Senate Advances Chips Bill

July 20, 2022

JULY 20 | The Senate is advancing an even broader “chips-plus” bill containing hundreds of pages of science-related provisions that Senate Majority Leader Chuck Schumer (D-N.Y.) agreed to add to a narrower bill focused on semiconductor manufacturing grants and tax incentives.

On Tuesday evening, the Senate held a procedural vote, which passed 64-34, paving the way for debate to begin on the broader package.  The text of the 1,055-page substitute amendment Schumer filed is more than 10 times as long as the alternative narrow version that would have been offered had not enough Republicans agreed to proceed to the bill.

The broader language brings the chips-plus bill much closer to the expansive competition bills the Senate (USICA) and House (COMPETES) approved separately and went to conference on earlier this year.  The main focus of all the various iterations of the bill is $54 billion in mandatory appropriations over five years that would fund grants for semiconductor manufacturing and research and 5G wireless deployment.  This new initiative will establish the “CHIPS for America Fund.”

There is $39 billion in “financial assistance to build, expand or modernize” domestic semiconductor facilities.  Up to $6 billion of that can be used in direct loans or loan guarantees.  Another $11 billion will go toward advanced research and development programs under the Commerce Department.  And $2 billion will be used for national defense tech applications or workforce training.  There are “guardrails” included in the legislation, and none of these funds can be used to underwrite stock buybacks or on facilities in China or “any other foreign country of concern.”

Meanwhile, the science provisions include funding authorizations for the National Science Foundation, Energy Department Office of Science, as well as provisions impacting NASA.  The proposal authorized more than $80 billion for the National Science Foundation over the next five years – nearly doubling the agency’s current budget – as well as $10 billion for “regional technology hubs”.  There is also funding for more advanced research and high-tech manufacturing programs under NIST.  The Energy Department is authorized for billions for advanced research programs in a variety of areas, including fusion and lasers.  Congress also wants to provide funding for STEM programs and research grants.

Lawmakers reached agreement over the past week to include tax incentives in the “chips-plus” bill that weren’t in the broader versions that went to conference.  The substitute amendment includes a multi-year 25 percent investment tax credit for semiconductor plants estimated to cost $24 billion.  The substitute does not include a tax provision to restore full and immediate expensing of research and development costs that some lawmakers including Sen. Todd Young (R-Ind.) had been advocating for in most recent days.  

The full and immediate expensing provision—which NSBA supports—expired at the end of 2021, and companies now must deduct domestic research and development costs over five years.  Sen. Young previously indicated that the negotiators were considering a one-year retroactive restoration, which would have renewed it just through 2022 , but, ultimately, it wasn’t included in the substitute amendment. There is still a possibility that a longer restoration of the full R&D expensing could be included in a broader year-end package.  

Sen. Schumer is expected to file cloture on the substitute amendment, which would set up a vote to cut off debate on it later this week, with a final vote as early as next week.