OBBB changes reviewed: Over the next few weeks CFO Services will go through the business credits and incentives impacted by the bill.
| Week 1 | Week 2 | Week 3 | Week 4 | Week 5 | Week 6 | Week 7 | Week 8 |
| OBBB Overview | 174 Research Expenses | 48D Semi Incentives | 48E/45Y Clean Energy | 45V Clean Hydrogen | 45Z Clean Fuel Production | 45Q Carbon Capture | 45X and Buy/Sell |
In Brief
- The One Big Beautiful Bill Act (OBBB) or P.L. 119-21 increases the Section 48D advanced manufacturing investment credit rate from 25% to 35% for qualified property placed in service after 2025.
- The credit continues to apply to investments in advanced manufacturing facilities, primarily those manufacturing semiconductors or semiconductor manufacturing equipment.
- The requirement that construction must begin before 2027 remains unchanged.
- The bill does not address the treatment of qualified progress expenditures, which may result in different credit rates depending on when the property is placed in service.
What’s New in Section 48D?
Credit Rate Increase
Prior Law: Section 48D provided a 25% investment tax credit for qualified property placed in service as part of an advanced manufacturing facility (semiconductors and related equipment), with construction required to begin before 2027.
OBBB Update: The credit rate is increased to 35% for property placed in service after 2025. This is a significant enhancement for taxpayers investing in new semiconductor manufacturing capacity in the U.S.
Eligibility and Construction Start Date
The requirement that construction must begin before 2027 is unchanged. Projects must be underway by the end of 2026 to qualify for the enhanced credit.
Qualified Progress Expenditures
The bill does not modify the rules for qualified progress expenditures. Taxpayers electing to claim the credit on progress expenditures (rather than at the placed-in-service date) may still be limited to the 25% rate, even if the property is ultimately placed in service after 2025.
Summary Table: Section 48D Credit Changes
| Feature | Prior Law (IRA/CHIPS) | OBBB (as Enacted) |
| Credit Rate | 25% | 35% (after 2025) |
| Construction Start Deadline | Before 2027 | Unchanged |
| Qualified Progress Expenditures | 25% if claimed early | Unchanged |
Key Takeaways
Enhanced Incentive: The 35% credit rate is a major boost for U.S. semiconductor manufacturing, potentially improving project economics and after-tax returns.
Timing Is Critical: Projects must begin construction before 2027 to qualify for the enhanced rate.
Planning Opportunity: Taxpayers should review project timelines and supply chain arrangements now to maximize eligibility for the enhanced credit.
IRS Circular 230 Required Notice‐‐IRS regulations require that we inform you that to the extent this communication contains any statement regarding federal taxes, that statement was not written or intended to be used, and it cannot be used, by any person (i) for the purpose of avoiding federal tax penalties that may be imposed on that person, or (ii) to promote, market or recommend to another party any transaction or matter addressed herein.