We all remember the lamest of lame-duck congressional sessions last year when Congress waited until December 16 to approve a one-year retroactive extension of the expired temporary tax provisions known as “tax extenders.” This action left only two weeks before the research and development (R&D) credit, investment incentives for businesses of all sizes and provisions to allow greater competitiveness in the global marketplace again expired on December 31. (continue reading…)
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. (continue reading…)
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. (continue reading…)
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. (continue reading…)
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. (continue reading…)
The House Committee on Financial Services approved on September 30th the Burdensome Data Collection Relief Act (H.R. 414), a bill introduced by Rep. Bill Huizenga’s (R-MI) and supported by the NAM to repeal the onerous Dodd-Frank “pay ratio” requirement. (continue reading…)
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. (continue reading…)
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.
We all know how the old saying goes. The camel was just fine until that last straw broke its back. In terms of Dodd-Frank regulations, the SEC’s recent “clawback” proposal is really the last straw for manufacturers.
The NAM has been working tirelessly for the past five years to ensure rules implementing the Dodd-Frank Act do not unduly burden manufacturers. While there has been some success in the derivatives space, executive compensation regulations stemming from the Act are ramping up and hitting manufacturers hard. Just last month, the SEC finalized the “pay ratio” rules to require the ratio between CEO and median employee pay to be regularly disclosed, costing some manufacturers tens of millions of dollars in compliance costs. Then, the SEC proposed pay versus performance rules that add an additional and duplicative layer of disclosure and burden to manufacturers without providing any significant benefit to shareholders.
Now, the SEC has come out with the proposed rule to implement the listing standards for recovery of erroneously awarded compensation, otherwise known as the clawback requirement. The NAM filed comments with the SEC raising manufacturers’ concerns with the proposal, including: its application to all executive officers regardless of fault, the difficulty in calculating the amount to be clawed back, and the unintended impacts on compensation practices.
Taken alone, the clawback requirement is costly and burdensome, but piling it on top of the other Dodd-Frank executive compensation requirements is simply breaking manufacturers’ backs.
Today, the NAM and the Broad Tax Extenders Coalition sent a letter to Congress signed by over two thousand companies, non-profits, coalitions and associations, representing millions of individuals, employees, and businesses of all sizes. The letter called on Congress to act immediately to extend the expired and expiring tax provisions known as “tax extenders.”
Over fifty tax provisions relied upon by millions of Americans expired at the end of 2014. For manufacturers, this means that the research and development tax credit, a driver of innovation and contributor to domestic, high-wage jobs, is not currently available. Also expired are the enhanced expensing limits that allow businesses of all sizes to make capital investments in machinery and equipment, crucial to growth in manufacturing. The competitiveness of US manufacturers that have operations overseas is also currently in jeopardy since deferral for active financing income and the look-through rule for controlled foreign corporations expired late last year.
Congress should give job creation and competitiveness a boost by acting immediately on a permanent or multi-year extension of the expired tax provisions, ending this uncertainty and providing much-needed predictability that fuels economic growth.
Join us by telling your members of Congress to support #JobsandGrowth by acting now on tax extenders.