Given the severe economic challenges facing our nation, policymakers are wise to look at tax relief to help carry many American businesses during a very rough patch. Contrary to the claims raised in recent stories in The Wall Street Journal (“Write-Offs a Boon to Builders, Bankers“) and the Washington Post (“Lawmakers and Financial Experts Question Obama’s Tax Cuts“), extending the period in which struggling companies can “carry back” current net operating losses or NOLs will help a wide cross-section of industries, including the manufacturing sector. The press needs only to look at a recent letter to Congress urging prompt enactment of NOL relief, which was signed by some 70 trade associations, to see the broad range of interest in the proposal.
Notably, the NOL carryback proposal it describes falls squarely within the three factors the Post’s editorial board uses to judge tax provisions in the stimulus package: targeted, timely, and temporary. (“Dr. Obama’s cure.”) It’s also important to understand that this tax relief is purely a timing issue, helping companies gain quick access to cash now rather than in the future. Specifically, the relief would temporarily change the current carryback period from 2 to 5 years for NOLs incurred in 2008 and 2009.
For manufacturers, NOL relief has a proven track record of helping companies and workers through tough times. In the wake of the 9/11 terrorist attacks, legislators extended the carryback period, a life saver for many manufacturers and manufacturing jobs. In fact, the CEO of one NAM member company, Owens-Illinois’ Joseph Lemieux, wrote a letter to President Bush citing the jobs restored and the plant reopened as a direct result of the enacted NOL relief. Union leaders, company management, and employees collectively praised the plant reopening back in April 2002. (See this AP story for more.) Previous NOL relief enacted in 1997 also produced effective results.
The proven track record of NOL relief speaks volumes, not rhetoric. Bottom line, struggling companies will be able to get an infusion of cash right now, when they need it the most.
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