No, this is not an April fool’s joke. There really is some good news coming out of Congress for manufacturers, in the area of tax policy no less! Nothing as ambitious as broad-based tax reform, but in the current environment, these provisions could have a big impact on manufacturing growth over the next couple of years.
Here’s the gist. The Senate Finance Committee finally introduced a tax extender package under the leadership of its new chairman Sen. Ron Wyden (D-OR). It’s called the Expiring Provisions Improvement Reform and Efficiency Act (EXPIRE) Act, and it’s got a three provisions in particular that should help boost manufacturers’ R&D and CAPEX in the short term. The bill includes two-year retroactive extensions of : (1) the R&D credit, (2) 50% bonus depreciation and (3) increased Sec. 179 “small business” expensing ($500,000 on purchases up to $2 million).
I know we need permanence and certainty in our tax system to level the playing field and better compete, and these temporary extensions are anything but that. However, realistically, I think it’s fair to say that this is probably the best we can hope for from a cantankerous Congress in an election year. Plus, Chairman Wyden pledged that this will be the last extenders bill under his leadership and added that he wants it to be a launching point for broader reform.
Increased investment in R&D and plant expansion/modernization boosts innovation, competitiveness, and ultimately, economic growth and job creation. AMT weighed in on a multi-industry letter urging the Senate Finance Committee to include bonus depreciation in the bill. It is a major victory for us that the provision is in it. It’s time for manufacturers to make their voice heard to get the EXPIRE Act enacted into law sooner rather than later.