Code of Federal Regulations · Section

§ 1.48D-3 — d-3 Qualified Property

26 C.F.R. § 1.48D-3

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(a) In general. This section provides definitions and rules relating to qualified property for purposes of section 48D of the Code and the section 48D regulations.

(b) Qualified property. The term qualified property means tangible depreciable property that is part of, and integral to, the operation of an advanced manufacturing facility and that is either—

(1) Constructed, reconstructed, or erected by the taxpayer; or

(2) Acquired by the taxpayer if the original use of such property commences with the taxpayer.

(c) Tangible depreciable property—(1) In general. The term tangible depreciable property means tangible personal property (as defined in § 1.48-1(c)), other tangible property (as defined in § 1.48-1(d)), and building and structural components (as defined in § 1.48-1(e), except as provided in paragraphs (c)(2) and (3) of this section) with respect to which depreciation (or amortization in lieu of depreciation) is allowable. The law of a State or local jurisdiction is not controlling for purposes of determining whether property is tangible property for purposes of section 48D or the section 48D regulations.

(2) Exception. Pursuant to section 48D(b)(2)(B)(ii), except as provided in paragraph (c)(3) of this section, the term tangible depreciable property does not include a building and its structural components, or a portion thereof, used for—

(i) Offices;

(ii) Administrative services such as human resources or personnel services, payroll services, legal and accounting services, and procurement services;

(iii) Sales or distribution functions;

(iv) Security services (not including cybersecurity operations); or

(v) Any other functions unrelated to manufacturing of semiconductors or semiconductor manufacturing equipment.

(3) Buildings or portions of a building not excluded by section 48D(b)(2)(B)(ii). Buildings or portions of a building not treated as offices and that are considered related to manufacturing of semiconductors or semiconductor manufacturing equipment include buildings or portions of a building used for:

(i) Gowning to enter to and from a cleanroom environment;

(ii) Monitoring operations and remote access of equipment;

(iii) Functions performed by unit process engineers including developing, monitoring, updating and overseeing individual process recipes running on every tool in the facility to manufacture, measure and test wafers including access to relevant data, data analysis, modifications and updates to the process recipes on the tools;

(iv) Functions performed by equipment engineers including overseeing tools to ensure proper operation by accessing data about the tool health and performance remotely adjusting the tool at workstations, and issuing work orders to the equipment and maintenance technicians from the workstations;

(v) Functions performed by test engineers including monitoring the electrical test data being collected from the wafers at certain points in their processing;

(vi) Functions performed by yield and defect engineers including reviewing inspection data collected from wafers;

(vii) Functions performed by metrology engineers including reviewing physical measurement data collected from the wafers;

(viii) Functions performed by integration engineers that are responsible for the technology node and the end-to-end wafer process;

(ix) Functions performed by facilities engineers including monitoring and controlling facilities systems; and

(x) Functions related to central utilities buildings, material handling and ultrapure water generation facilities, and computing (data center).

(d) Constructed, reconstructed, or erected by the taxpayer. Property is considered constructed, reconstructed, or erected by the taxpayer if the work is done for the benefit of the taxpayer in accordance with the taxpayer's specifications.

(e) Original use—(1) In general. Except as provided in paragraph (e)(2) of this section, the term original use means with respect to any property the first use to which the property is put by any taxpayer in connection with a trade or business or for the production of income. Additional capital expenditures paid or incurred by a taxpayer to recondition or rebuild property acquired or owned by the taxpayer satisfy the original use requirement to the extent of the expenditures paid or incurred by a taxpayer. However, a taxpayer's cost to acquire property reconditioned or rebuilt by another taxpayer does not satisfy the original use requirement. Whether property is reconditioned or rebuilt property will be determined based on the facts and circumstances.

(2) Treatment of inventory. For purposes of paragraph (e)(1) of this section, if a taxpayer initially acquires new property and holds the property primarily for sale to customers in the ordinary course of the taxpayer's trade or business and subsequently withdraws the property from inventory and uses the property primarily in the taxpayer's trade or business or primarily for the taxpayer's production of income, the taxpayer is considered the original user of the property. If a person initially acquires new property and holds the property primarily for sale to customers in the ordinary course of the person's business and a taxpayer subsequently acquires the property from the person for use primarily in the taxpayer's trade or business or primarily for the taxpayer's production of income, the taxpayer is considered the original user of the property. For purposes of this paragraph (e), the original use of the property by the taxpayer commences on the date on which the taxpayer first uses the property primarily in the taxpayer's trade or business or primarily for the taxpayer's production of income.

