§48D — Advanced manufacturing investment credit
Statute Text — 26 U.S.C. §48D
For purposes of section 46, the advanced manufacturing investment credit for any taxable year is an amount equal to 35 percent of the qualified investment for such taxable year with respect to any advanced manufacturing facility of an eligible taxpayer.
For purposes of subsection (a), the qualified investment with respect to any advanced manufacturing facility for any taxable year is the basis of any qualified property placed in service by the taxpayer during such taxable year which is part of an advanced manufacturing facility.
For purposes of this subsection, the term “qualified property” means property—
which is tangible property,
with respect to which depreciation (or amortization in lieu of depreciation) is allowable,
which is—
constructed, reconstructed, or erected by the taxpayer, or
acquired by the taxpayer if the original use of such property commences with the taxpayer, and
which is integral to the operation of the advanced manufacturing facility.
The term “qualified property” includes any building or its structural components which otherwise satisfy the requirements under subparagraph (A).
Clause (i) shall not apply with respect to a building or portion of a building used for offices, administrative services, or other functions unrelated to manufacturing.
For purposes of this section, the term “advanced manufacturing facility” means a facility for which the primary purpose is the manufacturing of semiconductors or semiconductor manufacturing equipment.
The qualified investment with respect to any advanced manufacturing facility for any taxable year shall not include that portion of the basis of any property which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)).
Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of subsection (a).
For purposes of this section, the term “eligible taxpayer” means any taxpayer which—
is not a foreign entity of concern (as defined in section 9901(6)
1
1 See References in Text note below.
of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021), and
has not made an applicable transaction (as defined in section 50(a)) during the taxable year.
Except as otherwise provided in paragraph (2)(A), in the case of a taxpayer making an election (at such time and in such manner as the Secretary may provide) under this subsection with respect to the credit determined under subsection (a) with respect to such taxpayer, such taxpayer shall be treated as making a payment against the tax imposed by subtitle A (for the taxable year with respect to which such credit was determined) equal to the amount of such credit.
For purposes of this subsection—
In the case of the credit determined under subsection (a) with respect to any property held directly by a partnership or S corporation, any election under paragraph (1) shall be made by such partnership or S corporation. If such partnership or S corporation makes an election under such paragraph (in such manner as the Secretary may provide) with respect to such credit—
the Secretary shall make a payment to such partnership or S corporation equal to the amount of such credit,
paragraph (3) shall be applied with respect to such credit before determining any partner’s distributive share, or shareholder’s pro rata share, of such credit,
any amount with respect to which the election in paragraph (1) is made shall be treated as tax exempt income for purposes of sections 705 and 1366, and
a partner’s distributive share of such tax exempt income shall be based on such partner’s distributive share of the otherwise applicable credit for each taxable year.
In the case of any property held directly by a partnership or S corporation, no election by any partner or shareholder shall be allowed under paragraph (1) with respect to any credit determined under subsection (a) with respect to such property.
Any election under paragraph (1) shall be made not later than the due date (including extensions of time) for the return of tax for the taxable year for which the election is made, but in no event earlier than 270 days after the date of the enactment of this section. Any such election, once made, shall be irrevocable. Except as otherwise provided in this subparagraph, any election under paragraph (1) shall apply with respect to any credit for the taxable year for which the election is made.
The payment described in paragraph (1) shall be treated as made on the later of the due date (determined without regard to extensions) of the return of tax for the taxable year or the date on which such return is filed.
For purposes of section 1324 of title 31, United States Code, the payments under subparagraph (A)(i)(I) shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.
As a condition of, and prior to, any amount being treated as a payment which is made by the taxpayer under paragraph (1) or any payment being made pursuant to subparagraph (A), the Secretary may require such information or registration as the Secretary deems necessary or appropriate for purposes of preventing duplication, fraud, improper payments, or excessive payments under this section.
In the case of any amount treated as a payment which is made by the taxpayer under paragraph (1), or any payment made pursuant to subparagraph (A), which the Secretary determines constitutes an excessive payment, the tax imposed on such taxpayer by chapter 1 for the taxable year in which such determination is made shall be increased by an amount equal to the sum of—
the amount of such excessive payment, plus
an amount equal to 20 percent of such excessive payment.
