The Biden administration on Tuesday unveiled the first opportunity for companies seeking funding under the CHIPS Act and outlined some of the strings attached to those funds — including the disclosure of stock buyback plans and a plan to provide child care.
The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act was enacted with bipartisan support in Congress last year and makes about $53 billion in funding available to subsidize the domestic production of computer chips — which are critical technological components in the modern economy. Like many laws Congress enacts, 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 which will go to projects building leading-edge, current-generation, and mature-node semiconductor facilities. Funding will come in the form of direct funding, federal loans and federally-guaranteed loans from third parties.
The agency noted that companies that are bringing private-sector funding to the table will receive "strong preference" and added a number of other conditions in line with the administration’s policy goals — including that companies limit or refrain from engaging in stock buybacks and develop a plan to provide workers with child care.
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The National Institute of Standards and Technology (NIST), which is a sub-agency of the Commerce Dept., wrote that the "CHIPS Program Office will require all applicants to detail their intentions with respect to stock buybacks over five years, including whether they intend to refrain from or limit them."
"The CHIPS Program Office will evaluate applications based on the extent of the applicant’s commitments to refrain from stock buybacks," NIST noted. "Applicants are prohibited by law from using CHIPS funds for dividends or stock buybacks."
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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, Democrat majorities enacted a 1% tax on buybacks under the Inflation Reduction Act, after initially proposing a 2% tax on the transactions. In his recent State of the Union address, President Joe Biden called for that tax rate to be quadrupled, although that proposal is unlikely to advance through Congress.
Despite the new tax and ongoing political opposition from the left, stock buybacks reached nearly $1 trillion in 2022 despite the opposition.
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The Biden administration will require that companies seeking $150 million or more in CHIPS funding submit a plan for providing the workers who build and operate their facility with 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 reach for low- and medium-income households, be located at a convenient location with hours that meet workers’ needs, grant workers confidence that they will not need to miss work for 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 are responsive to their workers’ needs, such as providing access at extended hours and addressing both supply and demand constraints in their communities." It also encourages applicants "to craft access to child care plans in tandem with community stakeholders, including state and local governments and local groups with expertise administering child care."
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Democrats had pushed to include child care provisions in the Inflation Reduction Act last year but were forced to remove them when moderate senators whose votes were essential to the spending package’s passage raised concerns about the cost of the measure.
By imposing the child care planning requirement on companies seeking larger amounts of funding under the CHIPS Act, the Biden administration can further the adoption of corporate child care policies while bypassing the impasse in Congress.
