FABS Act

II 117TH CONGRESS 1ST SESSION S. 2107 To amend the Internal Revenue Code of 1986 to establish the semiconductor manufacturing investment credit. IN THE SENATE OF THE UNITED STATES JUNE 17, 2021 Mr. WYDEN (for himself, Mr. CRAPO, Mr. WARNER, Mr. CORNYN, Ms. STABE- NOW, and Mr. DAINES) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to establish the semiconductor manufacturing investment credit. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Facilitating American- 4 Built Semiconductors Act’’ or the ‘‘FABS Act’’. 5 SEC. 2. SEMICONDUCTOR MANUFACTURING INVESTMENT 6 CREDIT. 7 (a) IN GENERAL.—Subpart E of part IV of sub- 8 chapter A of chapter 1 of the Internal Revenue Code of 9 VerDate Sep 11 2014 05:22 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2107.IS S2107 kjohnson on DSK79L0C42PROD with BILLS 2 •S 2107 IS 1986 is amended by inserting after section 48C the fol- 1 lowing new section: 2 ‘‘SEC. 48D. SEMICONDUCTOR MANUFACTURING INVEST- 3 MENT CREDIT. 4 ‘‘(a) IN GENERAL.—For purposes of section 46, the 5 semiconductor manufacturing investment credit for any 6 taxable year is an amount equal to the sum of— 7 ‘‘(1) 25 percent of the qualified investment for 8 such taxable year with respect to any semiconductor 9 manufacturing facility, and 10 ‘‘(2) 25 percent of the qualified investment for 11 such taxable year with respect to any semiconductor 12 manufacturing property. 13 ‘‘(b) QUALIFIED INVESTMENT WITH RESPECT TO 14 SEMICONDUCTOR MANUFACTURING FACILITIES.— 15 ‘‘(1) IN GENERAL.—For purposes of subsection 16 (a)(1), the qualified investment with respect to any 17 semiconductor manufacturing facility for any taxable 18 year is the basis of any qualified property placed in 19 service by the taxpayer during such taxable year 20 which is part of a semiconductor manufacturing fa- 21 cility. 22 ‘‘(2) QUALIFIED PROPERTY.—For purposes of 23 this subsection, the term ‘qualified property’ means 24 property— 25 VerDate Sep 11 2014 05:22 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2107.IS S2107 kjohnson on DSK79L0C42PROD with BILLS 3 •S 2107 IS ‘‘(A) which is tangible property (including 1 a building or its structural components) which 2 is an integral part of a semiconductor manufac- 3 turing facility, 4 ‘‘(B) with respect to which depreciation (or 5 amortization in lieu of depreciation) is allow- 6 able, 7 ‘‘(C) which is— 8 ‘‘(i) constructed, reconstructed, or 9 erected by the taxpayer, or 10 ‘‘(ii) acquired by the taxpayer if the 11 original use of such property commences 12 with the taxpayer, and 13 ‘‘(D) which is necessary for the manufac- 14 turing or processing of, or performing research 15 with respect to, semiconductors or semicon- 16 ductor tooling equipment. 17 ‘‘(3) SEMICONDUCTOR MANUFACTURING FACIL- 18 ITY.—For purposes of this subpart, the term ‘semi- 19 conductor manufacturing facility’ means a facility 20 for which the primary purpose is the manufacturing 21 or processing of, or performing research with respect 22 to, semiconductors or semiconductor tooling equip- 23 ment. 24 VerDate Sep 11 2014 05:22 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2107.IS S2107 kjohnson on DSK79L0C42PROD with BILLS 4 •S 2107 IS ‘‘(4) COORDINATION WITH REHABILITATION 1 CREDIT AND SEMICONDUCTOR MANUFACTURING 2 PROPERTY.—The qualified investment with respect 3 to any semiconductor manufacturing facility for any 4 taxable year shall not include that portion of the 5 basis of any property which is— 6 ‘‘(A) attributable to qualified rehabilitation 7 expenditures (as defined in section 47(c)(2)), or 8 ‘‘(B) semiconductor manufacturing prop- 9 erty (as defined in subsection (c)(2)). 