Last Tuesday, the IRS issued Proposed Regulations (RIN 1545-BQ54) on the Advanced Manufacturing Investment Credit, under Code Section 48D, for research and manufacturing of semiconductor chips. The regulations address how to claim the credit, and provide definition guidance, among other things. The amount of the section 48D credit allowable to a taxpayer for any taxable year is generally an amount equal to 25 percent of the basis of any qualified property that is part of an eligible taxpayer’s advanced manufacturing facility if the qualified property is placed in service during such taxable year and after December 31, 2022. The term "qualified property" means tangible property with respect to which depreciation (or amortization in lieu of depreciation) is allowable that is integral to the operation of the advanced manufacturing facility and includes any building or its structural components satisfying such requirements unless the building or portion of the building is used for offices, administrative services, or other functions unrelated to manufacturing. Because the basis of qualified property will be determined by an allocation of the building and a further allocation of all the costs under Code sections 263(a) and 263A which will get capitalized to the basis of qualified and non-qualified property a cost segregation study will, in most cases, be necessary. This will be especially true in the case of the Elective Payment Election and the penalty for excessive payments. See attachment for complete details on the proposed regulations.
