Thanks to tax reform, business looks bright for HM Manufacturing of Wauconda, Ill., a manufacturer of power transmission components.
“Tax reform has been a game-changer for small manufacturers like HM,” said HM President and CEO Nicole Wolter. “We’ve been able to invest in our employees, in our business and in our community.”
As a result of tax reform, Wolter has expanded her workforce and significantly increased pay and benefits for her workers.
“Across the board, we boosted wages by at least 25 percent,” said Wolter. “And we were able to give bonuses, too. It’s night and day from where we were in a decade ago, when wages were stagnant. I’m proud to say not a single person at HM is getting paid under $20 an hour now.”
“Our employees are hugely appreciative,” Wolter added. “They’re buying houses, they’re buying new cars, all because of this big pay bump. Between our new incentives, bonuses and benefits, word has spread and we get calls every day asking if we’re hiring.”
Staff size has grown 20 percent and, according to Wolter, she is now able to provide 100-percent employer-paid health care premiums and a 401(k) match. Tax reform has also made it possible for Wolter to make a $500,000 investment in capital equipment.
Beyond her business, Wolter has also been able to invest in the community to help build the workforce of the future.
“We’ve partnered with a local high school to get the next generation involved and excited about manufacturing,” Wolter said. “We’ve helped develop their manufacturing program to promote the manufacturing workforce of tomorrow. We’ve also given financial help and donated our older machines to their program.”
Local students are working at HM Manufacturing while they go to school through a new paid internship program. According to Wolter, interns earn $15 an hour.
“For years, manufacturers told Congress that if you pass tax reform, the industry would create jobs and reinvest in the American economy,” said National Association of Manufacturers Vice President of Tax and Domestic Economic Policy Chris Netram. “HM is leading by example, using the benefits of tax reform to invest in their community and improve the lives of the men and women who make things in America.”
“Make no mistake–everything we’ve done over the past two years is because of tax reform,” said Wolter.
The Manufacturers’ Center for Legal Action is the voice for manufacturers in the courts, fighting to advance policy objectives and advocate for strategic manufacturing interests. National Association of Manufacturers Senior Vice President, General Counsel and Corporate Secretary Linda Kelly leads the MCLA. Here she breaks down manufacturers’ biggest victories in 2019 and what is ahead for 2020.
What were the key legal issues for manufacturers this year?
Manufacturers face all sorts of issues in the courts. And even though only one company’s name may be on a case, the outcome can have profound effects across the entire industry on everything from project permitting to free speech.
This year, we filed amicus—or “friend of the court”—briefs in 74 cases. These address issues like regulatory overreach, product liability, labor and employment law, environmental issues, arbitration, class actions, free speech of manufacturers, ERISA, Alien Tort Statute, tax and international issues. If it matters to manufacturers, we’re on it.
We are also part of a dozen ongoing cases, including ones related to tax incentives, regulatory certainty and the manufacturing workforce. In the environmental space, the NAM has intervened in several cases to protect sensible pro-manufacturing regulatory reforms.
What legal wins did manufacturers accomplish in 2019?
We saw big wins this year invalidating the onerous Waters of the United States rule, preserving energy infrastructure projects, protecting Clean Air Act permitting reforms, securing manufacturers’ rights against government compelled speech, reversing overbroad collective bargaining interpretations by the National Labor Relations Board and more.
What does the invalidation of the 2015 Waters of the United States rule mean for manufacturers?
In two words: clarity and certainty. The 2015 rule was bafflingly unclear and uncertain. It left manufacturers to wonder whether wet areas on their property required a federal permit for any commercial activity there—at the risk of fines of $50,000 per day or more for the “wrong” interpretation. Two federal courts invalidated the rule in response to NAM litigation, which followed a NAM-led win in the U.S. Supreme Court in 2018 that allowed those cases to move forward. Soon thereafter, the EPA formally rescinded the rule.
What legal issues should manufacturers pay attention to in 2020?
Federal agencies will continue their regulatory reform efforts, and groups opposed to those reforms will continue to sue to block them. The MCLA stands ready to intervene in those cases or file briefs to provide the manufacturing perspective to the courts.