Clause (i)(II) shall not apply if the taxpayer demonstrates to the satisfaction of the Secretary that the excessive payment resulted from reasonable cause.
For purposes of this subparagraph, the term “excessive payment” means, with respect to property for which an election is made under this subsection for any taxable year, an amount equal to the excess of—
the amount treated as a payment which is made by the taxpayer under paragraph (1), or the amount of the payment made pursuant to subparagraph (A), with respect to such property for such taxable year, over
the amount of the credit which, without application of this subsection, would be otherwise allowable (determined without regard to section 38(c)) under subsection (a) with respect to such property for such taxable year.
In the case of a taxpayer making an election under this subsection with respect to the credit determined under subsection (a), such credit shall be reduced to zero and shall, for any other purposes under this title, be deemed to have been allowed to the taxpayer for such taxable year.
In the case of any possession of the United States with a mirror code tax system (as defined in section 24(k)), this subsection shall not be treated as part of the income tax laws of the United States for purposes of determining the income tax law of such possession unless such possession elects to have this subsection be so treated.
Rules similar to the rules of subsections (a) and (c) of section 50 shall apply with respect to—
any amount treated as a payment which is made by the taxpayer under paragraph (1), and
any payment made pursuant to paragraph (2)(A).
The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this subsection, including—
regulations or other guidance providing rules for determining a partner’s distributive share of the tax exempt income described in paragraph (2)(A)(i)(III), and
guidance to ensure that the amount of the payment or deemed payment made under this subsection is commensurate with the amount of the credit that would be otherwise allowable (determined without regard to section 38(c)).
The credit allowed under this section shall not apply to property the construction of which begins after December 31, 2026.
Treasury Regulations
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Treas. Reg. §1.48D-0Table of contents
This section lists the table of contents for §§ 1.48D-1 through 1.48D-6.
(a) Overview.
(b) Determination of credit.
(c) Coordination with section 47.
(1) In general.
(2) Example.
(d) Applicability date.
(a) In general.
(b) Applicable transaction.
(c) Basis.
(1) In general.
(2) Transition rule.
(d) Beginning of construction.
(e) Eligible taxpayer.
(f) Foreign entities.
(1) Foreign entity.
(2) Foreign entity of concern.
(g) Manufacturing of semiconductors.
(h) Manufacturing of semiconductor manufacturing equipment.
(i) Placed in service.
(j) Qualified investment.
(1) In general.
(2) Special rules for certain passthrough entities.
(i) Partnership.
(ii) S corporation.
(iii) Estate or trust.
(3) Qualified progress expenditures election.
(i) In general.
(ii) Special rules for certain passthrough entities.
(4) Examples.
(i) Example 1.
(ii) Example 2.
(k) Section 48D credit.
(l) Section 48D regulations.
(m) Semiconductor.
(n) Semiconductor manufacturing.
(1) Semiconductor wafer production.
(2) Semiconductor fabrication.
(3) Semiconductor packaging.
(4) Assembly.
(5) Testing.
(6) Advanced packaging.
(o) Semiconductor manufacturing equipment.
(p) Statutory references.
(1) Chapter 1.
(2) Code.
(3) Subtitle A.
(q) Applicability date.
(a) In general.
(b) Qualified property.
(c) Tangible depreciable property.
(1) In general.
(2) Exception.
(3) Buildings or portions of a building not excluded by section 48D(b)(2)(B)(ii).
(d) Constructed, reconstructed, or erected by the taxpayer.
(e) Original use.
(1) In general.
(2) Treatment of inventory.
(f) Part of an advanced manufacturing facility.
(1) In general.
(2) Property that is not located or co-located at an advanced manufacturing facility or on a contiguous piece of land to the advanced manufacturing facility.
(g) Integral to the operation of an advanced manufacturing facility.
(1) In general.
(2) Vertically integrated manufacturers.
(3) Specific examples of integral property.
(4) Research or storage facilities.
(5) Examples.
(i) Example 1.
