HR802-119

1. Short title This Act may be cited as the Semiconductor Technology Advancement and Research Act of 2025 or the STAR Act of 2025.

2. Qualified semiconductor design expenditures added to advanced manufacturing investment credit Section 48D of the Internal Revenue Code of 1986 is amended— in subsection (a), by striking an amount equal to and all that follows through the period and inserting , with respect to an eligible taxpayer, an amount equal to the sum of— 25 percent of the qualified investment for such taxable year with respect to any advanced manufacturing facility of such taxpayer, and 25 percent of the qualified semiconductor design expenditures paid or incurred by such taxpayer during the taxable year. by redesignating subsections (c), (d), and (e) as subsections (e), (f), and (g), respectively, by inserting after subsection (b) the following new subsections: For purposes of subsection (a)(2), the term qualified semiconductor design expenditures means the sum of the following amounts which are paid or incurred by the taxpayer during the taxable year in carrying on any trade or business of the taxpayer for— in-house semiconductor design expenses for semiconductor design conducted in the United States, and contract design expenses for semiconductor design conducted in the United States. The term in-house semiconductor design expenses means— any wages paid or incurred to an employee for qualified services performed by such employee, any amount paid or incurred for supplies used in the conduct of qualified semiconductor design, and under regulations prescribed by the Secretary, any amount paid or incurred to another person for the right to use computers in the conduct of qualified semiconductor design. The term qualified services means services consisting of— engaging in qualified semiconductor design, or engaging in the direct supervision or direct support of design activities which constitute qualified semiconductor design. The term supplies has the meaning given such term in section 41(b)(2)(C). The term wages has the meaning given such term in section 41(b)(2)(D). The term contract design expenses means 100 percent of any amount paid or incurred by the taxpayer to any person (other than an employee of the taxpayer) for qualified semiconductor design. If any contract design expenses paid or incurred during any taxable year are attributable to qualified semiconductor research to be conducted after the close of such taxable year, such amount shall be treated as paid or incurred during the period during which the qualified semiconductor design is conducted. In the case of in-house semiconductor design expenses, a taxpayer shall be treated as meeting the trade or business requirement of paragraph (1) if, at the time such in-house semiconductor design expenses are paid or incurred, the principal purpose of the taxpayer in making such expenditures is to use the results of the design in the active conduct of a future trade or business— of the taxpayer, or of 1 or more persons who with the taxpayer are treated as single taxpayer under paragraph (7). The term qualified semiconductor design— means the development (or direction of the development) of product design, design specifications, trade secrets, technology, or other intellectual property for the purpose of semiconductor manufacturing, substantially all of the activities of which constitute elements of a process of experimentation for a purpose described in subparagraph (B)(i), and does not include any activity described in subparagraph (B)(ii). For purposes of subparagraph (A)— Semiconductor design shall be treated as conducted for a purpose described in this paragraph if it relates to— a new or improved function, performance, or reliability or quality. Semiconductor design shall in no event be treated as conducted for a purpose described in this paragraph if it is conducted for purposes of— style, taste, cosmetic, or other design factors unrelated to a purpose described in clause (i), design after the commencement of commercial production of the semiconductor, unless such design is related to firmware, software, or manufacturing process activities that would otherwise meet the requirements of clause (i), duplication of an existing semiconductor product (in whole or in part) from a physical examination of the semiconductor itself or from plans, blueprints, detailed specifications, or publicly available information with respect to such semiconductor, or surveys or studies related to— efficiency, management function or techniques, market research, testing, or development, including advertising and promotions, routine data collection, or routine or ordinary testing or inspection for quality control. For purposes of this subsection, the term United States includes the possessions of the United States. For purposes of this subsection, in determining the amount of qualified semiconductor design expenditures, rules similar to the rules of section 41(f)(1) shall apply. Any qualified semiconductor design expenditures for which a credit is allowed under this section shall not be taken into account for purposes of determining the credit allowable under section 41 for such taxable year. by amending subsection (g) (as so redesignated) to read as follows:, by inserting or qualified semiconductor design expenditures paid or incurred after December 31, 2026 before the period. The credit allowed under this section shall not apply to— property the construction of which begins after December 31, 2036, or qualified semiconductor design expenditures paid or incurred after December 31, 2036. Section 56A(c)(9) of the Internal Revenue Code of 1986 is amended by striking 48D(d) and inserting 48D(f). The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act. , with respect to an eligible taxpayer, an amount equal to the sum of—(1)25 percent of the qualified investment for such taxable year with respect to any advanced manufacturing facility of such taxpayer, and(2)25 percent of the qualified semiconductor design expenditures paid or incurred by such taxpayer during the taxable year., (c)Qualified semiconductor design expenditures(1)In generalFor purposes of subsection (a)(2), the term qualified semiconductor design expenditures means the sum of the following amounts which are paid or incurred by the taxpayer during the taxable year in carrying on any trade or business of the taxpayer for—(A)in-house semiconductor design expenses for semiconductor design conducted in the United States, and(B)contract design expenses for semiconductor design conducted in the United States.