Chipmakers win bigger tax credit under bill passed by Senate
Companies such as Intel, Taiwan Semiconductor Manufacturing Company (TSMC) and Micron Technology will be eligible for an investment tax credit of 35 per cent if they break ground on new plants before an existing 2026 deadline. That's a jump from the existing 25 per cent and tops an increase to 30 per cent envisioned in a draft proposal.
The semiconductor manufacturing provision was tucked into a nearly 900-page bill that represents the heart of US President Donald Trump's economic agenda. House lawmakers are now set to take up the legislation with a goal of sending it to Trump for his signature by Jul 4.
Increases to the credit would sweeten a key incentive created under the 2022 Chips and Science Act, a bipartisan law signed by president Joe Biden. The programme also includes US$39 billion in grants and as much as US$75 billion in loans for manufacturing projects, designed to boost the American semiconductor industry after decades of production shifting to Asia.
The tax credit, which is not capped, was already likely to be costlier than those other forms of subsidies – a function of how much investment the Chips Act has spurred. In almost every case, it will account for the greatest share of incentives going to any one company, including those that did not win grant awards. Major beneficiaries of the grant programme include Intel, TSMC, Micron and Samsung Electronics.
Trump earlier this year called for repealing the Chips Act, but lawmakers in both parties have shown little desire to eliminate subsidies that provide high-paying jobs in their districts, in a sector seen as critical to national security. The Commerce Department, meanwhile, has continued to implement the grant programme, while urging larger investments and reworking the terms of awards that took months to negotiate.
So far, the Trump administration has secured increases in promised investment from TSMC, Micron and GlobalFoundries, which the White House has touted as evidence that Trump's policies are working. None of those included additional Chips Act grants beyond what had already been finalised or proposed.
Still, more company spending on projects very likely means more foregone government revenue in the form of tax credits – a number that would grow if the Senate bill becomes law.
Companies that commence projects by the end of next year can continue to claim credits for continuous construction after that date – a policy aimed at getting sites started while recognising that chip factories take years to build. BLOOMBERG
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