(ii) Example 2.
(h) Applicability date.
(a) In general.
(b) Advanced manufacturing facility.
(c) Primary purpose.
(1) In general.
(2) No primary purpose.
(3) Examples.
(i) Example 1: Primary purpose; in general.
(ii) Example 2: Primary purpose; semiconductor wafer production.
(iii) Example 3: Primary purpose; vertically integrated manufacturer.
(iv) Example 4: No primary purpose; vertically integrated manufacturer.
(d) Applicability date.
(a) Termination of credit.
(1) In general.
(2) Property.
(3) Single advanced manufacturing facility project.
(i) In general.
(ii) Related taxpayers.
(A) Definition.
(B) Related taxpayer rule.
(iii) Example.
(iv) Timing of single advanced manufacturing facility project determination.
(v) Disaggregation.
(vi) Example.
(b) Beginning of construction.
(1) In general.
(2) Continuity requirement.
(c) Physical work test.
(1) In general.
(2) Physical work of significant nature.
(i) In general.
(ii) Exceptions.
(d) Five percent safe harbor.
(1) In general.
(2) Costs.
(3) Cost overruns.
(i) Single advanced manufacturing facility project.
(ii) Example.
(iii) Single property.
(iv) Example.
(e) Continuity requirement.
(1) In general.
(2) Continuous construction.
(3) Continuous efforts.
(4) Excusable disruptions to continuous construction and continuous efforts tests.
(i) In general.
(ii) Effect of excusable disruptions on continuity safe harbor.
(iii) Non-exclusive list of construction disruptions.
(5) Timing of excusable disruption determination.
(6) Continuity safe harbor.
(i) In general.
(ii) Example.
(f) Applicability date.
(a) Elective payment election.
(1) In general.
(2) Partnerships and S corporations.
(3) Irrevocable.
(b) Pre-filing registration required.
(1) In general.
(2) Manner of registration.
(3) Members of a consolidated group.
(4) Timing of pre-filing registration.
(5) Each qualified investment in an advanced manufacturing facility must have its own registration number.
(6) Information required to complete the pre-filing registration process.
(7) Registration number.
(i) In general.
(ii) Registration number is only valid for one year.
(iii) Renewing registration numbers.
(iv) Amendment of previously submitted registration information if a change occurs before the registration number is used.
(v) Registration number is required to be reported on the return for the taxable year of the elective payment election.
(c) Time and manner of election.
(1) In general.
(2) Limitations.
(d) Special rules for partnerships and S corporations.
(1) In general.
(2) Election.
(i) Time and manner of election.
(ii) Effect of election.
(iii) Coordination with sections 705 and 1366.
(iv) Partner's distributive share.
(A) In general.
(B) Interim rule.
(C) Partnership requirements.
(v) S corporation shareholder's pro-rata share.
(vi) Timing of tax exempt income.
(3) Disregarded entity ownership.
(4) Electing partnerships in tiered structures.
(i) In general.
(ii) Electing partnerships in tiered structures; interim rule.
(5) Character of tax exempt income.
(6) Determination of amount of the section 48D credit.
(i) In general.
(ii) Application of section 49 at-risk rules to determination of section 48D credit for partnerships and S corporations.
(iii) Changes in at-risk amounts under section 49 at partner or shareholder level.
(7) Partnerships subject to subchapter C of chapter 63 of the Code.
(8) Example.
(e) Denial of double benefit.
(1) In general.
(2) Application of the denial of double benefit rule.
(3) Use of the section 48D credit for other purposes.
(4) Examples.
(i) Example 1.
(ii) Example 2.
(iii) Example 3.
(iv) Example 4.
(f) Excessive payment.
(1) In general.
(2) Reasonable cause.
(3) Excessive payment defined.
(4) Example.
(g) Basis reduction and recapture.
(1) In general.
(2) Basis adjustment.
(i) In general.
(ii) Basis adjustment by partnership or S corporation.
(iii) Basis adjustment of partners and S corporation shareholders.
(3) Recapture reporting.
(h) Applicability dates.
(1) In general.
(2) Prior taxable years.
