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President Joe Biden signed the CHIPS Act into law in August of this year to catalyze investments in the semiconductor manufacturing industry. In the hopes of boosting local competitiveness, innovation, and national security, the government approved over $52 billion in federal subsidies.

This passage marks one of the biggest semiconductor manufacturing investments in U.S. history. The European Union, China, and Canada have also endorsed similar programs, proving that some of the tiniest components in the modern world can have a massive impact worldwide.

This article will discuss how the CHIPS Act can help Ohio manufacturers. Read on to determine if it can impact your business.

Benefits of the CHIPS Act

The Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act offers various benefits for companies in the industry, including the ones listed below.

Increase in Generous Tax Incentives

Eligible firms can enjoy advanced investment credit, to be codified in the Internal Revenue Code Section 48D. This benefit amounts to 25% of the related investment for manufacturing facilities.

For properties to enjoy such perks, they should:

• Fall under the semiconductor category
• Qualify for depreciation or amortization
• Be an integral part of the advanced manufacturing facility

Taxpayers can claim the benefit as direct pay or payment against tax. For this reason, they can receive a tax refund even if they don’t have enough liability. Without this alternative, monetizing credits could be challenging.

Reduction in Supply Chain Issues

Experts believe the CHIPS Act is a powerful tool in mitigating risks and can help organizations achieve a sustainable and secure supply chain. It can support the building or expansion of semiconductor fabrication facilities.

Lowered National Security Concerns

The CHIPS Act can transform the research, development, and production components of the American semiconductor industry. This program will strengthen the backbone of other companies, including defense systems.

Remember, the semiconductor industry emerged from the U.S., but East Asian companies have trumped local suppliers. Today, manufacturers rely heavily on imports.

Types of CHIPS Act Perks

Ohio manufacturers can apply for the following funding:

• Domestic manufacturing incentives
• Research and development and workforce development incentives
• Department of Defense or microelectronics commons
• International efforts from the Department of State
• Workforce education from the National Science Foundation

As long as you’re not designated a foreign entity of concern, you may be eligible for some credit types.

Application for CHIPS Act Funding 

The IRS has yet to announce additional details on CHIPS Act funding. Ultimately, it aims to empower local firms to better compete in an international industry that powers both the economy and defense. It can be the game-changer companies need to take their organizations to the next level.

Watch for more in this GJM blog series as further details emerge from the IRS regarding the application process for CHIPS Act funding.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business & transaction advisory, healthcare management & advisory, outsourced accounting, and risk advisory. The firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution, nonprofit, private equity and utilities.