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Tax & AccountingNovember 01, 2022

New York's Green CHIPS incentives for semiconductor manufacturing

By: CCH AnswerConnect Editorial

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New York moved fast to align itself with the federal CHIPS Act, which was signed into law on Aug. 9, 2022, and generally provides a 25% federal investment tax credit for semiconductor manufacturing.

Two days after the federal enactment, New York Gov. Kathy Hochul signed the state’s Green CHIPS law, announcing that the program will position New York to benefit from the federal CHIPS Act provisions designed to increase domestic semiconductor manufacturing.

Gov. Hochul noted that the Green CHIPS law will enhance New York’s competitiveness against other states trying to attract chip manufacturers, while also ensuring that the expansion of advanced manufacturing is environmentally sustainable.

On Oct. 4, 2022, Gov. Hochul and other officials announced plans for Micron Technology to invest up to $100 billion to establish a semiconductor manufacturing campus in Upstate New York.

What tax incentives are available under the Green CHIPS program?

The Green CHIPS incentives were enacted as an expansion of New York’s existing Excelsior credit program. Credits available to Green CHIPS projects under the program include:

  • An investment tax credit of up to 5% of qualified investments;
  • A research and development tax credit of up to 8% of expenditures; and
  • A jobs tax credit up to 7.5% of gross wages per new job (applicable to the first $200,000 of gross wages per job).

How do projects qualify for the incentives?

To be eligible for the program, qualifying projects must:

  • Fall within the semiconductor manufacturing and related equipment and material supplier sector;
  • Create at least 500 net new jobs and make at least $3 billion in investment over a 10-year term (projects in good standing may enter a second 10-year term with additional new jobs and investment);
  • Adopt sustainability measures to mitigate the project’s greenhouse gas emissions;
  • Pay federal prevailing wage rates for project construction;
  • Commit to worker and community investments; and
  • Result in at least $15 of private investment for every $1 of state investment.

What limits are placed on the incentives?

The total amount of tax credits issued for tax years 2022 to 2041 for Green CHIPS projects cannot exceed $500 million per year. Any amount of tax credits not awarded for a particular tax year may be used to award tax credits in another tax year.

What are other states doing?

As noted below, several other states have enacted provisions over the past year to attract companies engaged in semiconductor manufacturing. Considering the recent federal legislation, it is expected that additional states will adopt incentives for semiconductor manufacturing in the near future.

Idaho enacted a sales and use tax exemption for qualifying projects relating to semiconductor fabrication, assembly, testing, advanced packaging, and research and development.

Illinois enacted a package of new income tax credits and other tax incentives to attract microchip and semiconductor manufacturing to the state.

Ohio expanded the application of its megaproject incentives to include semiconductor wafer manufacturing facilities and suppliers. Incentives are available under the property tax, sales tax, and commercial activity tax.

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