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Treas. Reg. §1.48D-0(a)Elective payment election.
Elective payment election.
(1) In general.
(2) Partnerships and S corporations.
(3) Irrevocable.
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Treas. Reg. §1.48D-0(b)Pre-filing registration required.
Pre-filing registration required.
(1) In general.
(2) Manner of registration.
(3) Members of a consolidated group.
(4) Timing of pre-filing registration.
(5) Each qualified investment in an advanced manufacturing facility must have its own registration number.
(6) Information required to complete the pre-filing registration process.
(7) Registration number.
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Treas. Reg. §1.48D-0(c)Time and manner of election.
Time and manner of election.
(1) In general.
(2) Limitations.
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Treas. Reg. §1.48D-0(d)Special rules for partnerships and S corporations.
Special rules for partnerships and S corporations.
(1) In general.
(2) Election.
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Treas. Reg. §1.48D-0(e)Denial of double benefit.
Denial of double benefit.
(1) In general.
(2) Application of the denial of double benefit rule.
(3) Use of the section 48D credit for other purposes.
(4) Examples.
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Treas. Reg. §1.48D-0(f)Excessive payment.
Excessive payment.
(1) In general.
(2) Reasonable cause.
(3) Excessive payment defined.
(4) Example.
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Treas. Reg. §1.48D-0(g)Basis reduction and recapture.
Basis reduction and recapture.
(1) In general.
(2) Basis adjustment.
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Treas. Reg. §1.48D-0(h)Applicability dates.
Applicability dates.
(1) In general.
(2) Prior taxable years.
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Treas. Reg. §1.48D-0(i)In general.
In general.
(ii) Basis adjustment by partnership or S corporation.
(iii) Basis adjustment of partners and S corporation shareholders.
(3) Recapture reporting.
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Treas. Reg. §1.48D-0(j)Qualified investment.
Qualified investment.
(1) In general.
(2) Special rules for certain passthrough entities.
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Treas. Reg. §1.48D-0(k)Section 48D credit.
Section 48D credit.
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Treas. Reg. §1.48D-0(l)Section 48D regulations.
Section 48D regulations.
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Treas. Reg. §1.48D-0(m)Semiconductor.
Semiconductor.
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Treas. Reg. §1.48D-0(n)Semiconductor manufacturing.
Semiconductor manufacturing.
(1) Semiconductor wafer production.
(2) Semiconductor fabrication.
(3) Semiconductor packaging.
(4) Assembly.
(5) Testing.
(6) Advanced packaging.
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Treas. Reg. §1.48D-0(o)Semiconductor manufacturing equipment.
Semiconductor manufacturing equipment.
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Treas. Reg. §1.48D-0(p)Statutory references.
Statutory references.
(1) Chapter 1.
(2) Code.
(3) Subtitle A.
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Treas. Reg. §1.48D-0(q)Applicability date.
Applicability date.
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Treas. Reg. §1.48D-0(v)S corporation shareholder's pro-rata share.
S corporation shareholder's pro-rata share.
(vi) Timing of tax exempt income.
(3) Disregarded entity ownership.
(4) Electing partnerships in tiered structures.
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Treas. Reg. §1.48D-1Advanced manufacturing investment credit determined
(a) Overview. For purposes of section 46 of the Code, the amount of the advanced manufacturing investment credit under section 48D of the Code determined for any taxable year is the amount determined under section 48D and this section and §§ 1.48D-2 through 1.48D-6 and 1.50-2 (the section 48D regulations) (subject to any applicable provisions of the Code that may limit the amount determined under section 48D), for such taxable year with respect to any advanced manufacturing facility of an eligible taxpayer. Paragraph (b) of this section provides the general rules for determining the amount of a taxpayer's section 48D credit for a taxable year. Paragraph (c) of this section provides rules coordinating the section 48D credit with the rules of section 47 of the Code (relating to the rehabilitation credit). Section 1.48D-2 provides definitions that apply for purposes of section 48D and the section 48D regulations. Section 1.48D-3 provides rules relating to the definition of qualified property for purposes of the section 48D credit. Section 1.48D-4 provides rules relating to the definition of an advanced manufacturing facility of an eligible taxpayer for purposes of the section 48D credit. Section 1.48D-5 provides rules regarding the beginning of construction of property for purposes of the section 48D credit. Section 1.48D-6 provides rules related to the elective payment election of the section 48D credit. See § 1.50-2 for additional rules under section 50(a)(3) and (6) of the Code relating to applicable transactions that result in the recapture of section 48D credits.
