WASHINGTON, Aug 25 (Reuters) -

The U.S. Commerce Department said on Monday that one of its

agencies will take over operational responsibility to oversee

$7.4 billion in semiconductor research funds, saying that the

private non-profit established under the Biden administration to

handle that function "served as a semiconductor slush fund."

The National Institute of Standards and Technology will

assume operational responsibility for the National Semiconductor

Technology Center, a public-private consortium established under

Democratic President Joe Biden, from the National Center for the

Advancement of Semiconductor Technology (Natcast).

The department said the Biden administration illegally

created Natcast, and as a result the agreement granting the

organization up to $7.4 billion in taxpayer money is invalid.

Natcast was an "effort to skirt clear legal restrictions

prohibiting government agencies from establishing corporations,"

the Commerce Department said on Monday in a statement, and said

that the Biden administration "stacked Natcast with former Biden

officials."

"From the very beginning Natcast served as a semiconductor

slush fund that did nothing but line the pockets of Biden

loyalists with American tax dollars," Commerce Secretary Howard

Lutnick said in the statement.

Natcast was created "to manage and disburse up to $7.4

billion in taxpayer funds," Lutnick said in a letter Monday.

Natcast and Commerce did not immediately answer how much of the

funds have been spent.

Commerce said the Biden administration acted "to protect

Natcast from any real oversight or accountability and tie the

hands of future administrations."

Natcast did not immediately respond to a request for

comment.

Commerce said the semiconductor technology center

operations will be reformed, which was required under the $52.7

billion Chips and Science semiconductor manufacturing and

research subsidy law.

Last week, Natcast said it was aligned closely with the

priorities of the White House, saying that it was "a linchpin to

realizing a more prosperous, competitive, and secure leadership

position for America."

In January the Biden administration announced plans to

build a research and development facility in Tempe, Arizona,

expected to open by 2028 while another research center opened in

Albany, New York, in July.