The Biden administration finalized rules for a 25% tax credit for semiconductor manufacturing projects, expanding eligibility for what is likely to be the largest incentive program from the 2022 Chips and Science Act. 

The new regulations, which come more than a year after the initial proposed rules, mean that a wider swath of companies will be able to get the tax breaks. That includes businesses that produce the wafers that are ultimately turned into semiconductors, as well as manufacturers of chips and chipmaking equipment.

The credits also will apply to solar wafers — an unexpected shift that could help spur domestic production of panel components. So far, the U.S. has struggled to foster manufacturing of those parts, despite a surge of investment in U.S. panel-making factories. 

Samsul Said/Bloomberg

But the benefits don’t extend all the way up the supply chain. Still excluded are facilities that produce underlying materials like polysilicon, which is used to make wafers. That approach is consistent with how the original law was written, as well as how the Commerce Department defines semiconductors and equipment as opposed to materials, a Treasury official said. 

The tax refunds are one of three main subsidy streams available from the Chips Act, which aims to revitalize the American semiconductor industry after decades of production shifting abroad. The law also set aside $39 billion in grant funding — more than 90% of which has been allocated, though not yet spent — and $75 billion in loans and loan guarantees, of which officials are likely to use less than half. 

The latter two incentive categories have garnered the most attention — President Joe Biden has even visited factories to herald the announcements — but it’s the tax credits that could be most meaningful for companies. Proposed grants typically cover 10% to 15% of project costs, compared with 25% for tax credits. The idea is to make it just as cost-effective to build a factory in the U.S. as in Asia.

“Our goal is to give you the minimum amount of money necessary to get you to expand on our shores in a way that advances our economic and national security objectives,” Mike Schmidt, director of the Commerce Department’s chips office, said in an August interview when asked about tax credits. “That means looking at all sources of funding and then figuring out how our funds get you over that hump.”

Some companies argued in negotiations that the tax credits shouldn’t “count against” their other funding, Schmidt said — a line of reasoning that didn’t sway government officials.

Chip companies have announced more than $400 billion in planned U.S. investment over the past several years, including massive factories from leading-edge manufacturers like Taiwan Semiconductor Manufacturing Co. and Intel Corp. There also are efforts underway to make older-generation processors and other supplies.

The surge in activity likely means that the Chips Act will be more expensive than anticipated.

The Congressional Budget Office originally estimated that the tax credits would cost $24 billion in forgone revenue. But the true number could be more than $85 billion, according to a June report by the Peterson Institute for International Economics that used “very conservative assumptions based on the current investment trends.” 

That would exceed the original projected cost of the entire Chips Act, the report said, “resulting in a total cost overrun of nearly 80%.”

Asked whether the Treasury Department has its own cost estimate for the tax credit, an official didn’t provide a specific number. But any overrun could be seen as a win by the Biden administration since it represents additional investments in American manufacturing. 

In almost every case, tax credits will account for the greatest share of Chips Act incentives going to any one company. Micron Technology Inc., for example, expects to get around $11.3 billion in tax credits for two chip factories in New York. That’s compared with $6.1 billion in grants and $7.5 billion in loans to support those two facilities plus another plant in Idaho.

Texas Instruments Inc. anticipates $6 billion to $8 billion in tax credits — as much as five times the size of its Chips Act grant.

The Public Company Accounting Oversight Board announced today it settled a disciplinary order sanctioning Yusufali & Associates and Yusufali Musaji, the firm’s owner and partner for multiple violations of PCAOB rules and standards.

The PCAOB imposed a $50,000 fine, revoked the firm’s registration and barred its partner.

The sanction is the latest in a long line of increased enforcement efforts by the PCAOB, most recently including sanctions against four firms in September for failing to make required communications with audit committees, as well as one firm for violating reporting requirements. The Board previously sanctioned Baker Tilly, Grant Thornton Bharat, Mazars and SW Audit in February, as well as three firms in November 2023 and five firms in July 2023.