10 ‘‘(c) QUALIFIED INVESTMENT WITH RESPECT TO 11 SEMICONDUCTOR MANUFACTURING PROPERTY.— 12 ‘‘(1) IN GENERAL.—For purposes of subsection 13 (a)(2), the qualified investment with respect to semi- 14 conductor manufacturing property for any taxable 15 year is the basis of any semiconductor manufac- 16 turing property placed in service by the taxpayer 17 during such taxable year. 18 ‘‘(2) SEMICONDUCTOR MANUFACTURING PROP- 19 ERTY.—For purposes of this subpart, the term 20 ‘semiconductor manufacturing property’ means tan- 21 gible property— 22 ‘‘(A) for which the primary purpose is to 23 manufacture or process, or perform research 24 VerDate Sep 11 2014 05:22 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2107.IS S2107 kjohnson on DSK79L0C42PROD with BILLS 5 •S 2107 IS with respect to, semiconductors or semicon- 1 ductor tooling equipment, 2 ‘‘(B) with respect to which depreciation (or 3 amortization in lieu of depreciation) is allow- 4 able, and 5 ‘‘(C) which is— 6 ‘‘(i) constructed, reconstructed, or 7 erected by the taxpayer, or 8 ‘‘(ii) acquired by the taxpayer if the 9 original use of such property commences 10 with the taxpayer. 11 ‘‘(d) CERTAIN PROGRESS EXPENDITURE RULES 12 MADE APPLICABLE.—Rules similar to the rules of sub- 13 sections (c)(4) and (d) of section 46 (as in effect on the 14 day before the date of the enactment of the Revenue Rec- 15 onciliation Act of 1990) shall apply for purposes of sub- 16 section (a). 17 ‘‘(e) REGULATIONS AND GUIDANCE.—The Secretary 18 shall prescribe such regulations or other guidance as may 19 be necessary or appropriate to carry out the purposes of 20 this section, including regulations or other guidance with 21 respect to— 22 ‘‘(1) determining the basis of qualified property 23 and semiconductor manufacturing property, 24 VerDate Sep 11 2014 05:22 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2107.IS S2107 kjohnson on DSK79L0C42PROD with BILLS 6 •S 2107 IS ‘‘(2) any such measures as are deemed appro- 1 priate to avoid abuse or fraud with respect to the 2 credit allowed under this section, and 3 ‘‘(3) ensuring that such credit is not allowed to 4 multiple taxpayers.’’. 5 (b) ELECTION FOR DIRECT PAYMENT.—Section 48D 6 of the Internal Revenue Code of 1986, as added by sub- 7 section (a), is amended by adding at the end the following: 8 ‘‘(f) ELECTION FOR DIRECT PAYMENT.— 9 ‘‘(1) IN GENERAL.—In the case of any qualified 10 property or semiconductor manufacturing property 11 placed in service during any taxable year (with the 12 exception of any such property to which subsection 13 (d) applied)), the amount of any credit determined 14 under subsection (a) with respect to such property 15 for such taxable year shall, at the election of the tax- 16 payer, be treated as a payment equal to such 17 amount which is made by the taxpayer against the 18 tax imposed by chapter 1 for such taxable year (re- 19 gardless of whether such tax would have been on 20 such taxpayer). 21 ‘‘(2) FORM AND EFFECT OF ELECTION.—An 22 election under paragraph (1) shall be made prior to 23 the date on which the qualified property or semicon- 24 ductor manufacturing property is placed in service 25 VerDate Sep 11 2014 05:22 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2107.IS S2107 kjohnson on DSK79L0C42PROD with BILLS 7 •S 2107 IS and in such manner as the Secretary may prescribe. 1 Such election, once made, shall— 2 ‘‘(A) be irrevocable with respect to the 3 qualified property or semiconductor manufac- 4 turing property to which such election applies, 5 and 6 ‘‘(B) reduce the amount of the credit 7 which would (but for this subsection) be allow- 8 able under this section with respect to such 9 property for the taxable year in which such 10 property is placed in service to zero. 11 ‘‘(3) APPLICATION TO PARTNERSHIPS AND S 12 CORPORATIONS.