Tax

Tax reform means money can go where it’s needed most: empowering manufacturing workers to invest in the community, support their families, grow the economy, create more secure jobs, increase wages and make manufacturing in the U.S. more competitive.

Policy and Legal

Lawmakers Push for Retroactive Tax Increase

Key members of Congress are seeking to include a significant rollback of net operating loss relief in a COVID-19 relief bill, according to Politico (subscription).

What it is: When a company’s deductible expenses are greater than its revenues, it results in a net operating loss. Under the CARES Act, companies with losses from 2018, 2019 and 2020 can carry these losses back for the five previous years and have the losses offset up to 100% of taxable income, providing critical liquidity through tax refunds.

  • Some members of Congress now want to limit carrybacks of businesses’ 2020 losses to only two prior tax years, while also limiting the amount of relief for pass-throughs.

Why it matters: The provision provides important liquidity support, especially for small and medium-sized manufacturers. Eliminating or reducing it could make it more challenging for manufacturers to keep workers on the payroll and stay in business, says NAM Senior Director of Tax Policy David Eiselsberg. Ultimately, it would amount to a major retroactive tax increase on businesses and workers that are critical to our pandemic response.

Blast from the past: As President Barack Obama said in a 2009 interview with MSNBC’s Chuck Todd, “The last thing you want to do is raise taxes in the middle of a recession.”

A more recent statement: Treasury Secretary Janet Yellen said during her confirmation hearing that the Biden administration’s “focus right now is not on tax increases; it’s on programs to help us through the pandemic.”

The NAM says: “Net operating loss relief is a vital tool for manufacturers that are working hard to stay in business and support their employees across the country,” said Eiselsberg. “Undoing this critical liquidity support would not only hurt the ability of businesses to get through the pandemic but would also result in a retroactive tax increase on a sector that is key to America’s success.”

Press Releases

Manufacturers Outline Executive Action Policy Priorities for Incoming Administration

Washington, D.C. – The National Association of Manufacturers called on President-elect Joe Biden to help ensure the future strength of manufacturing in America by extending key executive orders into the new administration and rescinding those that have harmed manufacturing.

“For decades, we have worked with policymakers from across the ideological spectrum to craft policies that encourage the growth of manufacturing in the United States,” said NAM President and CEO Jay Timmons in a letter to the incoming administration. “Now more than ever, America needs leaders in Washington who are focused on increasing American jobs, wages and investment.”

The letter outlines executive orders that have had a significant impact, positive or negative, on manufacturers over the past four years, and it urges the president-elect “to reverse the most harmful of these orders and keep or expand those that create an environment that is conducive to growing America’s manufacturing sector.”

The NAM’s recommendations will help manufacturers continue to respond to the devastating pandemic and will also power the United States’ economic recovery by setting the stage for manufacturing growth.

To read the full letter, click here.

Background:

The NAM has requested President-elect Biden repeal the following executive orders and consider executive orders for extension.

Executive Orders

Rescind:

  • “Rescission of the Deferred Action for Childhood Arrivals Program”
  • E.O. 13950 – “Combating Race and Sex Stereotyping”
  • E.O. 13672 – “Revocation of Federal Contracting”
  • E.O. 13769 – “Protecting the Nation from Foreign Terrorist Entry into the United States”
  • “President’s Report to Congress on the Proposed Refugee Admissions for FY 21”
  • Presidential Proclamation 10052 – “Suspending Entry of Aliens Who Present a Risk to the U.S. Labor Market Following the Coronavirus Outbreak”
  • E.O. 13944 – “Ensuring Essential Medicines, Medical Countermeasures and Critical Inputs Are Made in the United States”
  • E.O. 13948 – “Lowering Drug Prices by Putting America First”
  • E.O. 13957 – “Creating Schedule F in the Excepted Service”

Extend:

  • E.O. 13771 – “Reducing Regulation and Controlling Regulatory Costs”
  • E.O. 13805 – “Establishing a Presidential Advisory Council on Infrastructure”
  • E.O. 13766 – “Expediting Environmental Reviews and Approvals for High-Priority Infrastructure Projects”
  • E.O. 13845 – “Continuing the President’s National Council for the American Worker and the American Workforce Policy Advisory Board”
  • E.O. 13932 – “Modernizing and Reforming the Assessment and Hiring of Federal Job Candidates”
  • E.O. 13777 – “Enforcing the Regulatory Reform Agenda”
  • E.O. 13806 – “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States”
  • E.O.s – “Strengthening the Federal Government’s Anti-Counterfeiting Efforts”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.3 million men and women, contributes $2.32 trillion to the U.S. economy annually and has the largest economic multiplier of any major sector and accounts for 62% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Policy and Legal

Congress’s Funding Package: What Manufacturers Should Know

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Congress’s new funding package, which covers COVID-19 relief and much more, will provide Americans with much-needed security during this holiday season. Manufacturers are among the major beneficiaries, as Congress recognized that the sector is essential to keeping our country healthy, fed and functional throughout the pandemic.

