FABS Act
Bill: H.R.7104 | Sponsor: Rep. McCaul, Michael T. (R-TX)
Policy area: Taxation

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.

To amend the Internal Revenue Code of 1986 to establish the 
             semiconductor manufacturing investment credit.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Facilitating American-Built 
Semiconductors Act'' or the ``FABS Act''.

SEC. 2. SEMICONDUCTOR MANUFACTURING INVESTMENT CREDIT.

    (a) In General.--Subpart E of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 48C the following new section:

``SEC. 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' means 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' means a facility for which the primary 
        purpose is the fabrication, assembly, testing and packaging of 
        semiconductor chips; semiconductor manufacturing equipment used 
        in these and related processes such as material-handling and 
        photomasking; or associated metrology, material-handling and 
        other related tools.
            ``(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' means the amounts which are paid or incurred by 
        the taxpayer during the taxable year which would be described 
        in subsection (b) of section 41 if such subsection were applied 
        with the modifications set forth in paragraph (3).
            ``(2) Exclusion for amounts funded by grants, etc.--The 
        term `qualified semiconductor design expenditures' shall not 
        include any amount to the extent such amount is funded by any 
        grant, contract, or otherwise by another person (or any 
        governmental entity).
            ``(3) Modifications.--For purposes of paragraph (1), 
        subsection (b) of section 41 shall be applied--
                    ``(A) by substituting `semiconductor research' for 
                `qualified research' each place it appears in 
                paragraphs (2) and (3) of each subsection,
                    ``(B) by substituting `100 percent' for `65 
                percent' in paragraph (3)(A) of such subsection, and
                    ``(C) by substituting `100 percent' for `75 
                percent' in paragraph (3)(C)(i) of such subsection.
            ``(4) Semiconductor research.--The term `semiconductor 
        research' means any research related to designing or developing 
        a semiconductor product, including qualified semiconductor 
        manufacturing property, that is at least one generation beyond 
        the taxpayer's most advanced commercially available product (or 
        the first generation if no such product exists).
    ``(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' means, with respect to the credits 
        allowed under this section to any taxpayer, the first date on 
        which any of the following has occurred:
                    ``(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 of the Internal Revenue Code of 1986 is 
        amended--
                    (A) by striking ``and'' at the end of paragraph 
                (5),
                    (B) by striking the period at the end of paragraph 
                (6) and inserting ``, and'', 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'' at the end of clause (iv),
                    (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)'' and inserting ``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) of 
the Internal Revenue Code of 1986 (as in effect on the day before the 
date of the enactment of the Revenue Reconciliation Act of 1990).
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