(f) Part of an advanced manufacturing facility—(1) In general. To qualify for the section 48D credit, property must be part of the advanced manufacturing facility, as provided in this paragraph (f). Property is part of an advanced manufacturing facility if the property is physically located or co-located either at the advanced manufacturing facility, or on a contiguous piece of land to the advanced manufacturing facility. Parcels or tracts of land will be considered contiguous if they possess common boundaries, and would be contiguous but for the interposition of a road, street, railroad, public utility, stream or similar property.

(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. 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 may be considered part of the advanced manufacturing facility if the property is owned by the same taxpayer as the entire advanced manufacturing facility, connected to the advanced manufacturing facility (e.g., via pipeline) and the sole purpose, function, and output of the property is dedicated to the operation of the advanced manufacturing facility.

(g) Integral to the operation of an advanced manufacturing facility—(1) In general. To qualify for the section 48D credit, property must be integral to the operation of manufacturing of semiconductors or manufacturing of semiconductor manufacturing equipment, both as provided in § 1.48D-2. Property is integral to the operation of manufacturing of semiconductors or manufacturing of semiconductor manufacturing equipment if such property is used directly in the manufacturing operation, is essential to the completeness of the manufacturing operation, and is not transformed in any material way as a result of the manufacturing operation. Materials, supplies, and other inventoriable items of property that are transformed during the manufacturing of semiconductors or into a unit of semiconductor manufacturing equipment are not considered property integral to the operation of an advanced manufacturing facility. For this purpose, the term transform does not include the normal degradation of components of semiconductor manufacturing equipment. In addition, property such as pavements, parking areas, inherently permanent advertising displays, or inherently permanent outdoor lighting facilities, although used in the operation of a business, ordinarily are not integral to the operation of an advanced manufacturing facility. Thus, for example, all property used by the taxpayer to acquire or transport materials or supplies to the point where the actual manufacturing activity commences (such as docks, railroad tracks, and bridges), or all property (other than materials or supplies) used by the taxpayer during the manufacturing of semiconductors or during the manufacturing of semiconductor manufacturing equipment within the meaning of § 1.48D-2, would be considered property integral to the operation of an advanced manufacturing facility of an eligible taxpayer. Property is considered integral to the operation of an advanced manufacturing facility of an eligible taxpayer if so used either by the owner of the property or by a lessee of the property.

(2) Vertically integrated manufacturers. If an advanced manufacturing facility that is engaged in the manufacturing of semiconductors within the meaning of § 1.48D-2 also conducts vertically integrated activities (for example, producing raw materials and manufacturing, ingots, wafers, and semiconductors), then property integral to the operation of such an advanced manufacturing facility includes only the property used in the manufacturing of semiconductors within the meaning of § 1.48D-2.

(3) Specific examples of integral property. Specific examples of property that normally would be integral to the operation of the advanced manufacturing facility of an eligible taxpayer are:

(i) Equipment and tools used in the processes of Chemical Vapor Deposition (CVD), and Physical Vapor Deposition (PVD), Atomic Layer deposition (ALD), oxidation, annealing, and epitaxy. Such equipment includes Deposition and thin-film growth equipment, etching equipment, and lithography equipment (including Extreme Ultraviolet Lithography (EUV));

(ii) Wet process tools, analytical tools, E-Beam operation tools (to repair masks), mask manufacturing equipment, chemical mechanical polishing equipment, reticle handlers, and stockers;

(iii) Inspection and metrology equipment, including scanning electron microscopes, atomic force microscopes, ion milling tools, optical inspection systems, wafer probes and optical scatterometer;

(iv) Clean room facilities, including locker and gowning rooms, specialized lighting systems, automated material systems for wafer handling, specialized recirculating air handlers, to maintain the cleanroom free from particles, control temperature and humidity levels, and specialized ceilings comprised of HEPA filters;

(v) Cleanroom equipment (including jogs, hand tools, calibration equipment, and temperature pollution monitoring tools) and specialty cleaning equipment;

(vi) Electrical power facilities, cooling facilities, chemical supply systems, and wastewater and wastewater treatment systems, including water management, water conservation, and water treatment equipment, materials and technologies;

(vii) Electricity distribution equipment including connectors, capacitors, meters and sockets, switchgear, surge arresters and transformers;

(viii) Sub-fab levels containing pumps, transformers, abatement systems, ultrapure water systems, uninterruptible power supply, and boilers, pipes, storage systems, wafer routing systems and databases, backup systems, quality assurance equipment, and computer data centers;

(ix) Utility level equipment including chillers, systems to handle nitrogen, argon, and other gases, compressor systems, and pipes;