The NAM’s policy team reports that legislators closely followed the NAM’s recommendations in a wide variety of policy areas. Here are a few highlights.

The Paycheck Protection Program: This program was reauthorized with $284 billion in new funding and extended through March 31, 2021. It also lets businesses choose when to spend the loans, expands the list of acceptable uses for the loans and simplifies loan forgiveness.

Taxes: The last round of stimulus, called the CARES Act, included a payroll tax credit for “eligible employees” affected by the virus. This new package extends that credit through June 30, 2021, while also upping the percentage from 50% to 70%. Meanwhile, it increases the amount of workers’ pay that qualifies for this tax credit from $10,000 for the year to $10,000 per quarter.

And that’s not it for taxes. This package also extends or makes permanent many other provisions. For example, it extends the deadline by which workers must pay back deferred payroll taxes, while also extending the temporary, refundable tax credit for small and medium-sized employers that are providing required paid leave.

Labor: As you’ve probably read by now, the package gives workers on unemployment $300 per week on top of their state benefits. These payments will last until March 14, 2021.

Vaccines/COVID-19 care: And now for the measures that will help end this pandemic for good. The package includes $20 billion for the purchase of vaccines, making them free for all who need them; $8 billion for vaccine distribution; $20 billion to assist states with testing; and a $20 billion distribution from the existing provider relief fund.

And we’re still not finished . . .

Long-term fixes: Congress also included manufacturing priorities that predate the pandemic and remain absolutely crucial.

  • Energy: This is the big one—the first comprehensive modernization of U.S. energy policy in well over a decade, and an upgrade that the NAM has long fought for. We can’t cover all of its many provisions here, but they include everything from energy storage to nuclear development to carbon capture to renewable energy. It’s a major victory for manufacturers and the NAM.
  • Environment: The legislation also includes a provision for phasing down hydrofluorocarbons—greenhouse gases used in refrigeration. Relatedly, it creates new R&D programs for technologies that can reduce greenhouse gas emissions in the power sector. Both are high priorities for manufacturers’ sustainability efforts.
  • Anti-counterfeiting measures: These measures are designed to protect manufacturers’ intellectual property, and they include the empowerment of the Federal Trade Commission to take action against bad actors exploiting the pandemic.
  • Transportation: As part of this package, Congress passed the bipartisan Water Resources Development Act, which provides a two-year authorization for ports, inland waterways and important water infrastructure investments.
  • Broadband: And lastly, the package funds the improvement of digital infrastructure and broadband access, including for underserved and rural populations. It also includes a support program for those experiencing hardship due to COVID-19.

What’s missing? Since you ask, the package does not include the liability protections that the NAM advocated. But the NAM will continue working on this priority next year.

The last word: NAM President and CEO Jay Timmons said of the legislation, “Some are stirring up controversy over aspects of the spending text to drum up ratings or score political points. But the bottom line is manufacturers—and all Americans—need relief now. This package gives manufacturers and many other Americans a lifeline in the face of the disaster this pandemic continues to wreak on lives and livelihoods. There is unfinished work for sure. But it makes no sense to hold up an action that can bring real relief to this country.”

You can read a more expansive list of policy wins here.

Press Releases

Manufacturers Secure Priorities in Year-End Stimulus Legislation

Stoick: “We have been fully engaged with House and Senate leaders to keep this vital work going"

Washington, D.C. – Following passage of Senate amendment to H.R. 133 – United States Mexico Economic Partnership Act [Consolidated Appropriations Act, 2021], National Association of Manufacturers Vice President of Government Relations Jordan Stoick released the following statement:

“Manufacturers secured many of our top priorities in this important legislation, including numerous provisions the NAM first proposed in our ‘American Renewal Action Plan.’ The additional funds for the Paycheck Protection Program will provide a continued lifeline for small manufacturers. Furthermore, the resources for testing and vaccine distribution, as well as tax incentives for manufacturers that keep employees on payroll and invest in safety measures, will ensure America’s dedicated, essential manufacturing workers can continue their mission safely.