(2)In-house semiconductor design expenses(A)In generalThe term in-house semiconductor design expenses means—(i)any wages paid or incurred to an employee for qualified services performed by such employee,(ii)any amount paid or incurred for supplies used in the conduct of qualified semiconductor design, and(iii)under regulations prescribed by the Secretary, any amount paid or incurred to another person for the right to use computers in the conduct of qualified semiconductor design.Clause (iii) shall not apply to any amount to the extent that the taxpayer (or any person with whom the taxpayer must aggregate expenditures under paragraph (7) receives or accrues any amount from any other person for the right to use substantially identical personal property. (B)Qualified servicesThe term qualified services means services consisting of—(i)engaging in qualified semiconductor design, or(ii)engaging in the direct supervision or direct support of design activities which constitute qualified semiconductor design.If substantially all of the services performed by an individual for the taxpayer during the taxable year consists of services meeting the requirements of clause (i) or (ii), the term “qualified services” means all of the services performed by such individual for the taxpayer during the taxable year.(C)SuppliesThe term supplies has the meaning given such term in section 41(b)(2)(C). (D)WagesThe term wages has the meaning given such term in section 41(b)(2)(D). (3)Contract design expenses(A)In generalThe term contract design expenses means 100 percent of any amount paid or incurred by the taxpayer to any person (other than an employee of the taxpayer) for qualified semiconductor design.(B)Prepaid amountsIf any contract design expenses paid or incurred during any taxable year are attributable to qualified semiconductor research to be conducted after the close of such taxable year, such amount shall be treated as paid or incurred during the period during which the qualified semiconductor design is conducted. (4)Trade or business requirement disregarded for in-house design expenses of certain startup venturesIn the case of in-house semiconductor design expenses, a taxpayer shall be treated as meeting the trade or business requirement of paragraph (1) if, at the time such in-house semiconductor design expenses are paid or incurred, the principal purpose of the taxpayer in making such expenditures is to use the results of the design in the active conduct of a future trade or business—(A)of the taxpayer, or(B)of 1 or more persons who with the taxpayer are treated as single taxpayer under paragraph (7).(5)Qualified semiconductor design(A)In generalThe term qualified semiconductor design—(i)means the development (or direction of the development) of product design, design specifications, trade secrets, technology, or other intellectual property for the purpose of semiconductor manufacturing, substantially all of the activities of which constitute elements of a process of experimentation for a purpose described in subparagraph (B)(i), and(ii)does not include any activity described in subparagraph (B)(ii).(B)Purposes for which research may qualify for creditFor purposes of subparagraph (A)—(i)In generalSemiconductor design shall be treated as conducted for a purpose described in this paragraph if it relates to—(I)a new or improved function,(II)performance, or(III)reliability or quality.(ii)Certain purposes not qualifiedSemiconductor design shall in no event be treated as conducted for a purpose described in this paragraph if it is conducted for purposes of—(I)style, taste, cosmetic, or other design factors unrelated to a purpose described in clause (i),(II)design after the commencement of commercial production of the semiconductor, unless such design is related to firmware, software, or manufacturing process activities that would otherwise meet the requirements of clause (i),(III)duplication of an existing semiconductor product (in whole or in part) from a physical examination of the semiconductor itself or from plans, blueprints, detailed specifications, or publicly available information with respect to such semiconductor, or(IV)surveys or studies related to—(aa)efficiency,(bb)management function or techniques,(cc)market research, testing, or development, including advertising and promotions,(dd)routine data collection, or (ee)routine or ordinary testing or inspection for quality control.(6)United StatesFor purposes of this subsection, the term United States includes the possessions of the United States.(7)Aggregation of expendituresFor purposes of this subsection, in determining the amount of qualified semiconductor design expenditures, rules similar to the rules of section 41(f)(1) shall apply. (d)Coordination with credit for increasing research expendituresAny qualified semiconductor design expenditures for which a credit is allowed under this section shall not be taken into account for purposes of determining the credit allowable under section 41 for such taxable year., and (g)Termination of creditThe credit allowed under this section shall not apply to—(1)property the construction of which begins after December 31, 2036, or(2)qualified semiconductor design expenditures paid or incurred after December 31, 2036..