In July 2022, Congress enacted the CHIPS Act of 2022 (Division A of P.L. 117-167), which was signed into law by President Joe Biden on Aug. 9, 2022.
The act appropriates funding for the CHIPS for America provisions enacted in Title XCIX of the William M. “Mac” Thornberry National Defense Authorization Act for Fiscal Year 2021 (2021 NDAA, P.L. 116-283). It also revised the 2021 NDAA CHIPS provisions and established three additional funds to support efforts that seek to address semiconductor-related challenges in defense, workforce and education, and international technology security and innovation. In total, the act appropriates $52.7 billion for semiconductor manufacturing, research and development, workforce training and education, and collaboration and coordination with allied and other friendly countries for FY2022-FY2027.
Of interest to the construction industry, the CHIPS Act establishes and appropriates $39 billion to a CHIPS for America Fund to bolster semiconductor manufacturing capacity in the United States by providing financial incentives for building, expanding and equipping domestic fabrication facilities and companies in the semiconductor supply chain. The fund also provides $11 billion for semiconductor R&D activities at the National Institute of Standards and Technology and in partnership with U.S. industry through a National Semiconductor Technology Center, a National Advanced Packaging Manufacturing Program and the establishment of up to three Manufacturing USA institutes.
In addition, a key piece of the CHIPS Act is a new tax credit with a $24 billion price tag. The Advanced Manufacturing Investment Credit is equal to 25% of eligible investment projects and incentivizes building and expanding domestic semiconductor manufacturing facilities.
The tax credit will provide a direct-pay, refundable credit for facilities with a primary purpose of making semiconductors or semiconductor manufacturing equipment. It applies to tangible property that can be amortized and depreciated that is placed in service between Jan. 1, 2023, and Dec. 31, 2026. Projects already underway may qualify.
Applicants seeking CHIPS Act funding must develop a Construction Workforce Plan to recruit, hire, train and retain a diverse and skilled construction workforce and deliver a project on time.
To purportedly achieve this goal, both NOFO's strongly encourage applicants to require controversial project labor agreements. The strong push for CHIPS Act funding applicants to mandate anti-competitive and inflationary PLAs on CHIPS Act projects undermines congressional authority because no such language was included in the CHIPS Act legislative text. An ABC-led coalition of construction industry stakeholders fought hard to keep PLA mandates out of the CHIPS Act.
Contractors and developers must also be aware that Davis-Bacon prevailing wage requirements apply to all CHIPS Act-funded construction projects. This presents additional compliance risks, increased costs and may discourage competition from small businesses and large businesses unfamiliar with Davis-Bacon Act regulations that are typically limited to government-procured and financed projects.
It is ABC’s hope that merit shop contractors have an opportunity to participate in CHIPS production without undue regulatory burdens. Visit ABC’s CHIPS resources and guidance webpage for more information.