Code of Federal Regulations · Section

§ 1.48D-2 — d-2 Definitions

26 C.F.R. § 1.48D-2

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(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.

26 C.F.R. § 1.48D-1 26 C.F.R. § 1.48D-3

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