semicon25 ductor manufacturing property is placed in service 


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1 or the last day of the taxable year in which the 

2 qualified semiconductor design expenditures are paid 

3 or incurred and in such manner as the Secretary 

4 may prescribe. Such election, once made, shall— 

5 ‘‘(A) be irrevocable with respect to the 

6 qualified property, semiconductor manufac7 turing property, or qualified semiconductor de8 sign expenditures to which such election applies, 

9 and 

10 ‘‘(B) reduce the amount of the credit 

11 which would (but for this subsection) be allow12 able under this section with respect to such 

13 property or such expenditures for the taxable 

14 year in which such property is placed in service 

15 to zero. 

16 ‘‘(3) APPLICATION TO PARTNERSHIPS AND S

17 CORPORATIONS.—In the case of a partnership or S 

18 corporation which makes an election under para19 graph (1)— 

20 ‘‘(A) such paragraph shall apply with re21 spect to such partnership or corporation with22 out regard to the fact that no tax is imposed 

23 by chapter 1 on such partnership or corpora24 tion, and 


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1 ‘‘(B)(i) in the case of a partnership, each 

2 partner’s distributive share of the credit deter3 mined under subsection (a) with respect to the 

4 qualified property, semiconductor manufac5 turing property, or qualified semiconductor de6 sign expenditures shall be deemed to be zero, 

7 and 

8 ‘‘(ii) in the case of a S corporation, each 

9 shareholder’s pro rata share of the credit deter10 mined under subsection (a) with respect to such 

11 property shall be deemed to be zero. 

12 ‘‘(g) RECAPTURE.— 

13 ‘‘(1) IN GENERAL.—If there is a recapture 

14 event with the respect to the credits allowed under 

15 this section to any taxpayer, the tax imposed on 

16 such taxpayer by this chapter for the taxable year 

17 which includes the date of such recapture event shall 

18 be increased by the amount of such credits. 

19 ‘‘(2) RECAPTURE EVENT.—For purposes of this 

20 subsection, the term ‘recapture event’ means, with 

21 respect to the credits allowed under this section to 

22 any taxpayer, the first date on which any of the fol23 lowing has occurred: 

24 ‘‘(A) Any semiconductor manufacturing fa25 cility property with respect to which any such 


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1 credit was allowed is transferred to a foreign 

2 entity of concern (as defined in section 9901 of 

3 the William M. (Mac) Thornberry National De4 fense Authorization Act for Fiscal Year 2021) 

5 or an entity under the influence, control, or 

6 ownership of such a foreign entity of concern. 

7 ‘‘(B) Foreign entities of concern (as so de8 fined) or entities under the influence, control, 

9 or ownership of such foreign entities of concern 

10 acquire a controlling interest in the taxpayer. 

11 ‘‘(h) REGULATIONS AND GUIDANCE.—The Secretary 

12 shall prescribe such regulations or other guidance as may 

13 be necessary or appropriate to carry out the purposes of 

14 this section, including regulations or other guidance with 

15 respect to— 

16 ‘‘(1) determining the basis of qualified property 

17 and semiconductor manufacturing property, 

18 ‘‘(2) any such measures as are deemed appro19 priate to avoid abuse or fraud with respect to the 

20 credit allowed under this section, 

21 ‘‘(3) ensuring that such credit is not allowed to 

22 multiple taxpayers, and 

23 ‘‘(4) carrying out the purposes of subsection 

24 (g), including providing for the recapture of the 


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1 credit allowed under this section if the certification 

2 described in such subsection is false. 

3 ‘‘(i) TERMINATION.—No credit shall be determined 

4 under this section for any property placed in service, or 

5 any qualified semiconductor design expenditures paid or 

6 incurred, after December 31, 2032.’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Section 46 of the Internal Revenue Code of 

9 1986 is amended— 

10 (A) by striking ‘‘and’’ at the end of para11 graph (5), 

12 (B) by striking the period at the end of 

13 paragraph (6) and inserting ‘‘, and’’, and 

14 (C) by adding at the end the following new 

15 paragraph: 

16 ‘‘(7) the semiconductor manufacturing invest17 ment credit.’’. 

18 (2) Section 49(a)(1)(C) of such Code is amend19 ed— 

20 (A) by striking ‘‘and’’ at the end of clause 

21 (iv), 

22 (B) by striking the period at the end of 

23 clause (v) and inserting a comma, and (C) by 

24 adding at the end the following new clauses: 


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1 ‘‘(vi) the basis of any qualified prop2 erty (as defined in section 48D(b)(2)) 

3 which is part of a semiconductor manufac4 turing facility, and 

5 ‘‘(vii) the basis of any semiconductor 

6 manufacturing property.’’. 

7 (3) Section 50(a)(2)(E) of such Code is amend8 ed by striking ‘‘or 48C(b)(2)’’ and inserting 

9 ‘‘48C(b)(2), or 48D(f)(1)’’. 

10 (4) Section 59A(b)(1)(B)(ii) of such Code is 

11 amended— 

12 (A) in subclause (I), by striking ‘‘plus’’, 

13 (B) by redesignating subclause (II) as sub14 clause (III), and 

15 (C) by inserting after subclause (I) the fol16 lowing: 

17 ‘‘(II) the credit allowed under section 38 

18 for the taxable year which is properly allocable 

19 to the portion of the investment credit deter20 mined under section 46 that is properly allo21 cable to section 48D(a), plus’’. 

22 (5) The table of sections for subpart E of part 

23 IV of subchapter A of chapter 1 of such Code is 

24 amended by inserting after the item relating to sec25 tion 48C the following new item: 

‘‘Sec. 48D. Semiconductor manufacturing investment credit.’’. 


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1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to property placed in service after 

3 December 31, 2022, and to qualified semiconductor design 

4 expenditures paid or incurred after December 31, 2022, 

5 under rules similar to the rules of section 48(m) of the 

6 Internal Revenue Code of 1986 (as in effect on the day 

7 before the date of the enactment of the Revenue Reconcili8 ation Act of 1990). 

Æ 


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