Micron is getting billions more in taxpayer money than anyone is talking about

Syracuse, N.Y. -- When President Joe Biden came to Syracuse last month, he announced that Micron Technology would get a $6.1 billion grant to build semiconductor plants in Central New York and Idaho.

But the total taxpayer subsidy for Micron for building two plants in Clay and one in Boise could be more than three times that high.

Micron’s potential subsidies could be more than $20 billion, from a combination of federal, state and local incentives. Some of that money would come from direct government payments, like the CHIPS Act grant Biden touted.

The sweetest slice of the subsidy pie, however, would be a little-discussed provision of the CHIPS Act called the advanced manufacturing investment credit. That tax credit allows chipmakers like Micron to get back from the government 25% of what they spend on buildings and machines to produce semiconductors, or chips.

Micron says it will spend $50 billion through 2030 to build and outfit two fabrication plants, or fabs, in the town of Clay and one at its headquarters in Boise, Idaho.

For every dollar Micron spends specifically for chipmaking buildings and equipment, it can get 25 cents back on its taxes. Not all of that spending in Clay and Boise would qualify for the credit, but the vast majority would.

That means the tax credit alone could add up to more than $10 billion for Micron over the next six years, according to experts and syracuse.com’s analysis of publicly available numbers. The credit is the part of the federal effort that few are talking about. Biden never even mentioned the tax credit last month.

The CHIPS grant and tax credit could add up to a $16 billion federal subsidy for Micron to build the three fabs. The Clay project is much larger and would likely account for most of those subsidies.

It’s a lucrative deal for an American company that earned a $43 billion profit over the past decade by building chips overseas. That gigantic public support is key, national leaders say, to bringing chipmakers like Micron back from Asia to the U.S.

In exchange for that federal taxpayer support, Micron has said it would hire 4,800 people for the first two fabs in Clay and 2,000 in Idaho. That means each of those jobs could cost taxpayers more than $2 million. Micron has said the average pay for workers in Clay would exceed $100,000.

There’s another sweetener from the federal government for Micron: up to $7.5 billion in low-interest loans. Micron would have to repay the money, but the company could save undisclosed millions in interest and fees.

The CHIPS grant, tax credit and loan represent only Micron’s federal subsidies. Both New York and Idaho are giving Micron big incentives, too.

In New York, Micron could get another $2 billion to $3 billion in state investment and job creation credits for the two fabs in Clay. The company could also save several billion dollars in local and state sales taxes, according to county officials.

The incentives are huge, but Micron’s impact will be, too. The company’s planned projects would be the biggest in the history of both New York and Idaho. The Clay project has the potential to transform Central New York’s economic landscape and increase Onondaga County’s population by more than 100,000 people. It could have an economic impact of nearly $17 billion a year, according to a study commissioned by New York state.

While jobs have been a major focus of Micron’s announcement to come to Central New York, the CHIPS and Science Act, passed in 2022, is not principally a job creation law.

The larger goal, say Biden, Micron and U.S. Sen. Charles Schumer, is to bring chip plants back from Asia, where government largesse makes production much cheaper than in the U.S.

Schumer and Biden say the U.S. economy and national security depend upon domestic production of memory computer chips, which are the lifeblood of electronic devices from cell phones to jet fighters. Micron is the only U.S. manufacturer of memory chips, and demand is expected to skyrocket along with the boom in artificial intelligence and autonomous vehicles.

What we don’t know

The CHIPS Act has been secretive from the start. The law specifically forbids the government from releasing information about company applications. The U.S. Department of Commerce, which is overseeing the $52 billion CHIPS pool, has said little about the terms of the CHIPS subsides.

It’s also early in the process: The agreements reached with chipmakers for grants are preliminary, and many of the details have yet to be worked out and made public.

Because of that, there’s a lot we don’t know about Micron’s federal subsidy package, including:

• Exactly how much Micron would receive from the federal tax credit. While the law puts no cap or timetable on the credit, the Internal Revenue Service has yet to issue final rules. Micron says it “expects to benefit” from the tax credit, but offered no details. Intel, which received the biggest CHIIPS grant, offers a clue: The company says it plans to claim $25 billion in tax credits on its projected $100 billion in spending over the next five years.
• The terms of Micron’s $6.1 billion grant award. We don’t know what milestones Micron must meet to get the money.
• The company’s eventual savings from $7.5 billion in CHIPS Act loans, which could be a combination of lower-than-market interest rates and reduced transaction fees.
• The breakdown of Micron’s $50 billion in spending between Clay and Boise.

And we might never know the final total Micron receives from the tax credit. The credit would be claimed on Micron’s income tax returns, which are not public. There is no provision in the CHIPS Act that requires public disclosure.

Billion-dollar rewards for bringing chip-making home

Building and outfitting fabs are among the most expensive and complex construction projects on the planet. Getting a tax break on building and equipment costs in the 2022 CHIPS and Science Act was a huge win for semiconductor manufacturers.

Chipmakers say it’s 30% to 40% cheaper to build and run fabs in other countries, like Taiwan and Singapore.

Schumer has said the tax credit was a late addition to the CHIPS bill that upset some senators, who thought it was too much. But without it, Schumer said, Micron never would have considered coming to White Pine Commerce Park, in Clay.

“Micron was very clear they couldn’t invest in the United States, let alone Syracuse, without the CHIPS incentive and the investment tax credit together,” said Schumer, the architect of the CHIPS Act.

Micron’s executive in charge of building the Clay and Boise fabs agreed.

“It’s incredibly important for us to be able to compete on cost with other countries and bring manufacturing back to the U.S.,” said Scott Gatzemeier, Micron’s corporate vice president for front end U.S. expansion. “We have not been shy about saying we would not be looking to invest in the U.S. if it was not for incentives that make it cost-competitive.”

