FABS Act

To amend the Internal Revenue Code of 1986 to establish the semiconductor manufacturing investment credit. 1. Short title This Act may be cited as the Facilitating American-Built Semiconductors Act FABS Act 2. Semiconductor manufacturing investment credit (a) In general Subpart E of part IV of subchapter A of chapter 1 48D. Semiconductor manufacturing investment credit (a) In general For purposes of section 46, the semiconductor manufacturing investment credit for any taxable year is an amount equal to the sum of— (1) 25 percent of the qualified investment for such taxable year with respect to any semiconductor manufacturing facility property, and (2) 25 percent of the qualified semiconductor design expenditures paid or incurred during the taxable year. (b) Qualified investment with respect to semiconductor manufacturing facility property (1) In general For purposes of subsection (a)(1), the qualified investment with respect to any semiconductor manufacturing facility property for any taxable year is the basis of any qualified property placed in service by the taxpayer during such taxable year which is part of any semiconductor manufacturing facility property. (2) Qualified property For purposes of this subsection, the term qualified property (A) which is tangible property (including a building or its structural components) which is an integral part of any semiconductor manufacturing facility property, (B) with respect to which depreciation (or amortization in lieu of depreciation) is allowable, (C) which is— (i) constructed, reconstructed, or erected by the taxpayer, or (ii) acquired by the taxpayer if the original use of such property commences with the taxpayer, and (D) the primary purpose of which is to manufacture or process, or perform research with respect to, semiconductors or semiconductor tooling equipment. (3) Semiconductor manufacturing facility property For purposes of this subpart, the term semiconductor manufacturing facility property (4) Coordination with rehabilitation credit The qualified investment with respect to any semiconductor manufacturing facility property for any taxable year shall not include that portion of the basis of any property which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)). (c) Qualified semiconductor design expenditures For purposes of this section— (1) In general Except as otherwise provided in this subsection, the term qualified semiconductor design expenditures (2) Exclusion for amounts funded by grants, etc The term qualified semiconductor design expenditures (3) Modifications For purposes of paragraph (1), subsection (b) of section 41 shall be applied— (A) by substituting semiconductor research qualified research (B) by substituting 100 percent 65 percent (C) by substituting 100 percent 75 percent (4) Semiconductor research The term semiconductor research (d) Coordination with credit for increasing research expenditures (1) In general Except as provided in paragraph (2), any qualified semiconductor design expenditures for which a credit is allowed under this section shall not be taken into account for purposes of determining the credit allowable under section 41 for such taxable year. (2) Expenditures included in determining increase to research activities Any qualified semiconductor design expenditures for any taxable year which are qualified research expenses (within the meaning of section 41(b)) shall be taken into account in determining the base amount or the average qualified research expenses, whichever is applicable, for purposes of applying section 41 to subsequent taxable years. Such qualified semiconductor design expenditures shall not be taken into account for purposes of section 41(f)(3). (e) Special rules (1) Certain progress expenditure rules made Applicable Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a). (2) Aggregation and Allocation of Expenditures Rules similar to the rules of paragraphs (1) and (2) of section 41(f) shall apply for purposes of this section. (f) Election for direct payment (1) In general In the case of any qualified property or semiconductor manufacturing property placed in service during any taxable year (with the exception of any such property to which subsection (g)(1) applied)), or in the case of any qualified semiconductor design expenditures paid or incurred during the taxable year, the amount of any credit determined under subsection (a) with respect to such property or such expenditures for such taxable year shall, at the election of the taxpayer, be treated as a payment equal to such amount which is made by the taxpayer against the tax imposed by chapter 1 for such taxable year (regardless of whether such tax would have been on such taxpayer). (2) Form and effect of election An election under paragraph (1) shall be made prior to the date on which the qualified property or semiconductor manufacturing property is placed in service or the last day of the taxable year in which the qualified semiconductor design expenditures are paid or incurred and in such manner as the Secretary may prescribe. Such election, once made, shall— (A) be irrevocable with respect to the qualified property, semiconductor manufacturing property, or qualified semiconductor design expenditures to which such election applies, and (B) reduce the amount of the credit which would (but for this subsection) be allowable under this section with respect to such property or such expenditures for the taxable year in which such property is placed in service to zero. (3) Application to partnerships and s corporations In the case of a partnership or S corporation which makes an election under paragraph (1)— (A) such paragraph shall apply with respect to such partnership or corporation without regard to the fact that no tax is imposed by chapter 1 on such partnership or corporation, and (B) (i) in the case of a partnership, each partner’s distributive share of the credit determined under subsection (a) with respect to the qualified property, semiconductor manufacturing property, or qualified semiconductor design expenditures shall be deemed to be zero, and (ii) in the case of a S corporation, each shareholder’s pro rata share of the credit determined under subsection (a) with respect to such property shall be deemed to be zero. (g) Recapture (1) In general If there is a recapture event with the respect to the credits allowed under this section to any taxpayer, the tax imposed on such taxpayer by this chapter for the taxable year which includes the date of such recapture event shall be increased by the amount of such credits. (2) Recapture event For purposes of this subsection, the term recapture event (A) Any semiconductor manufacturing facility property with respect to which any such credit was allowed is transferred to a foreign entity of concern (as defined in section 9901 of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021) or an entity under the influence, control, or ownership of such a foreign entity of concern. (B) Foreign entities of concern (as so defined) or entities under the influence, control, or ownership of such foreign entities of concern acquire a controlling interest in the taxpayer. (h) Regulations and guidance The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance with respect to— (1) determining the basis of qualified property and semiconductor manufacturing property, (2) any such measures as are deemed appropriate to avoid abuse or fraud with respect to the credit allowed under this section, (3) ensuring that such credit is not allowed to multiple taxpayers, and (4) carrying out the purposes of subsection (g), including providing for the recapture of the credit allowed under this section if the certification described in such subsection is false. (i) Termination No credit shall be determined under this section for any property placed in service, or any qualified semiconductor design expenditures paid or incurred, after December 31, 2032. . (b) Conforming amendments (1) Section 46 (A) by striking and (B) by striking the period at the end of paragraph (6) and inserting , and (C) by adding at the end the following new paragraph: (7) the semiconductor manufacturing investment credit. . (2) Section 49(a)(1)(C) of such Code is amended— (A) by striking and (B) by striking the period at the end of clause (v) and inserting a comma, and (C) by adding at the end the following new clauses: (vi) the basis of any qualified property (as defined in section 48D(b)(2)) which is part of a semiconductor manufacturing facility, and (vii) the basis of any semiconductor manufacturing property. . (3) Section 50(a)(2)(E) of such Code is amended by striking or 48C(b)(2) 48C(b)(2), or 48D(f)(1) (4) Section 59A(b)(1)(B)(ii) of such Code is amended— (A) in subclause (I), by striking plus (B) by redesignating subclause (II) as subclause (III), and (C) by inserting after subclause (I) the following: (II) the credit allowed under section 38 for the taxable year which is properly allocable to the portion of the investment credit determined under section 46 that is properly allocable to section 48D(a), plus . (5) The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 48C the following new item: Sec. 48D. Semiconductor manufacturing investment credit. . (c) Effective date The amendments made by this section shall apply to property placed in service after December 31, 2022, and to qualified semiconductor design expenditures paid or incurred after December 31, 2022, under rules similar to the rules of section 48(m)

Summary: Facilitating American-Built Semiconductors Act or the FABS Act This bill allows a new tax credit through 2032 for investment in any semiconductor manufacturing facility and for semiconductor design expenditures.