Manufacturers applaud Sen. Rob Portman’s (R-OH) leadership in introducing legislation to roll back recent aggressive IRS audit practices. The bill, S. 2809, would prevent the IRS from denying cooperative taxpayers access to the IRS Appeals Office in order to seek an independent review of the examination. In addition, the bill would limit the use of designated summonses to cases where a taxpayer is not cooperating with the IRS. The bill also would prevent the IRS from unilaterally extending the statute of limitations on an audit. Finally, manufacturers are pleased that the legislation would prevent the IRS from hiring outside law firms to assist in an audit and investigation of a corporate taxpayer. This practice has already been questioned by at least one court. Beyond the concerns about potential conflicts of interest that this practice raises, the fact that the IRS would outsource this inherently governmental function and expose confidential tax information to an outside entity is a real concern to manufacturers. The NAM urges Congress to take up this bill and put an end to these abuses once and for all.
Manufacturers continue to hope this year’s State of the Union speech, to be delivered by President Obama tomorrow night, will include a 2016 resolution to what would finally be a demonstrated commitment on the kind of comprehensive tax reform that will result in a pro-growth, competitive tax code.
We’re told that the president plans to deliver an optimistic outlook on the improvements over the past seven years of his administration, highlighting “the road traveled the past seven years…to recover from crisis.” It’s hard for many to be optimistic about the economy even now, over six years after the official end of the “great recession.” In fact, while there are certainly success stories, global headwinds continue to buffet our economy and manufacturing in particular.
The president’s preview video says that he will also talk about the things that need to be done in the future. So, what can Washington do to help turn around this trend? High on manufacturers’ list has long been enactment of comprehensive tax reform, one that would return the United States to a competitive position versus our international peers.
Last January, the NAM released a study, titled A Missed Opportunity, which laid out the economic cost of delayed tax reform. This study detailed the benefits to be had from enactment of pro-growth comprehensive tax reform that reduces the corporate tax rate to 25 percent or less, shifts to a competitive international tax system, a permanent R&D incentive, robust cost-recovery provisions and lower rates for pass-through businesses.
In sum, we found that implementation of tax reform with these provisions would, over 10 years, contribute more than $12 trillion in GDP, increase investment by $3.3 trillion and add more than 6.5 million jobs to the U.S. economy. That these provisions are elemental for a pro-growth tax reform is not revolutionary. Even still, comprehensive tax reform continues to be a future goal.
However, since the theme is optimism, we will remain optimistic that progress will be made and that the need for comprehensive tax reform will move from a resolution for “the future” and become a resolution for now.
Learn more about the NAM’s tax reform priorities by clicking here.
As the saying goes, there’s good news and bad news. Last week’s overall jobs numbers were generally viewed as good news for the overall economy and the labor market. However, as the NAM’s Chief Economist, Chad Moutray, describes it, “One of the larger exceptions to that is manufacturing, which continues to struggle. The sector lost 1,000 employees in November, with zero growth on net since January. Manufacturers remain mired by global headwinds and lower commodity prices. These challenges have dampened demand and production for manufacturers, and as a result, hiring has slowed to a standstill.” Read More
This week, the NAM joined a number of other business associations representing a wide swath of the economy in a letter calling on the IRS to reconsider regulations under Section 7602 of the IRC code that allows the IRS to hire outside attorneys to carry out taxpayer examinations, including taking testimony and reviewing books, papers and testimony produced in compliance with subpoenas. In sum, these associations are urging the IRS to stop allowing outside firms to carry out the governmental functions that should properly … all of which are functions that are inherently governmental. Read More
To invest or not to invest, that’s the question on the mind of businesses large and small all across the country. What’s holding them back? Well there are lots of reasons, the economy, the season, their future growth expectations and tax policy to name a few. Most of these reasons make sense. A business owner must think about the investment and decide if it’s an expenditure worth making, a risk worth taking. What’s not reasonable though is that tax policy is one of these questions. Read More