(b) Determination of credit. Subject to any applicable sections of the Code that may limit the credit determined under section 48D, the section 48D credit for any taxable year of an eligible taxpayer with respect to any advanced manufacturing facility is an amount equal to 25 percent of the taxpayer's qualified investment for the taxable year with respect to that advanced manufacturing facility. A section 48D credit is available only with respect to qualified property that a taxpayer places in service after December 31, 2022, and, for any qualified property the construction of which began prior to January 1, 2023, only to the extent of the basis of that property attributable to the construction, reconstruction, or erection of that property occurring after August 9, 2022. Under section 48D(e), no section 48D credit is allowed to a taxpayer for placing qualified property in service in any taxable year if the beginning of construction of that qualified property as determined under § 1.48D-5 begins after December 31, 2026 (the date specified in section 48D(e)).
(c) Coordination with section 47—(1) In general. The qualified investment with respect to any advanced manufacturing facility of an eligible taxpayer for any taxable year does not include that portion of the basis of any property that is attributable to qualified rehabilitation expenditures, as defined in section 47(c)(2) and § 1.48-12(c), with respect to a qualified rehabilitated building, as defined in section 47(c)(1) and § 1.48-12(b).
(2) Example: Coordination with section 47. X Corp, a calendar-year C corporation, owns Building A, a certified historic structure. X Corp's adjusted basis in Building A is $100,000. Between August 1, 2024, and October 31, 2024, X Corp incurs $1 million to reconstruct, within the meaning of section 48D(b)(2)(A)(iii)(I) and § 1.48-12(b)(2)(iv), Building A. X Corp places the reconstructed Building A, a qualified rehabilitated building, in service on November 15, 2024. Of the $1 million of capitalized expenditures incurred to reconstruct Building A (all of which would meet the definition of qualified investment), $250,000 also meets the definition of qualified rehabilitation expenditures (QREs). As such, X Corp's qualified investment in Building A is $750,000 ($1 million−$250,000). X Corp's qualified investment in Building A remains $750,000 even if X Corp does not determine a rehabilitation credit with respect to the $250,000 of QREs.
(d) Applicability date. This section applies to property that is placed in service after December 31, 2022, and during a taxable year ending on or after October 23, 2024.
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Treas. Reg. §1.48D-1(a)Overview.
Overview. For purposes of section 46 of the Code, the amount of the advanced manufacturing investment credit under section 48D of the Code determined for any taxable year is the amount determined under section 48D and this section and §§ 1.48D-2 through 1.48D-6 and 1.50-2 (the section 48D regulations) (subject to any applicable provisions of the Code that may limit the amount determined under section 48D), for such taxable year with respect to any advanced manufacturing facility of an eligible taxpayer. Paragraph (b) of this section provides the general rules for determining the amount of a taxpayer's section 48D credit for a taxable year. Paragraph (c) of this section provides rules coordinating the section 48D credit with the rules of section 47 of the Code (relating to the rehabilitation credit). Section 1.48D-2 provides definitions that apply for purposes of section 48D and the section 48D regulations. Section 1.48D-3 provides rules relating to the definition of qualified property for purposes of the section 48D credit. Section 1.48D-4 provides rules relating to the definition of an advanced manufacturing facility of an eligible taxpayer for purposes of the section 48D credit. Section 1.48D-5 provides rules regarding the beginning of construction of property for purposes of the section 48D credit. Section 1.48D-6 provides rules related to the elective payment election of the section 48D credit. See § 1.50-2 for additional rules under section 50(a)(3) and (6) of the Code relating to applicable transactions that result in the recapture of section 48D credits.
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Treas. Reg. §1.48D-1(b)Determination of credit.