“Across the country, manufacturers are providing the vaccines, PPE and supplies needed to defeat COVID-19, so we have been fully engaged with House and Senate leaders to keep this vital work going. We have a difficult winter ahead, and this legislation will help save lives and livelihoods and keep manufacturers operating. As folks continue to roll up their sleeves and receive initial doses of the vaccine, we are also looking to the other priorities facing us in the new year—including historic investments in infrastructure, energy innovation and more—to ensure manufacturers can lead a full economic recovery and American renewal.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.2 million men and women, contributes $2.35 trillion to the U.S. economy annually and has the largest economic multiplier of any major sector and accounts for 62% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Policy and Legal

Manufacturers Push for Tax Deduction Extension

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The NAM is calling for Congress to temporarily extend a COVID-19 tax relief provision that would support manufacturers affected by the pandemic.

The background: Currently, the maximum deduction for interest on business loans is limited to 30% of earnings before interest, tax, depreciation and amortization (EBITDA). When COVID-19 hit, however, many businesses saw their earnings fall, which also caused their allowable business interest deduction to decrease, even as firms were forced to take out loans to stay afloat. To support these businesses, Congress increased the allowable business interest deduction from 30% to 50% of EBITDA in the bipartisan CARES Act.

The problem: The legislation only covered tax years 2019 and 2020, which means it expires in just a few weeks. At that point, the allowable deduction will fall again to 30% of EBITDA, making it more expensive for struggling companies to stay afloat. The NAM is calling on Congress to extend the provision for one more year.

Why it matters: In a capital-intensive industry like manufacturing, businesses use debt to finance important investments in critical technology.

  • With the pandemic causing earnings to fall in some sectors, many manufacturers are holding a larger ratio of debt-to-earnings, making their investments more expensive.

The word from the NAM: “Congress intended to offer a lifeline to businesses that are struggling in the midst of COVID-19—and although we can see a light at the end of the tunnel, the pandemic still rages on,” said NAM Vice President of Tax and Domestic Economic Policy Chris Netram. “Manufacturers are calling on Congress to extend this provision for another year so that it does what it was meant to do: support American workers and keep America in business.”

Press Releases

Manufacturers Congratulate Vilsack on Return to USDA

Timmons: “His collaborative, bipartisan, results-oriented approach will be a strong addition to the Biden administration”

Washington, D.C. – Following President-elect Joe Biden’s announcement nominating Tom Vilsack for Secretary of Agriculture, National Association of Manufacturers President and CEO Jay Timmons released this statement:

“As the pandemic has made abundantly clear, manufacturers play an essential role in producing and protecting our nation’s food supply and keeping our families fed. We look forward to working with Sec. Vilsack when he returns to the Department of Agriculture to ensure that manufacturers can continue fulfilling this mission and that in times of critical stress, the manufacturing workers in our food supply chain are always recognized as the essential workers that they are.

“After eight years leading the department, Sec. Vilsack undoubtedly has the experience to steer the USDA through these challenging times. We congratulate him on his nomination to serve the nation once again. Through the years, I’ve had the chance to work with Sec. Vilsack, including when he served as governor of Iowa and I was doing work for the National Governors Association. As I saw firsthand, he was ahead of his time in advancing equal opportunity and inclusion, and he has a firm belief in igniting opportunity for all Americans. His collaborative, bipartisan, results-oriented approach will be a strong addition to the Biden administration.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.2 million men and women, contributes $2.35 trillion to the U.S. economy annually and has the largest economic multiplier of any major sector and accounts for 62% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Press Releases

Manufacturers: Yellen Is a Champion of the American Worker

Timmons: “Janet Yellen possesses extraordinary expertise and sterling credentials to serve as U.S. Treasury Secretary”

Washington, D.C. – Following President-elect Joe Biden’s announcement of former Federal Reserve Chair Janet Yellen to be his nominee for Secretary of the Treasury, National Association of Manufacturers President and CEO Jay Timmons released this statement:

“Janet Yellen possesses extraordinary expertise and sterling credentials to serve as U.S. Treasury Secretary. Her nomination is, of course, historic as she will be the first woman to serve as Secretary. NAM leadership met twice with Chair Yellen during her time leading the Federal Reserve. We were struck by, and appreciative of, how focused she was on American workers and the success of the manufacturing sector. Our conversations with her were refreshingly never one-way as she listened intently to the perspectives of America’s frontline job creators and asked probative questions on how Federal Reserve policies impacted our ability to invest, hire and strengthen our communities. We look forward to a similar productive relationship in working with the future Secretary as we continue to seek clarity on additional stimulus and economic needs for the sector’s recovery.”

