The "Semiconductor Technology Advancement and Research Act of 2025" or the "STAR Act of 2025" amends Section 48D of the Internal Revenue Code of 1986 to include a tax credit for qualified semiconductor design expenditures, encouraging semiconductor design within the United States. It provides a tax credit equal to 25% of qualified semiconductor design expenditures paid or incurred during the taxable year.
Blake Moore
Representative
UT-1
The "Semiconductor Technology Advancement and Research Act of 2025" or "STAR Act of 2025" incentivizes domestic semiconductor design by adding qualified semiconductor design expenditures to the advanced manufacturing investment credit. This includes a 25% tax credit for these expenditures, covering in-house and contract design expenses for semiconductor design conducted in the United States. This credit aims to boost innovation and development in semiconductor technology. The credit will terminate for construction beginning or expenditures made after December 31, 2036.
STAR Act of 2025: New Tax Breaks for Chip Design Could Spark Innovation
The Semiconductor Technology Advancement and Research Act of 2025, or STAR Act, is all about boosting American chip design. Basically, it throws a lifeline to companies investing in the brains behind semiconductor technology right here in the U.S. The core of the bill? A 25% tax credit on "qualified semiconductor design expenditures."
Decoding the Design Credit
This section dives into what counts as a "qualified" expense. The bill breaks it down into two main categories: in-house and contract design. In-house includes wages for employees doing the design work, supplies used, and even the cost of using computers for the design process (Section 2). Contract design covers payments to other companies for their design services, as long as that work happens in the U.S. (Section 2). Think of a company like Tesla, if they were designing their own specialized chips for self-driving cars – the costs associated with that design work, whether done by Tesla employees or a specialized firm they hired, could qualify.
What's In, What's Out
The bill is pretty specific about what doesn't qualify. It's not about making a chip look prettier (no "style" changes) or just copying an existing design (Section 2). It's focused on genuine innovation – experimenting to make chips faster, better, or more reliable. This is crucial because it prevents companies from simply rebranding old tech and claiming the credit. This focus on new development is what could make a real difference in keeping the U.S. competitive.
Real-World Impact and Time Limits
For a startup working on the next generation of microchips, this tax credit could be a game-changer. It could free up cash to hire more engineers or invest in better equipment. For established companies, it's an incentive to keep their design teams in the U.S. rather than outsourcing. However, there's a catch: this isn't a forever deal. The credit sunsets after December 31, 2036 (Section 2). This means companies have a limited window to take advantage of it, which could spur a surge in domestic design activity in the coming years. It's also worth noting that companies can't "double-dip" – they can't use the same expenses to claim this credit and the existing research expenditure credit (Section 2). One potential challenge is that companies might try to game the system, reclassifying routine work as "innovation" to snag the credit. This is something that will need to be monitored closely.