Lawmakers in the conference committee for an innovation bill are discussing the possibility of adding tax provisions that would restore expensing of research and experimentation (R&E) costs and create a tax credit for semiconductors. The tax proposals enjoy significant bipartisan support, but numerous political headwinds complicate the outlook.
The underlying innovation bill is with a formal conference committee charged with merging the Senate-passed version of the United States Innovation and Competition Act (USICA), with the House-passed bill known as “America COMPETES.” Neither underlying bill currently carries a tax title, but that would not preclude the conference committee from adding one in conference.
There is strong bipartisan support for both restoring R&E expensing and incentives for semiconductor manufacturing. The Senate passed, by a 90-5 margin, a nonbinding motion to “instruct” lawmakers participating in the conference to include R&E expensing, and also approved a similar motion for semiconductor manufacturing by a voice vote. But there is also strong resistance to adding a tax title to an already contentious bill, as it could open up the process for other members to push various tax priorities. Many Democrats also appear reluctant to pass business tax relief while the enhanced child tax credit is stalled, and could push for “social” tax relief that would complicate the process.
In addition, there are also competing versions of legislation to encourage semi-conductor manufacturing. Both the USICA and America COMPETES bills contain the “Creating Helpful Incentives to Produce Semiconductors for America Act” (CHIPS Act), which provides incentives for domestic semiconductor manufacturing and investments in chip research. But some lawmakers also are pushing for conferees to add the “Facilitating American-Built Semiconductors Act” (FABS Act) to the ultimate legislation—which would establish a 25% tax credit towards the purchase, construction, manufacture, or utilization of a semiconductor manufacturing facility or related equipment used for the design or processing of chips. Other lawmakers are pushing conferees to add the “Supporting American Printed Circuit Boards Act,” which would provide tax incentives to manufacturers, researchers and buyers of printed circuit boards.
The timeline for completion of the conference committee and final passage of the updated legislation remains uncertain. Disagreements on potential additions and revisions to the underlying bills will likely take weeks—if not months—to resolve. If the Section 174 R&E fix is not included in the innovation legislation, it still has a good chance of being addressed in a year-end “extenders” bill after the November elections.
Businesses should seek to remain apprised of the ongoing conference committee and its underlying negotiations, as significant developments are expected in the near-term.
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
More tax hot topics
No Results Found. Please search again using different keywords and/or filters.