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.2 million men and women, contributes $2.35 trillion to the U.S. economy annually and has the largest economic multiplier of any major sector and accounts for 62% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Policy and Legal

Labor Department Finalizes Rule on Pension Investments

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The U.S. Department of Labor has adopted a final rule that requires pension plan managers to make investments based solely on financial implications, according to The Wall Street Journal (subscription).

What it does: The rule clarifies that pension plan managers can only consider “pecuniary” factors—that is, factors relating to the financial performance of the plan—when making investment decisions on pensioners’ behalf.

  • Existing standards hold managers to a fiduciary duty to represent pensioners’ financial best interests; the new rule cautions plan managers against considering so-called environmental, social and governance (ESG) factors unless they would have a financial impact on plan performance.
  • The goal of the rule is to prevent investment decisions based on non-pecuniary metrics rather than on the financial interests of the workers whose savings are at stake.

A win for the NAM: The NAM sent a comment letter supporting the DOL’s proposed rule in July, arguing that fund managers should be required to look out for the financial interests of pension plan participants.

The last word: “This is a positive outcome for manufacturing workers across the country,” said NAM Director of Tax and Domestic Economic Policy Charles Crain. “Pension plan participants should be able to trust that their long-term savings will be protected over any other considerations so that they can enjoy a stable and secure retirement.”

Policy and Legal

NAM Wins Victory as SEC Shelves Rule Change

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In a victory for the NAM, reports suggest that the Securities and Exchange Commission has abandoned a planned rule that would have decreased market transparency and made it more difficult for public companies to communicate with shareholders.

The background: Form 13F requires asset managers to report their holdings in public companies. Under current law, if an institution manages more than $100 million in assets, they are required to report the businesses they hold shares in. Companies use that information for investor relations, outreach and communication with shareholders—and because there is no other way for public companies to know who their owners are, it’s fundamental to the day-to-day operations of businesses across the country.

The proposal: This summer, the SEC proposed changing the Form 13F disclosure threshold from $100 million to $3.5 billion—a 3,500% increase. The change would have exempted 89% of current filers from the 13F reporting requirement, preventing businesses from communicating with many owners and disproportionately affecting small public companies that tend to be held by small investment managers.

The result: The NAM strongly opposed the SEC’s proposal and led an aggressive response that included direct outreach from the NAM and NAM members to the SEC, as well as multiple official submissions to the comment file. In the face of this strong opposition from manufacturers, recent news reports indicate that the SEC will abandon the rule.

The word from the NAM: “This is a critical victory for manufacturers—from large corporations to small and mid-sized businesses,” said NAM Director of Tax and Domestic Economic Policy Charles Crain. “We are proud of the extraordinary work from so many NAM members who mobilized to fight this rule—and we are pleased that the SEC now intends to preserve vital transparency for manufacturers and their shareholders.”

Business Operations

Why America Is a Great Location for Manufacturers

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Manufacturing is a key driver of the American economy—but how does manufacturing in the United States stack up against the rest of the world?

Recently, The Manufacturing Institute and KPMG—a professional services firms providing innovative business solutions and audit, tax, and advisory services—released a new assessment of the cost of doing business in the manufacturing sector for the United States and 16 other major manufacturing exporting nations around the globe.

High costs, but high value: The study found that primary costs (compensation, property, utilities, taxes and interest rates) in the U.S. are on average 16% higher than in the other markets—yet the U.S. ranks fairly high on the list overall at #5.

  • Another number bears that out: over the past decade, foreign direct investment in U.S. manufacturing has jumped from $569.3 billion in 2006 to a record $1,785.7 billion in 2019.

The benefits of tax reform: Tax reform made the U.S. a more desirable location for manufacturers, the study found. It compared how the U.S. would have ranked with its pre-reform corporate tax rate of 40% (the combined federal and state tax rate) instead of the post-reform corporate rate of 27%. With the old rate, the U.S. would have ranked only 11th.

The benefits of skilled workers: A major U.S. advantage is its supply of high-skilled workers. According to the study, the U.S. ranks at the top of the list for real value added per employee, along with Ireland and Switzerland. As manufacturing has become increasingly advanced, the need for sophisticated employees keeps growing.

While it’s true that American manufacturing requires more skilled workers, as The Manufacturing Institute has previously shown, the existing workforce is still a big draw due to its productivity.

The bottom line: The United States is an attractive location for manufacturers, despite relatively high costs, because of high worker productivity and the overall business environment.

The last word: “We need to continue to push the envelope of technological innovation and workforce development and recruitment in the manufacturing sector,” said Chad Moutray, chief economist for the National Association of Manufacturers and director of the Center for Manufacturing Research at The Manufacturing Institute. “These efforts will serve to strengthen the sector overall, but also help to maintain the nation’s global competitiveness.”

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