With the CHIPs ‘grant’ process up and running (Department of Commerce), the current focus is now preparing for the 48D tax credit.
Proposed Regulations and theme of Comments
During March of this year, the proposed regulations were released by the IRS, related to n the 48D credit. Generally speaking, there is typically a 2-month commentary window, and CFO Services was one of 43 commenters on the regulations.
Primarily the theme of the comments was around the definition of semiconductors and semiconductor manufacturing. These comments ranged from materials definitions, wafer substrates, and silicon carbide (SiC). In addition, comments also addressed the limitation of the credit to only original new equipment. With such a wide range of participants in the semiconductor space, it is not surprising the variety of comments.
CFO Services will be participating in the upcoming hearing on the proposed regulations later this month. After that process is complete, the IRS will review all commentary and issue final regulations. There is not a set timetable on when final regulations are released, but hopefully it is before companies need to consider the 48D credit for financial close in early 2024.
Elective payment regulations released
Proposed regulations were released in late June, related to the “elective payment” option, under 48D, which will make the credit extremely beneficial to all participants in the semiconductor space.
The comment period ends in mid-August, with a hearing at the end of that month. CFO Services is preparing commentary and will attend this hearing.
Upcoming items for clients (48D)
- Project registration process upcoming: Each project (“location”) will need to register with the IRS each year to receive the 48D credit, per the temporary regulations released in June. This registration process will be targeted to open this fall.
- Start identifying 2023 spend: Now is the time to start identifying 2023 spend that could qualify for the 48D credit, before the 2023 year-end, as it will be needed to provide a clear value for the provision.
Now that the IRS has moved past providing guidance on the individual IRA credits, they have issued information for the business-related IRA credits.
First round of 48C allocation concept papers closes the end of July
The IRA funded an additional $10B to the allocation of 48C credits. The first allocation of $4B will accept concept papers for review by the DOE through July 31st. All allocations of the first round will be issued by the IRS no later than March of 2024.
Proposed Regulations released
Late June the IRS also released proposed regulations on the “elective payment” and “transferability” of certain credits from the Inflation Reduction Act (“IRA”).
Similar to 48D, both proposed regulations have comment periods that end in mid-August, with an applicable hearing at the end of that month. CFO Services is currently preparing commentary and plans to attend this hearing. The “transferability” of certain credits will be especially important to understand, because a ‘credit transfer’ option will create funding opportunities for those companies that otherwise find no value in generating credits.
Upcoming items for clients
- Project registration upcoming: Each project (“location”) will need to register with the IRS each year to receive the IRA credit as per the temporary regulations released in June. This registration process will be targeted to open this fall.
- Identify qualified projects for energy, carbon capture, material development: It is important now to identify projects that could qualify for the different IRA credits. With the significant compliance and complexity of credits, companies should complete proper due diligence now, in order to gain knowledge/understanding of credit-program options and value (ROI), before the fall, when you will need to start registering projects.
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