Owens-Illinois (O-I) is an iconic American manufacturer. Founded in 1903 by Michael Owens who invented the automatic bottle-making machine, O-I has been churning out glass bottles for more than 100 years. This company with over 21,000 employees worldwide make the bottles used by thousands of manufacturers and millions of consumers each year. However, even after all of these years, O-I needs to continually innovate in order to grow. Read More
All week we’ve been telling the story of how the expiration of critical pro-investment tax policies — including enhanced Sec. 179 expensing, 50 percent first year expensing (aka bonus depreciation) and the comparable provision allowing the accelerated use of AMT credits in lieu of bonus depreciation – effects manufacturers large and small. Read More
A letter on the website for Cleveland’s Tendon Manufacturing Inc., from owner Mike Gordon states what Tendon’s customers have long known, “some things never change; our focus continues to be, to provide excellent service, competitive pricing and quality products to our customers.” Another thing that doesn’t change is Gordon’s strong support for an extension of enhanced Section 179 expensing that would allow him to up his investment in his company. Read More
Let’s face it: our economy is not where it needs to be, and uncertainty is holding back greater investment in the economy. Increased investment by the manufacturing sector will make a difference. Investment incentives that allow companies to immediately write off at least 50 percent (or 100 percent for small businesses) of the cost of capital equipment and provide relief for businesses that continue to struggle have made a difference in recent years. These incentives expired at the end of 2014. Reviving and extending these important provisions will promote the investment needed to push our economy into high gear. Read More
The House Ways and Means Committee is scheduled to consider a bill authored by Rep. Pat Tiberi (R-OH) to make 50 percent first year expensing (aka bonus depreciation) permanent. The bill would also make a critical policy change that would allow companies with stored corporate Alternative Minimum Tax Credits (AMT) to be used more quickly in lieu of bonus depreciation.
The underlying policy has long had bipartisan support – which makes sense because economists of all stripes confirm that reducing the tax cost of capital investment is a positive for jobs and economic growth. A basic premise of economic theory is that investment is a positive function of an increase in demand and a negative function of cost. The cost of capital to a firm includes three components: the price of capital equipment, the cost of financing the equipment and the tax treatment of investment. 50 percent expensing lowers the after-tax cost of capital and increases the number of profitable projects a firm can undertake, helping spur the growth in business investment.
The NAM has long supported the continuance of this on-again, off-again, tax provision which has been included in the tax extenders package while also supporting making this provision permanent as would happen in Rep. Tiberi’s bill. In fact, earlier this year the NAM released a study on the impact the enactment of a pro-growth, pro-manufacturing tax reform plan would have on our economy. The study, A Missed Opportunity: the Economic Cost of Delaying Pro-Business Tax Reform takes a close look at the economic impact of enacting a five-prong pro-business tax package similar to NAM’s priorities and concludes that lack of action on pro-business tax reform is costing the U.S. economy in terms of slower growth in Gross Domestic Product (GDP), investment and employment. One of the policies that was studied was the impact of full expensing in addition to a lower corporate tax rate, lower rates for pass through businesses, a permanent R&D incentive and a shift to a competitive international tax system. The report finds that over a ten-year period, a pro-business tax plan would increase GDP over $12 trillion relative to CBO projections – and over 58 percent of the impact is attributable to the expensing and R&D provisions. The study also found that enactment of these policies would increase investment by over $3.3 trillion – with over four-fifths attributable to full expensing and the reduced corporate and individual tax rates.
Also, just today, the non-partisan tax research group, the Tax Foundation, released a paper updating the impact of permanent 50 percent first year expensing. Their paper, like our study, confirms that making this policy permanent creates job, adds to the capital stock and increases investment.
While the policy has enjoyed bipartisan support for many years now, there continues to be a difference of opinion regarding how long the policy should be enacted for. For manufacturers, it’s simple. Capital investment often requires several years of planning and in an already uncertain world with challenges confronting businesses every day, uncertainty regarding taxes is not something any company should have to continually be confronted with. That’s why the NAM urges members of the Ways and Means Committee to support Rep. Tiberi’s bill tomorrow and put an end to this tax uncertainty and allow manufacturers to lead the economic resurgence we all agree is needed.