—In the case of a partnership or S 13 corporation which makes an election under para- 14 graph (1)— 15 ‘‘(A) such paragraph shall apply with re- 16 spect to such partnership or corporation with- 17 out regard to the fact that no tax is imposed 18 by chapter 1 on such partnership or corpora- 19 tion, and 20 ‘‘(B)(i) in the case of a partnership, each 21 partner’s distributive share of the credit deter- 22 mined under subsection (a) with respect to the 23 qualified property or semiconductor manufac- 24 turing property shall be deemed to be zero, and 25 VerDate Sep 11 2014 05:22 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2107.IS S2107 kjohnson on DSK79L0C42PROD with BILLS 8 •S 2107 IS ‘‘(ii) in the case of a S corporation, each 1 shareholder’s pro rata share of the credit deter- 2 mined under subsection (a) with respect to such 3 property shall be deemed to be zero.’’. 4 (c) CONFORMING AMENDMENTS.— 5 (1) Section 46 of the Internal Revenue Code of 6 1986 is amended— 7 (A) by striking ‘‘and’’ at the end of para- 8 graph (5), 9 (B) by striking the period at the end of 10 paragraph (6) and inserting ‘‘, and’’, and 11 (C) by adding at the end the following new 12 paragraph: 13 ‘‘(7) the semiconductor manufacturing invest- 14 ment credit.’’. 15 (2) Section 49(a)(1)(C) of such Code is amend- 16 ed— 17 (A) by striking ‘‘and’’ at the end of clause 18 (iv), 19 (B) by striking the period at the end of 20 clause (v) and inserting a comma, and 21 (C) by adding at the end the following new 22 clauses: 23 ‘‘(vi) the basis of any qualified prop- 24 erty (as defined in section 48D(b)(2)) 25 VerDate Sep 11 2014 05:22 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2107.IS S2107 kjohnson on DSK79L0C42PROD with BILLS 9 •S 2107 IS which is part of a semiconductor manufac- 1 turing facility, and 2 ‘‘(vii) the basis of any semiconductor 3 manufacturing property.’’. 4 (3) Section 50(a)(2)(E) of such Code is amend- 5 ed by striking ‘‘or 48C(b)(2)’’ and inserting 6 ‘‘48C(b)(2), or 48D(d)’’. 7 (4) Section 59A(b)(1)(B)(ii) of such Code is 8 amended— 9 (A) in subclause (I), by striking ‘‘plus’’, 10 (B) by redesignating subclause (II) as sub- 11 clause (III), and 12 (C) by inserting after subclause (I) the fol- 13 lowing: 14 ‘‘(II) the credit allowed under 15 section 38 for the taxable year which 16 is properly allocable to the portion of 17 the investment credit determined 18 under section 46 that is properly allo- 19 cable to section 48D(a), plus’’. 20 (5) The table of sections for subpart E of part 21 IV of subchapter A of chapter 1 of such Code is 22 amended by inserting after the item relating to sec- 23 tion 48C the following new item: 24 ‘‘48D. Semiconductor manufacturing investment credit.’’. (d) EFFECTIVE DATE.— 25 VerDate Sep 11 2014 05:22 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2107.IS S2107 kjohnson on DSK79L0C42PROD with BILLS 10 •S 2107 IS (1) IN GENERAL.—Except as provided under 1 paragraph (2), the amendments made by this section 2 shall apply to property placed in service after De- 3 cember 31, 2021, under rules similar to the rules of 4 section 48(m) of the Internal Revenue Code of 1986 5 (as in effect on the day before the date of the enact- 6 ment of the Revenue Reconciliation Act of 1990). 7 (2) ELECTION FOR DIRECT PAYMENT.—The 8 amendments made by subsection (b) shall be effec- 9 tive with respect to any election made after Decem- 10 ber 31, 2021. 11 Æ VerDate Sep 11 2014 05:22 Jun 24, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\S2107.IS S2107 kjohnson on DSK79L0C42PROD with BILLS