Determination of credit. Subject to any applicable sections of the Code that may limit the credit determined under section 48D, the section 48D credit for any taxable year of an eligible taxpayer with respect to any advanced manufacturing facility is an amount equal to 25 percent of the taxpayer's qualified investment for the taxable year with respect to that advanced manufacturing facility. A section 48D credit is available only with respect to qualified property that a taxpayer places in service after December 31, 2022, and, for any qualified property the construction of which began prior to January 1, 2023, only to the extent of the basis of that property attributable to the construction, reconstruction, or erection of that property occurring after August 9, 2022. Under section 48D(e), no section 48D credit is allowed to a taxpayer for placing qualified property in service in any taxable year if the beginning of construction of that qualified property as determined under § 1.48D-5 begins after December 31, 2026 (the date specified in section 48D(e)).
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Treas. Reg. §1.48D-1(c)Coordination with section 47—(1) In general.
Coordination with section 47—(1) In general. The qualified investment with respect to any advanced manufacturing facility of an eligible taxpayer for any taxable year does not include that portion of the basis of any property that is attributable to qualified rehabilitation expenditures, as defined in section 47(c)(2) and § 1.48-12(c), with respect to a qualified rehabilitated building, as defined in section 47(c)(1) and § 1.48-12(b).
(2) Example: Coordination with section 47. X Corp, a calendar-year C corporation, owns Building A, a certified historic structure. X Corp's adjusted basis in Building A is $100,000. Between August 1, 2024, and October 31, 2024, X Corp incurs $1 million to reconstruct, within the meaning of section 48D(b)(2)(A)(iii)(I) and § 1.48-12(b)(2)(iv), Building A. X Corp places the reconstructed Building A, a qualified rehabilitated building, in service on November 15, 2024. Of the $1 million of capitalized expenditures incurred to reconstruct Building A (all of which would meet the definition of qualified investment), $250,000 also meets the definition of qualified rehabilitation expenditures (QREs). As such, X Corp's qualified investment in Building A is $750,000 ($1 million−$250,000). X Corp's qualified investment in Building A remains $750,000 even if X Corp does not determine a rehabilitation credit with respect to the $250,000 of QREs.
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Treas. Reg. §1.48D-1(d)Applicability date.
Applicability date. This section applies to property that is placed in service after December 31, 2022, and during a taxable year ending on or after October 23, 2024.
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Treas. Reg. §1.48D-2Definitions
(a) In general. The definitions in paragraphs (b) through (p) of this section apply for purposes of sections 48D and 50 of the Code and § 1.48D-1, this section and §§ 1.48D-3 through 1.48D-6 and 1.50-2 (the section 48D regulations).
(b) Applicable transaction. The term applicable transaction has the meaning provided in section 50(a)(6) and § 1.50-2.
(c) Basis—(1) In general. With respect to any qualified property, the term basis has the same meaning as provided in § 1.46-3(c). Thus, the basis of the qualified property generally is determined in accordance with the general rules of subtitle A for determining the basis of property (see subtitle A, subchapter O, part II of the Code). As such, the basis of qualified property would generally be the cost of that qualified property (see section 1012 of the Code) unreduced by any adjustments to basis and would include all items properly included by the taxpayer in the depreciable basis of the qualified property.
(2) Transition rule. For property the construction of which began prior to January 1, 2023, and is placed in service after December 31, 2022, the portion of the basis of such property attributable to construction, reconstruction, or erection after August 9, 2022, must be allocated using any reasonable method, including by applying the principles of section 461 of the Code. Rules similar to the rules in §§ 1.48-2(b)(2), 1.48-11(b)(5)(i), and 1.48-12(c)(1) are applicable.
(d) Beginning of construction. The term beginning of construction has the meaning provided in § 1.48D-5.
(e) Eligible taxpayer. The term eligible taxpayer means any taxpayer that—
(1) Is not a foreign entity of concern; and
(2) Has not made an applicable transaction during the taxable year.
(f) Foreign entities—(1) Foreign entity. The term foreign entity has the same meaning as provided in 15 CFR 231.103.
