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SPECIAL INDUSTRIES

equipment,” the terms “semiconductors” to semiconductors and semiconductor or off, depending on changes in voltage,
and “semiconductor manufacturing tooling equipment.¹⁹ However, Con- to make an integrated circuit. It may
equipment” are not defined. In fact, the gress ultimately did not include lan- have as its base a wafer (i.e., thin piece
concept of “semiconductor manufactur- guage related to processing and research of semiconductor material, also known
ing equipment” was a late modification and leveraged the version proposed as “substrate”) for building multiple
to the legislation. When the advanced under the BBBA, with the modification integrated circuits. Semiconductor chips
manufacturing ITC was included as from “tooling” to “manufacturing” noted are manufactured at “fabs” or fabrication
part of the Build Back Better Act above within the enacted legislation plants, industrial facilities where raw
(BBBA),¹⁵ which passed in the House under Sec. 48D. The change from “tool- wafers become fully functioning elec-
of Representatives on Nov. 19, 2021, the ing” to “manufacturing” may be viewed tronic chips, using an etching process
term “advanced manufacturing facility” as more expansive, since it is generally called lithography.²²
was defined as “a facility for which the understood that “manufacturing equip- Again, the term “semiconductor”
primary purpose is the manufacturing ment” encompasses tooling equipment is not defined under Sec. 48D. In the
of semiconductors or semiconductor and potentially many other types absence of a definition in the tax law,
tooling equipment” (emphasis added).¹⁶ of equipment. the IRS and Treasury would likely
The subsequent version of the BBBA construe such a word with a technical
released by the Senate on Dec. 11, 2021, ‘Semiconductor’ and or specialized meaning to have its usual,
(and ultimately stalled) included this ‘semiconductor manufacturing established meaning as it is commonly
same language. In the CHIPS Act of equipment’ or commercially understood.²³ Specifi-
2022, Congress changed “semiconductor Generally, semiconductors are materials cally, in interpreting a statute, the IRS
tooling equipment” to “semiconductor that have electrical conductivity, acting may look to other government agencies,
manufacturing equipment,” so that the as either a conductor or an insula- including the departments of Com-
facility’s primary purpose must be either tor of electricity, depending on small merce and Energy, as well as industry
(1) manufacturing semiconductors changes in voltage.²⁰ However, the term trade groups, for the ordinary meaning
or (2) manufacturing semiconductor “semiconductors” is often used synony- of the term “semiconductor.”²⁴
manufacturing equipment. mously with semiconductor chips and As part of the fact sheet released on
Multiple other bills were proposed integrated circuits. The SIA states that June 8, 2021, the White House stated
within both the House and Senate “semiconductors, sometimes referred to the following related to a 100-Day
to create an ITC for semiconductor as integrated circuits ... or microchips, Supply Chain Review Report (100-Day
manufacturing prior to the enactment are made from pure elements, typically Report) prepared under Executive
of the CHIPS Act of 2022, includ- silicon or germanium, or compounds Order 14017: “Semiconductors are
ing the proposed CHIPS for America such as gallium arsenide. In a process essential to our national security, our
Act introduced in June 2020, and the called doping, small amounts of impuri- economic competitiveness, and to our
proposed Facilitating American-Built ties are added to these pure elements, daily lives. These tiny chips are vital to
Semiconductors (FABS) Act introduced causing large changes in the conductiv- virtually every sector of the economy —
in June 2021. Notably, the latter bill ity of the material.”²¹ including energy, healthcare, agriculture,
included property to manufacture, pro- A microchip or chip may include consumer electronics, manufacturing,
cess, or perform research with respect transistors (i.e., switches) that turn on defense, and transportation.”²⁵

15. H.R. 5376, ultimately, the Inflation Reduction Act of 2022, P.L. 117-169. to use words in their known and ordinary signification. ... This rule is applied
16. H.R. 5376, §136503. to taxing acts.”).
17. S. 3933 and H.R. 7178. 24. See Sterrett, “Use of Industry Definitions in Interpretation of the Internal Rev-
18. S. 2107. enue Code: Toward a More Systematic Approach,” 16 Va. Tax. Rev. 1, 6–7
19. Id., §2 (June 17, 2021). (1996) (describing external definitions of statutory language, such as industry
20. National Institute of Standards and Technology, U.S. Department of Com- definitions of terms, as “intrinsic aids” that can be used in any exercise of
merce, “Semiconductor Glossary.” statutory interpretation).
21. Semiconductor Industry Association, “What is a Semiconductor?” 25. White House Fact Sheet, “Biden-Harris Administration Announces Supply
22. National Institute of Standards and Technology, U.S. Department of Com- Chain Disruptions Task Force to Address Short-Term Supply Chain Disconti-
merce, “Semiconductor Glossary.” nuities” (June 8, 2021).
23. See McDermott Int’l, Inc. v. Wilander, 498 U.S. 337, 342 (1991); Old Colony
Railroad Co., 284 U.S. 552, 560 (1932) (“The legislature must be presumed

34 April 2023 The Tax Adviser