The IRS released final regulations (TD 9899) for making an election to claim the Section 48D advanced manufacturing tax credit for semiconductor production as a refundable payment.
The credit, established by the 2022 CHIPS Act (Public Law 117-167) is valued at 25% of the qualified investment in equipment used for semiconductor or semiconductor manufacturing equipment production. The property must be placed into service after 2022, and construction on planned property must begin before Jan. 1, 2027, to qualify.
The rules, released on March 5, allow taxpayers to elect to treat the amount of the credit they qualify for under 48D(a) as a refundable payment against their federal taxes owed. Under the election, if the credit amount exceeds taxes owed, the remainder is treated as an overpayment and paid out to the taxpayer, essentially making the credit fully refundable for some taxpayers.
To claim the credit and elect for refundability, a taxpayer must pre-file through the IRS’s registration portal and receive a registration number for the qualified investment in an advanced manufacturing facility for semiconductors. Registration requires detailed information, including a list of each qualified investment relevant to 48D claims and supporting documentation. Each investment must have its own IRS registration number for credit claims, which are valid for a year, requiring re-registration for each investment claimed annually. The election generally must be made on a timely filed original return.
The final regulations include detailed rules for pass-through entities seeking to claim the credit. Partnerships and S corporations cannot elect for the refundable payment but can claim a credit worth up to and equal to the amount of taxes owed. Partners and shareholders in the entities that made the investment cannot claim the credit themselves.
The regulations are applicable for tax years ending after they are published in the Federal Register.
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