(2) Foreign entity of concern. The term foreign entity of concern has the same meaning as provided in 15 CFR 231.104.
(g) Manufacturing of semiconductors. The term manufacturing of semiconductors and the term semiconductor manufacturing are synonymous.
(h) Manufacturing of semiconductor manufacturing equipment. The term manufacturing of semiconductor manufacturing equipment means the physical production (in a manufacturing facility) of semiconductor manufacturing equipment, which is used by an advanced manufacturing facility engaged in the manufacturing of semiconductors as defined in paragraph (g) of this section.
(i) Placed in service. The term placed in service has the same meaning as provided in § 1.46-3(d).
(j) Qualified investment—(1) In general. Except as provided in paragraph (j)(2) and (3) of this section, the term qualified investment with respect to an advanced manufacturing facility means, for any taxable year, the basis of any qualified property that is part of an advanced manufacturing facility and placed in service by the taxpayer during the taxable year.
(2) Special rules for certain passthrough entities. In the case of any qualified property that is part of an advanced manufacturing facility of an eligible taxpayer and placed in service by an entity described in paragraphs (j)(2)(i) through (iii) of this section during a taxable year, the rules of this paragraph (j)(2) apply to determine the qualified investment for the taxable year with respect to the advanced manufacturing facility.
(i) Partnership. In the case of a partnership that places in service qualified property that is part of an advanced manufacturing facility of an eligible taxpayer, each partner in the partnership must take into account separately the partner's share of the basis of the qualified property placed in service by the partnership during the taxable year as provided in § 1.46-3(f).
(ii) S corporation. The basis of qualified property that is part of an advanced manufacturing facility of an eligible taxpayer and placed in service during the taxable year by an S corporation (as defined in section 1361(a) of the Code) must be apportioned pro rata among the S corporation's shareholders on the last day of the S corporation's taxable year as provided in section 1366.
(iii) Estate or trust. The basis of qualified property that is part of an advanced manufacturing facility of an eligible taxpayer and placed in service during the taxable year by an estate or trust must be apportioned among the estate or trust and its beneficiaries on the basis of the income of the estate or trust allocable to each for that taxable year.
(3) Qualified progress expenditures election—(i) In general. A taxpayer may elect, as provided in § 1.46-5, to increase the qualified investment with respect to any advanced manufacturing facility of an eligible taxpayer for the taxable year, by any qualified progress expenditures made after August 9, 2022.
(ii) Special rules for certain passthrough entities. Notwithstanding the provisions of § 1.46-5, relating to elections of progress expenditure property being constructed by or for a partnership or S corporation, the rules of § 1.46-5(o)(1) and (p) do not apply to prohibit a partnership or S corporation from making a progress expenditure election under § 1.46-5 with respect to qualified property if the partnership or S corporation intends to make an elective payment election under section 48D(d) and § 1.48D-6 with respect to a section 48D credit determined with respect to such qualified property.
(4) Examples. The provisions of this paragraph (j) are illustrated by the following examples.
(i) Example 1: Advanced manufacturing investment credit: qualified investment in general. On November 1, 2024, X, a calendar-year C corporation, places in service qualified property with a basis of $200,000, and on December 1, 2024, X places in service qualified property with a basis of $300,000. X's qualified investment for the taxable year is $500,000 ($200,000 + $300,000).
(ii) Example 2: Advanced manufacturing investment credit: qualified investment for partnerships. A, B, C, and D, all calendar-year C corporations, are partners in the ABCD partnership. Partners A, B, C, and D share partnership profits equally. On November 1, 2024, the ABCD partnership placed in service qualified property with a basis of $1 million. Each partner's share of the basis of the qualified property, as determined in § 1.46-3(f)(2), is $250,000 ($1m × 0.25) and each partner's qualified investment is $250,000.
(k) Section 48D credit. The term section 48D credit means the advanced manufacturing investment credit determined under section 48D and the section 48D regulations.
(l) Section 48D regulations. The term section 48D regulations means §§ 1.48D-1 through 1.48D-6 and 1.50-2.
