Senate Draft Tax Bill Expands CHIPS Act Investment Tax Credit

Key Provision: Expanded Investment Tax Credit for Chipmakers
The Senate draft currently includes a proposed expansion of the Advanced Manufacturing Investment Tax Credit, a key incentive originally enacted under the 2022 CHIPS and Science Act. Specifically, the Senate proposal would:

• Increase the credit from 25% to 30% of eligible investments in semiconductor manufacturing facilities; and
• Allow companies that begin construction by the end of 2026 to continue claiming credits for ongoing work beyond that date, in recognition of the long construction timelines of semiconductor manufacturing facilities.

Under current law, the credit equals 25% of the qualified investment in an advanced manufacturing facility. Such a facility must be primarily engaged in the production of semiconductors or semiconductor manufacturing equipment. Qualified property must meet the following criteria:

• Placed in service after December 31, 2022
• Tangible property subject to depreciation or amortization
• Integral to the operation of the facility
• Originally placed in service by the taxpayer

The Senate proposal appears to be intended to encourage early project launches and sustain momentum in domestic semiconductor manufacturing.

A Refresher: The CHIPS and Science Act
The CHIPS and Science Act, signed into law in 2022, is a bipartisan initiative to restore U.S. leadership in semiconductor production and reduce reliance on foreign supply chains. The law authorized a range of incentives, including:

• $39 billion in direct funding to support construction and equipment for chip fabrication and R&D
• Up to $75 billion in loan and loan guarantee authority
• The Advanced Manufacturing Investment Tax Credit, which is uncapped and has emerged as one of the most financially significant incentives in the law.

According to a June 2025 report released by the Commerce Department Office of the Inspector General, covering the period between August 22 and January 2025:  

• The CHIPS Program Office has made 20 awards totaling up to $33.7 billion in direct funding and up to $5.5 billion in loans.
• The CHIPS Research and Development Office has awarded nearly $8.3 billion to fund R&D initiatives, including the National Semiconductor Technology Center, National Advanced Packaging Manufacturing Program, and CHIPS Manufacturing USA Institute.

Political Outlook and Trump Administration Stance on CHIPS Act Incentives
Although President Trump previously called for repealing the CHIPS Act, lawmakers from both parties continue to support its programs, particularly in states and districts benefiting from semiconductor investment.

In March 2025, President Trump issued an executive order (EO) creating the U.S. Investment Accelerator, a new office within the Department of Commerce tasked with expediting and facilitating investments exceeding $1 billion in the United States as well as overseeing the CHIPS incentive program. (See Pillsbury’s alert on the Investment Accelerator here.) The EO places the CHIPS program office under the purview of the Accelerator, directing the Secretary of Commerce to renegotiate agreements made under the prior administration, with the goal of achieving “improved terms” for U.S. taxpayers, which may include pushing awardees to increase the size and scope of their projects.

Next Steps
The Senate’s expansion of the tax credit reflects a policy preference for continued federal support for the domestic semiconductor industry, but also a shift to performance-based incentives like credits over direct subsidies as the preferred driver for large-scale manufacturing investments.

The Senate’s tax package is expected to undergo revisions before a floor vote. The House will then need to consider a reconciled version before the bill can proceed to the President’s desk, as both chambers need to pass the same version of the bill. Companies engaged in semiconductor projects—or those evaluating U.S. manufacturing incentives more broadly—should closely monitor the evolving landscape, particularly around tax credit eligibility and timing.

For additional information or strategic guidance, please contact your Pillsbury tax or public policy contact.