The semiconductor industry is in line for up to $10 billion in New York tax breaks over the next 20 years after Gov. Kathy Hochul approved the measure on Thursday morning, despite some critics saying it amounts to corporate welfare.
The Green CHIPS tax break allows for up to $500 million a year in state tax credits for the semiconductor industry over the next two decades — a move meant to lure chip manufacturers to New York amid a global race to fix an ongoing shortage, and ultimately make the U.S. less dependent on semiconductors built overseas. Currently, 12% of the world’s semiconductors are built in the U.S., according to the Semiconductor Industry Association.
The measure would require chip plants to commit to a minimum investment of $3 billion and 500 net new jobs, as well as mitigate their emissions. If it ends up being fully expended, the new measure would become the largest tax break offered by New York state to a specific industry – surpassing the $420 million a year flagged for the film industry, according to Reinvent Albany, a government accountability group.
“We say: You come to New York or you rebuild in New York, you continue to invest in New York? We will welcome you with open arms,” Hochul said at a bill-signing event at the College of Nanoscale Science and Engineering in Albany.
The state Legislature approved the measure with little public debate or opposition in early June, just before they ended their annual legislative session. It will largely affect economies in upstate New York, where counties expect it to be a significant job creator should semiconductor companies take advantage of the tax break to build there. Semiconductors help power a range of electronics, from smartphones to computers.
At the time, Gov. Kathy Hochul said the bill was necessary to supplement the federal CHIPS and Science Act – which includes more than $50 billion flagged for semiconductor manufacturing and research. President Joe Biden signed the bill into law this week.
Among those who joined Hochul at the state’s bill-signing event was Senate Majority Leader Chuck Schumer, who said the federal and state measures “will be a ‘rocket chip’ to help New York's economy take off.”
But the state bill has its critics, who say it amounts to a giveaway to corporate interests.
Reinvent Albany raised alarm when the surprise bill was fast-tracked through the Legislature in the waning days of its session, calling it an “ugly, cynical giveaway that could not withstand public scrutiny.” The organization called for public hearings to assess the measure, which did not happen.
“Companies themselves say that access to infrastructure, a qualified workforce, and quality of life are far more important factors than tax breaks,” the group wrote in a statement Thursday. “We have seen no evidence suggesting that chip manufacturers are an exception.”
New York has spent decades chasing semiconductor manufacturers, including GlobalFoundries, which has benefitted from more than $1 billion in state incentives and recently broke ground on a second chip manufacturing plant in Saratoga County. It has also pumped major incentives into the Albany NanoTech Complex, the expansive facility where Hochul signed the bill on Thursday.
The tax credit will cover up to 5% of capital expenses and 8% of research and development expenses, according to the state. Among other things, it also provides a credit of up to 7.5% of the first $200,000 of salaries and wages for each new job created.
Just six of 213 state lawmakers voted against it, including three from New York City: state Sen. Liz Krueger, and Assemblymembers Ron Kim and Jessica Gonzalez-Rojas.
“I respect the people who have dreams of what might happen, but I have watched this state for decades make deals that are races to the bottom with people from other states … where we give away our tax dollars,” Krueger said during the June 2nd vote. “Sometimes when you add them up, they’re dramatically more than could ever be seen from economic activity.”
On Thursday, Hochul pushed back against critics, noting that the tax break is an extension of the state’s existing Excelsior tax credit – which is provided only after a private investment is made and jobs are created.
“We’re having a performance-based incentive, which means this is not a handout,” Hochul said. “It's not a handout, but what this is gonna do is offset the cost of developing a semiconductor plant, and we're gonna do it in a very green way.”