Tax Notes Quotes Clete Willems on Proposed Gov’t Clawback of Benefits from Chip Manufacturers

For its article "Clawbacks Will Prevent Companies From Exporting CHIPS Benefits," Tax Notes quoted Akin Gump public law and policy partner Clete Willems. The article discusses provisions in the CHIPS and Science Act, prevent benefits, such as tax credits and grants for the semiconductor industry targeted at building domestic manufacturing capacity, from being diverted to increase foreign manufacturer capacity.

Willems, who served in the Trump White House as Deputy Assistant to the President for International Economics, characterized these as "pretty novel guardrail provisions," adding, "Guardrails were absolutely essential to make sure that the underlying objective of the legislation - which is to build more production capacity in the United States and not in other countries like China - would be achieved."

He said that tax credits and grants provided in the bill are subject to clawback provisions allowing the federal government to take back those benefits should companies engage in significant transactions that would expand semiconductor manufacturing in China or other countries of concern such as Iran, North Korea and Russia.

Willems noted, "The whole goal of this legislation is to try to bring more front-end semiconductor manufacturing into the United States and trying to build more fabs here instead of in other countries like China," adding that money's fungibility would otherwise free up monies that could be used to build capacity in China, thereby undermining Congress' objective.

Rulemaking remains to be done, notes the article, in order to provide clarity on which transactions would trigger the clawback provisions. Said Willems, "We're not going to have clarity on this overnight . . . and I'm hearing that Commerce is thinking this is going to be a three- or four-month sprint until they have some clarity on what those guardrails are going to look like."

Willems noted that, no matter how long the process takes, it is an important one "both because of what it's going to mean for companies who are interested in the funding and the tax provisions here, but also because of the precedents it could set." He believes that if this process works well here, there is going to be considerable interest from Congress in imposing similar guardrails in the future regarding the kinds of business that companies do in China.