Supply Chain Security and Growth Act of 2025
The Supply Chain Security and Growth Act of 2025 creates a new Section 48F credit—the Critical Supply Chains Reshoring Investment Credit. It offers a 40% credit of the basis of qualified property placed in service for a qualifying “critical supply chain facility” that manufactures certain strategic items (such as active pharmaceutical ingredients, drugs, biologics, medical countermeasures, medical diagnostics, semiconductors, aerospace equipment, and artificial nanomaterials) and is located in specified possessions or Puerto Rico. The credit is designed to encourage domestic reshoring of key supply chains, particularly in economically distressed zones, while addressing national security concerns about foreign-owned or control-laden investments. The bill also makes the credit transferable, allows an election to treat certain taxes and credits as applicable entities, coordinates with the electricity production credit to avoid double benefits, and broadens a related tax credit for taxes paid to possessions (Puerto Rico and other U.S. possessions). Effective date: property placed in service after December 31, 2024.
Key Points
- 1Establishes a new 48F critical supply chains reshoring investment credit equal to 40% of the qualified investment for a qualifying taxpayer in a critical supply chain facility placed in service in a given year.
- 2Defines a qualifying facility and eligible properties and activities. Eligible facilities must primarily manufacture items such as APIs, drugs, biologics, medical countermeasures, diagnostics, semiconductors, aerospace equipment, or artificial nanomaterials, and must be located in a specified possession or Puerto Rico.
- 3Eligibility rules include restrictions on “prohibited foreign entities” and related ownership/control limits, with complex definitions of “covered nations” and “covered officers” to determine eligibility. Aggregation rules allow affiliated groups to treat investments collectively, with a focus on groups investing in economically distressed zones (census tracts that are Opportunity Zones and have at least 30% poverty).
- 4Coordination and interaction with other credits and rules: the credit is coordinated with the electricity production credit (Section 45), may be made transferable, and can be elected to be treated as an applicable entity for purposes of related credits; it also becomes part of the overall investment credit framework under Section 46.
- 5Effective date and scope: applies to property placed in service after December 31, 2024.
- 6Section 3 adds a separate enhancement to the deemed foreign tax credit for taxes paid to U.S. possessions, increasing the deemed credit from 80% to 100% for taxes paid or accrued to possessions like Puerto Rico, effective for amounts after December 31, 2024.