Page 211 - TaxAdviser_Jan_Apr23_Neat

.S. companies have gone from
Lawmakers on both sides of the aisle have
Uleading global semiconductor
chip production at the inception come to view the expansion of semiconductor
of the industry to comprising only
approximately 12% of global produc- manufacturing in the United States as an
important economic and national
tion capacity today. According to the
Semiconductor Industry Association security issue.
(SIA), the United States is behind
other countries when it comes to semi-
Authorization Act for Fiscal Year 2021 [semiconductor] manufacturing, supply
conductor chip production “mostly
(2021 NDAA) was enacted on Jan. 1, chains, and national security, and invest
because other countries’ governments 2021.² Congress authorized activities in research and development, science
have invested ambitiously in chip related to semiconductor manufacturing and technology, and the workforce of
manufacturing incentives and the U.S. and research and development (R&D) the future to keep the United States the
government has not. Meanwhile, fed- through various government agencies leader in the industries of tomorrow,
in Title XCIX of the 2021 NDAA including nanotechnology, clean energy,
eral investments in chip research have
(CHIPS for America programs) under quantum computing, and artificial
held flat as a share of GDP, while other
multiple sections, including, but not intelligence.”⁴
countries have significantly ramped up limited to, Section 9902. Under Section Division A of the CHIPS and Sci-
research investments.”¹ 9902, the U.S. Department of Com- ence Act, designated as the CHIPS
The decline in U.S. domestic chip merce is authorized to provide financial Act of 2022, enhanced the CHIPS for
production capacity began garnering assistance to eligible applicants through America programs and provides over
national attention during 2020 and 2021 a competitive selection process. $50 billion in associated appropriations.
as the COVID-19 pandemic, difficulties Although Commerce, as well as Of that amount, $39 billion is allocated
in foreign trade and logistics, spik- other government agencies, had the under Section 103 of the CHIPS Act
ing demand for consumer electronics, authority to establish the CHIPS for of 2022 to the semiconductor incen-
and disasters at certain critical foreign America programs, funding appropria- tives program established under Section
manufacturing facilities led to a sudden tions were lacking for nearly two years 9902 of the 2021 NDAA (over five fis-
and projected multiyear semiconductor after the enactment of the 2021 NDAA. cal years) “to incentivize investment in
shortage. The shortage has had an im- After much anticipation, Congress facilities and equipment in the United
pact on multiple sectors of the economy passed the bipartisan Creating Helpful States for the fabrication, assembly, test-
including automobile manufacturers Incentives to Produce Semiconductors ing, or packaging of semiconductors at
and has heightened scrutiny on the (CHIPS) and Science Act of 2022, mature technology nodes” and produc-
vulnerabilities associated with increas- which President Joe Biden signed into tion or research and development of
ing reliance on a global semiconductor law on Aug. 9, 2022.³ The Biden-Harris semiconductors, materials used to manu-
supply chain. In response, lawmakers administration concurrently announced facture semiconductors, or semiconduc-
on both sides of the aisle have come to that the legislation “will boost American tor manufacturing equipment through
view the expansion of semiconductor semiconductor research, development, a competitive application process.⁵
manufacturing in the United States as and production, ensuring U.S. leadership Commerce announced its goal to begin
an important economic and national in the technology that forms the foun- soliciting applications for the fiscal year
security issue. dation of everything from automobiles 2022 allocation ($19 billion of the $39
Against this backdrop, the William to household appliances to defense billion) by early February 2023, within
M. (Mac) Thornberry National Defense systems” and “strengthen American six months of the enactment date.

1. “Congress Passes Investments in Domestic Semiconductor Manufacturing, 4. White House Fact Sheet, “CHIPS and Science Act Will Lower Costs, Create
Research & Design,” Semiconductor Industry Association (2023). Jobs, Strengthen Supply Chains, and Counter China” (Aug. 9, 2022).
2. William M. (Mac) Thornberry National Defense Authorization Act for Fiscal 5. CHIPS Act of 2022, §103, amending 2021 NDAA, §§9902(e)(1) and (2).
Year 2021, P.L. 116-283.
3. Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Sci-
ence Act of 2022, P.L. 117-167.

www.thetaxadviser.com April 2023 31