Top tax writer in house backs adding token credit to Chinese bill

More and more lawmakers say they are looking to add tax breaks for semiconductors to a broad package aimed at bolstering U.S. competition from China.

Negotiations on the compromise bill are set to officially begin on Thursday, aiming to wrap up by the end of the summer. Bills passed by the House and Senate (HR 4521 and S. 1260) include more than $50 billion for chip subsidies, but lawmakers say tax credits are also needed.

Home Ways and Means Chair Richard Neal (D-Mass.) on Wednesday backed an effort to add a tax incentive to chips based on the law facilitating U.S.-built semiconductors.

Heads of the Senate Finance Committee Ron Wyden (D-Oré.) and Mike Crapo (R-Idaho) are also pushing for the inclusion of credit. The Senate version of the bill (S. 2107) would provide a 25% tax credit for investments in chip manufacturing facilities or related equipment.

Semiconductor tax relief senators seek in competition bill

Photo: David Williams/Bloomberg via Getty Images

An ion trap in a semiconductor chip at the Honeywell Quantum Computer Lab in Broomfield, Colorado on October 14, 2020.

Neal said he supports extending the vote to cover chip research and development, as reflected in the House version of the bill (HR 7104).

“Research and development is a priority for me,” Neal said in an interview. “There is a great opportunity here.”

representing Michael McCaul (R-Texas), the sponsor of the FABS Act, will push for research and development to be included in negotiations, its staff said in an email.

Industry has welcomed the one-time subsidies already included in Chinese bills, but companies are also hoping for recurring tax incentives that won’t be subject to repeated congressional approval. A semiconductor industry executive said the House version of the FABS Act is ideal because it applies to the entire supply chain, not just manufacturers.

Separately, Rep. Anna Eshoo (D-Calif.) said it would advocate including its printed circuit board tax incentive bill in the conference.

The Supporting American Printed Circuit Boards Act (HR 7677), co-sponsored by Rep. Blake Moore (R-Utah), would provide tax incentives to manufacturers, researchers and buyers of PCBs, which are the foundation on which tiny semiconductors are built.

“If we can integrate it, that would be wonderful,” Eshoo said in an interview. “It has good bipartisan support and we need help with the circuit boards.”

To contact the reporter on this story: Mary Curi in washington at [email protected]

To contact the editors responsible for this story: Sarah Babbage to [email protected]; Anna Yukhananov to [email protected]