(x) Industrial automation and control equipment (including, but not limited to, programmable logic controllers, process controllers, distributed control systems, human machine interface and motor controls and accessories);

(xi) Industrial automation communications devices, networks, and software for industrial automation control products and systems including automated material handling systems (AMHS) and advance wafer routing software systems and databases;

(xii) Tooling equipment;

(xiii) Back-end manufacturing equipment related to assembly, testing, and packaging;

(xiv) Photolithography tools;

(xv) Photomasks, reticles, pellicle, steppers, scanners, and photoresist related equipment;

(xvi) Emulation tools;

(xvii) Rapid thermal processing tools (annealing tubs and vacuum ovens), melting laser annealing (MLA) equipment, wafer bonding equipment, physical removal processing tools (flycutter DieSaw and backgrind), and edge seal dispense;

(xviii) Site infrastructure including but limited to energy, water, natural gas, backup power generators, transformers, stormwater management and fire protection;

(xix) Equipment and installation (wipe-film evaporators);

(xx) Chemical and gas delivery systems (piping, storage, and waste systems including hazardous waste);

(xxi) Bulk chemical purification systems (Liquid N2, Ar, H2, etc.);

(xxii) HVAC air conditioning and air handling systems, critical cooling water systems and heating systems;

(xxiii) Wafer stockers with temperature and air quality control;

(xxiv) Temperature control systems;

(xxv) Security and monitoring system and devices;

(xxvi) Failure analysis labs and equipment;

(xxvii) Quality assurance equipment including incoming goods, in-process inspection, and finished-good inspection;

(xxviii) Transportation, trolleys and carts that are used to transport wafers or overhead conveyer systems to move the carts;

(xxxix) Lighting products;

(xxx) Industrial gas generation and/or handling systems, such as air separation units, including any associated backup and storage equipment;

(xxxi) Input shaping tooling;

(xxxii) Crystal formation and coating equipment;

(xxxiii) Mechanical equipment; and

(xxxiv) Polishing equipment.

(4) Research or storage facilities. If property, including a building and its structural components, constitutes a research or storage facility and is used in connection with the manufacturing of semiconductors or manufacturing of semiconductor manufacturing equipment, the property may qualify as integral to the operation of the advanced manufacturing facility under section 48D(b)(2)(A)(iv). Specific examples of research facilities include research facilities that manufacture semiconductors in connection with research, such as pre-pilot production lines and prototypes, including semiconductor packaging. Specific examples of storage facilities are mineral or chemical storage equipment, gas storage tanks, including high pressure cylinders or specially designed tanks and drums, wastewater storage, and inventory and finished goods warehouses. A research facility that does not manufacture any type of semiconductor, as provided in § 1.48D-2(m), or semiconductor manufacturing equipment, as provided in § 1.48D-2(o), does not qualify.

(5) Examples. The following examples illustrate the rules of this paragraph (g):

(i) Example 1. X Corp, a calendar-year C corporation, is a manufacturer of air separation units that are designed to supply on demand nitrogen to an advanced manufacturing facility. In January 2025, X Corp places in service an air separation unit that is co-located at an advanced manufacturing facility on a contiguous piece of land to the advanced manufacturing facility. The air separation unit produces nitrogen on demand, and the nitrogen is used directly in the manufacturing of semiconductors. The air separation unit is part of the advanced manufacturing facility within the meaning of paragraph (f) of this section because the air separation unit is located on a contiguous piece of land to the advanced manufacturing facility. The air separation unit is property integral to the operation of an advanced manufacturing facility under this paragraph (g) because it is used directly in, and is essential to, the completeness of the semiconductor manufacturing operation, and is not transformed in any material way as a result of the semiconductor manufacturing operation.

(ii) Example 2. Y Corp, a calendar-year C corporation, is a manufacturer of specialty chemicals that are used in the manufacturing of semiconductors. In 2025, Y Corp places in service equipment at its facility that manufactures the specialty chemicals. The equipment is located five miles from the advanced manufacturing facility, but is not part of the advanced manufacturing facility within the meaning of paragraph (f) of this section because it is not located or co-located at the advanced manufacturing facility, or on a contiguous piece of land to the advanced manufacturing facility, and it is not connected to the advanced manufacturing facility. Also in 2025, Y Corp places in service chemical storage tanks that are part of the advanced manufacturing facility within the meaning of paragraph (f) of this section because the property is located on a contiguous piece of land to the advanced manufacturing facility. The chemical storage tanks are property integral to the operation of the advanced manufacturing facility pursuant to paragraph (g) of this section.

(h) 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-2 26 C.F.R. § 1.48D-4

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