Fifty years ago, 90% of the kind of memory chips Micron specializes in were built in the U.S. Now, Gatzemeier said, just 2% are made here, and all of those are made by Micron in its Virginia fab.

Gatzemeier said the company won’t speculate on what the eventual tax break might be, especially because the final IRS regulations have not been released.

Micron originally said fabs 1 and 2 in Clay would open by 2032. That has now been moved up to 2029. The third and fourth fabs would be done by 2041.

How the tax credit works

After a company spends money on chipmaking buildings and equipment, it can deduct 25% of that from its tax return. The tax credit is considered “refundable,” which means the company gets the money even if the credit exceeds the company’s tax bill.

Offices, parking structures and other non-manufacturing buildings wouldn’t qualify for the credit. However, it is much cheaper to build and equip an office than a fab, where individual machines can cost hundreds of millions of dollars.

Good Jobs First, a group that tracks government subsidies, estimates that after removing offices and other nonmanufacturing space from the equation, Micron could get $10 billion from the tax credit.

The other three semiconductor companies that have won big CHIPS grants -- Intel, Samsung and Taiwan Semiconductor Manufacturing Co. -- say they’ll apply for the tax credits, too. Those companies and Micron plan a combined $273 billion in projects; 25% of that would be $68 billion.

Intel already claimed $845 million from the credit in 2023, according to the company’s annual report. Intel’s chief executive officer has said the company plans to claim $25 billion in tax credits.

Intel’s share of the tax credit, let alone credits claimed by all four big chipmakers, would exceed the $24 billion the Congressional Budget Office estimates will be paid out in tax credits through 2031. Congress has so far allotted $24 billion. It’s not clear what happens if that money runs out and companies keep applying.

There’s no limit on how much companies can get in either the CHIPS Act or the Internal Revenue Service draft regulations. There is also no expiration date, although construction must start by end of 2026 to qualify for the credit. Micron says it plans to break ground in Clay in 2025.

Other tax breaks and grants Micron is counting on

This estimated $10 billion in tax credits is the largest of a lucrative list of public subsidies Micron would receive for the first two Clay fabs.

In addition to the tax credit, and the $6.1 billion CHIPS Act award, Micron could get billions more in state and local subsidies. That support ranges from lower tax bills to substantial help building the public infrastructure needed to run the massive chipmaking complex.

The biggest of those is the $2.8 billion from New York state, mostly from the existing Green CHIPS job program, for building the first two fabs. The law rewards the creation of jobs and carbon-neutral emissions. That subsidy comes after Micron creates a certain number of jobs and spends a predetermined amount of money.

Micron could also save $700 million in discounts on electricity from the New York Power Authority for building the first two Clay fabs.

New York state has committed to another $300 million in spending, including $200 million for roads and other infrastructure improvements around the White Pine Commerce Park in Clay, where Micron plans to build.

Onondaga County is offering its own hefty tax breaks and subsidies. The county plans to spend $1 billion in wastewater infrastructure, which will include an industrial pretreatment plant on the Micron campus and a massive expansion of the Oak Orchard treatment plant, in Clay, that would serve Micron and the business and residential development expected to follow. Micron will be expected to pay back much of that cost in higher rates.

Micron has applied for local property and school tax breaks from Onondaga County and the Liverpool school district that would total about $300 million over 49 years. The company would also be exempt from paying sales and use taxes on construction, which could add up to several billion dollars.

How this package compares

If you ignore the federal money and just count the state and local tax subsidies, Micron is already one of the country’s most subsidized projects ever, according to the Good Jobs First database. In raw numbers, the $6.3 billion already announced that Micron would get from state and local sources would be the second-biggest subsidy on record, the group says. That would be for the full buildout of all four fabs in Clay.

Only Boeing’s $8.7 billion package in 2013 in Washington state was bigger, according to Good Jobs First.

Taking inflation into account, the Micron package falls to third, behind the incentives Alcoa received in 2007 in New York.

It’s hard to compare the federal subsidies because for decades Washington didn’t get heavily involved in industrial policy, said Jacob Whiton, a research analyst with Good Jobs First.

We may never know the full number

We might never know the final tax credit Micron receives. The credits would be submitted on Micron’s annual tax returns, which, like yours, are private.

The final regulations for the tax break aren’t done, Gatzemeier said, so it’s possible companies could eventually be required to disclose the amount they received. Neither the CHIPS Act nor the IRS draft regulations require public disclosure.

A 2021 Securities and Exchange Commission rule requires companies to report the aggregate amount received from government subsidies. The rule doesn’t require companies to itemize those incentives, however.

In Micron’s 2023 annual report, written before Biden’s announcement, the company projected it would receive more than $3 billion in government subsidies worldwide over the next decade. The report did not say what those subsidies were or which governments granted them.

“We also receive a 25% investment tax credit on qualified investments in U.S. semiconductor manufacturing under the CHIPS Act,” according to the report, which does not say how much Micron expects to receive.

It doesn’t have to be that way. Intel, on its annual reports, breaks out the incentives by location and agency. In 2023, Intel reported that it received a CHIPS investment tax credit of $845 million. Intel has already started construction on fabs in Ohio and Arizona. GlobalFoundries, in Saratoga County, said in its 2023 annual report that the company filed for a $66.4 million refund under the CHIPS tax credit.

“You’re kind of at the mercy of these companies for the level of information they’re willing to provide,” Whiton said.

Glenn Coin covers Micron Technology for syracuse.com/ The Post-Standard. Got a tip, comment or story idea? Contact Glenn at: email | 315-470-3251