The violations committed by the Yusufali & Associates and/or Musaji include:

• Failing to obtain engagement quality reviews;
• Failing to obtain sufficient appropriate audit evidence and to perform sufficient audit procedures for multiple significant accounts;
• Failing to determine whether there are critical audit matters;
• Failing to make certain required audit committee communications;
• Failing to comply with audit documentation requirements and failing to cooperate with a Board inspection; and,
• Failing to file Form APs.

The Board also found that the firm’s quality control system failed to provide reasonable assurance that the firm:

1. Would comply with standards, including requirements regarding audit documentation, engagement quality reviews and Form APs filings, and, 
2. Only undertook engagements that it could reasonably expect to perform with professional competence.

“To protect investors, the PCAOB will not hesitate to hold accountable auditors who fail to perform audits in accordance with PCAOB rules and standards,” PCAOB Chair Erica Williams said in a statement.

Without admitting or denying the finding, Musaji and the firm consented to the PCAOB’s order, which:
 

• Censures both respondents and imposes a $50,000 civil money penalty, jointly and severally, against them; 
• Revokes the firm’s registration with the right to reapply after three years; 
• Bars Musaji with a right to petition to terminate his bar after three years; 
• Requires the firm to undertake remedial efforts to improve its system of quality control before reapplying to registration; and, 
• Requires Musaji to complete 50 additional hours of continued professional education before seeking to terminate his bar.

Global confidence among accountants and finance professionals globally declined moderately in the third quarter of this year and is now at its lowest level since Q4 2023, although confidence increased in North America, according to the quarterly Global Economic Conditions Survey from the Association of Chartered Certified Accountants and the Institute of Management Accountants.

The survey, released Tuesday, found CFOs’ confidence also declined globally amid a sharp deterioration in their assessment of new orders. Even though confidence improved in North America, it recovered less than half of its previous decline. In contrast, there was a significant decrease in confidence in the Asia Pacific region. Concerns about the continued weakness of the Chinese economy probably weighed on sentiment, with the survey being completed before the authorities announced a pivot to a more aggressive policy stimulus. Confidence also fell significantly in Western Europe, driven by a decline in U.K. confidence, amid concerns about tax hikes in the upcoming budget.

The survey also asked accountants to rank their top three risk priorities and for the second consecutive quarter, regulatory change ranked at the top for respondents in financial services, while the economy remained in first place for those in the corporate sector. Both public sector entities and small and medium-sized practices cited cybersecurity as their largest concern. But for the first time, climate change claimed a spot in the top three, with the public sector placing it third. Another first-ever was by region, with Western Europe ranking talent scarcity and retention first.

“The global economy has been quite resilient so far in 2024, but the latest survey of accountants points to some easing in growth at the current juncture,” said ACCA chief economist Jonathan Ashworth in a statement. 

The proportion of respondents reporting increased operating costs remains elevated by historical standards in most parts of the world, although the share of global respondents reporting problems accessing finance moved lower again amid policy easing by central banks. 

“While the increase in confidence in North America is welcome, the key indicators are consistent with some slowing in the U.S. economy and significant caution on behalf of businesses,” said 

Alain Mulder, senior director of Europe operations and global special projects at the IMA, in a statement. “But with the job market showing resilience and the Federal Reserve beginning its rate-cutting cycle, the most likely scenario for the U.S. economy still looks to be a soft landing. 

In North America, confidence improved somewhat in Q3, but recovered less than half of Q2’s decline, and remained below its historical average. The New Orders, Capital Expenditure and Employment indices all declined in different degrees and are well below their historical averages. The proportion of respondents reporting increased operating costs eased to its lowest since Q1 2021, while remaining high by historical standards. 

“All in all, while the increase in confidence is welcome, the key indicators are consistent with some slowing in the U.S. economy and significant caution on behalf of businesses,” said the report. “But with the job market showing resilience and the Federal Reserve beginning its rate-cutting cycle, the most likely scenario for the U.S. economy still looks to be a soft landing. Nevertheless, given the uncertainty faced by firms amid the election, and sharply heightened geopolitical tensions, one cannot rule out a sharper-than-expected slowdown.”