The Biden administration on Tuesday unveiled the first opportunity for companies seeking funding under the CHIPS Act and outlined some of the commitments attached to those funds — including disclosing stock buyback plans and a child care plan.
The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act was enacted with bipartisan support in Congress last year and provides approximately $53 billion in funding to subsidize the domestic production of computer chips — which are critical technological components in the modern economy. Like many laws enacted by Congress, the CHIPS Act tasks federal agencies with implementing the law and developing certain priorities or standards for the programs created.
Biden’s Commerce Department announced its priorities for the first tranche of CHIPS funding awards that will go to projects that build state-of-the-art, current generation and mature node semiconductor facilities. Funding will come in the form of direct funding, federal loans and third-party federally guaranteed loans.
The agency noted that companies that bring private-sector financing to the table would receive “strong preference” and added a number of other conditions in line with the administration’s policy goals — including that the companies limit or avoid equity buybacks and develop plans to provide workers with childcare.
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The National Institute of Standards and Technology (NIST), which is a sub-agency of the Commerce Department, wrote that “the CHIPS Program Office will require all applicants to detail their intentions with respect to stock repurchases over a five-year period; including whether I intend to avoid or limit them.’
“The CHIPS Program Office will evaluate applications based on the extent of the applicant’s commitments to refrain from stock purchases,” NIST noted. “Applicants are prohibited by law from using CHIPS funds for dividends or share repurchases.”
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Corporate stock buybacks have drawn the ire of Democrats in recent years who believe they primarily benefit corporations, executives and wealthy investors.
During the last Congress, the Democratic majorities approved a 1% tax on acquisitions under the Inflation Reduction Act, after initially proposing a 2% tax on transactions. In his recent State of the Union address, President Joe Biden called for quadrupling that tax rate, though the proposal is unlikely to advance in Congress.
Despite the new tax and continued political opposition from the left, share buybacks reached nearly $1 trillion in 2022 despite the opposition.
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The Biden administration will require companies seeking CHIPS funding of $150 million or more to submit a plan to give workers who build and operate their facilities access to child care. NIST wrote that “the first-of-its-kind commitment will be essential to getting people — especially women — into the workforce.”
The agency’s fact sheet explained that applicant companies’ child care plans must be “within close proximity to low- and moderate-income households, be conveniently located with hours that meet employee needs, provide employees with confidence that they will not need to miss work on unexpected child care issues and provide a safe and healthy environment that families can trust.”
NIST added that the CHIPS Program Office expects applicant companies to “devise solutions that meet the needs of their workers, such as providing access to extended hours and addressing supply and demand constraints in their communities.” It also encourages applicants to “build access to child care plans in conjunction with community stakeholders, including state and local governments and local groups with expertise in child care management.”
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Democrats pushed to include child care provisions in the inflation-reduction law last year, but were forced to remove them after moderate senators whose votes were key to passing the spending package raised concerns about the measure’s cost.
By imposing a child care planning requirement on companies seeking greater amounts of funding under the CHIPS Act, the Biden administration can advance the adoption of corporate child care policies by bypassing the congressional gridlock.