(m) Semiconductor. The term semiconductor means, consistent with 15 CFR 231.115, an integrated electronic device or system most commonly manufactured using materials such as, but not limited to, silicon, silicon carbide, or III-V compounds, and processes such as, but not limited to, lithography, deposition, and etching. Such devices and systems include, but are not limited to, analog and digital electronics, power electronics, and photonics, for memory, processing, sensing, actuation, and communications applications.
(n) Semiconductor manufacturing. The term semiconductor manufacturing and the term manufacturing of semiconductors are synonymous and mean, consistent with 15 CFR 231.116, semiconductor wafer production, semiconductor fabrication, or semiconductor packaging. The following terms have the following meanings in connection with semiconductor wafer production, semiconductor fabrication, and semiconductor packaging for purposes of section 48D and the section 48D regulations:
(1) Semiconductor wafer production includes the processes of growing single-crystal ingots and boules, wafer slicing, etching and polishing, bonding, cleaning, epitaxial deposition, and metrology.
(2) Semiconductor fabrication includes the process of forming devices such as transistors, poly capacitors, non-metal resistors, and diodes, as well as interconnects between such devices, on a wafer of semiconductor material.
(3) Semiconductor packaging means the process of enclosing a semiconductor in a protective container (package) and providing external power and signal connectivity for the assembled integrated circuit and includes the process of assembly and testing of semiconductors and advanced packaging of semiconductors.
(4) Assembly includes, but is not limited to, wafer-dicing, die-bonding, wire bonding, solder bumping, and encapsulation.
(5) Testing includes, but is not limited to, probing, screening, and burn-in work.
(6) Advanced packaging means a subset of packaging technologies that uses novel techniques and materials to increase the performance, power, modularity, and/or durability of an integrated circuit. Advanced packaging technologies include flip-chip, 2D, 2.5D, and 3D stacking, fan-out and fan-in, and embedded die/system-in-package (SiP).
(o) Semiconductor manufacturing equipment. The term semiconductor manufacturing equipment means the highly engineered and specialized equipment used in the manufacturing of semiconductors as defined in paragraph (g) of this section and the subsystems that enable or are incorporated into the manufacturing equipment. Specific examples of semiconductor manufacturing equipment and subsystems that enable semiconductor manufacturing equipment include but are not limited to:
(1) Deposition equipment, including, Chemical Vapor Deposition (CVD), Physical Vapor Deposition (PVD), Electrodeposition, and Atomic Layer Deposition (ALD);
(2) Etching equipment (wet etch, dry etch);
(3) Equipment for epitaxial growth of transistor features;
(4) Chemical-mechanical polishing equipment to planarize layers through the semiconductor fabrication process;
(5) Lithography equipment (steppers and scanners of various light wavelengths, such as deep UV, extreme ultraviolet (EUV), photoresist coating, and developer tracks);
(6) Equipment for producing ingots and boules, wafer growth equipment, wafer slicing equipment, wafer dicing equipment, and wire bonders;
(7) Inspection and measuring equipment, including scanning electron microscopes, atomic force microscopes, optical inspection systems, wafer probes and optical scatterometer, EDS (Energy Dispersive Spectroscopy);
(8) Certain metrology and inspection systems to measure critical dimensions of the integrated circuit features throughout the fabrication process, detection and measurement of defects on the wafers during the fabrication process;
(9) Ion implantation and diffusion/oxidation furnaces;
(10) Specialty glass components including EUV mirrors and optical pathways, lenses and mirrors used in inspection equipment and other fabrication processes, and lens assemblies for wafer defect inspection;
(11) Electrostatic chucks;
(12) High performance pumps;
(13) High purity quartz devices;
(14) Ultra-high vacuum chamber components; and
(15) Photomasks and light sources used in photolithography.
(p) Statutory references—(1) Chapter 1. The term chapter 1 means chapter 1 of the Code.
(2) Code. The term Code means the Internal Revenue Code.
(3) Subtitle A. The term subtitle A means subtitle A of the Code.
(q) Applicability date. This section applies to property that is placed in service after December 31, 2022, and during a taxable year ending on or after October 23, 2024.
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