We are likely to see appellate court rulings next year interpreting whether making and selling energy products is a “public nuisance” for which companies can be held liable. We are confident the courts will apply the law fairly and reject these groundless lawsuits. But if a court finds in favor of the plaintiffs, we could see the U.S. Supreme Court again weigh in on the scope of public nuisance law.
Plaintiffs’ lawyers will keep trying to twist legal precedent to profit at the expense of manufacturers, and the MCLA will fight them every step of the way to benefit the people who make things in America.
Washington, D.C. – National Association of Manufacturers President and CEO Jay Timmons released the following statement after the House of Representatives passed government funding legislation that includes a long-term reauthorization of the Export-Import Bank and repeals the medical device tax, health insurance tax and “Cadillac” tax:
Manufacturers continue to rack up victories for the men and women of our industry as the year comes to a close. Congressional leaders are to be commended for including so many of our top priorities in this must-pass bill. Securing a long-term reauthorization of the Export-Import Bank will safeguard manufacturing jobs in America and help level the playing field with other countries, especially China and Germany, so it could not come at a more critical time.
For nearly a decade, manufacturers have led the charge for the permanent repeal of onerous taxes on Americans’ health care. Winning these long-sought repeals will reduce the cost of providing quality benefits to manufacturing employees and delivering lifesaving medical technologies to patients.
Above all, this vote proves once again that even in a fiercely divided Washington, manufacturers can break through and get important work done for the good of our industry and the American people. Now the Senate must do its job so we can secure the President’s signature and ring in 2020 as a stronger, more competitive industry.
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 12.8 million men and women, contributes $2.38 trillion to the U.S. economy annually, has the largest economic multiplier of any major sector and accounts for more than three-quarters 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 Manufacturers or to follow us on Twitter and Facebook, please visit www.nam.org.
In part enabled by the recent tax reform law, Indiana-based pharmaceutical manufacturer Eli Lilly and Company (“Lilly”) is investing $400 million in its Lilly Technology Center campus in Indianapolis. In addition to serving the growing demand for its current medicines, the investment will provide manufacturing capacity for future medicines through innovations like technology upgrades and new automated facilities that use robotics and data analytics to improve efficiency.
“Tax reform was a part of our decision to make this investment in our company and our employees because it allowed us to keep dollars here and invest them in the United States,” said Lilly Senior Vice President and President of Manufacturing Operations Myles O’Neill.
The investment is expected to create approximately 100 new jobs, including operators, engineers, chemists and biologists, and projects spurred by this large-scale investment will provide hundreds of additional jobs for men and women who will support the implementation of this new investment.
“These investments support our manufacturing capabilities in Indianapolis, including additional capacity and technology upgrades to our active ingredient, syringe filling, device assembly and packaging operations,” O’Neill said. “All of these projects support Lilly’s investment in next-generation manufacturing and feature high levels of automation, robotics, new technologies and advanced data analytics.”
Lilly has invested over $5 billion in the United States since 2012, with the majority of this investment in its Indiana facilities and nearly $2 billion in the manufacturing of diabetes medicines. One of the largest employers in the Indianapolis area, the company employs more than 30,000 people and sells products in approximately 125 countries.
“Lilly’s investment is a demonstration of the extraordinary opportunity that tax relief has given companies and communities across the United States,” said National Association of Manufacturers Vice President, Tax and Domestic Economic Policy Chris Netram. “We have seen stories like this one from large and small manufacturers nationwide. That’s why we advocated for tax reform, and that’s why we’ll keep fighting for the kind of smart, responsible tax policies that benefit millions of manufacturing employees and support effective growth.”
When the Tax Cuts and Jobs Act passed in 2017, it enacted a temporary reduction in federal taxes on beer, wine and spirits. Now Congress is considering making those tax cuts permanent.
The bipartisan Craft Beverage Modernization and Tax Reform Act would extend tax cuts that have allowed producers, distributors and other businesses to invest and grow. According to the Beer Institute, the beer industry provides more than 2.2 million American jobs, generating more than $350 billion in economic output. The tax reduction in the Tax Cuts and Jobs Act was estimated to save the industry $130 million per year. If that reduction becomes permanent, the industry can continue growing operations, hiring workers and creating benefits for communities nationwide.
“As a manufacturer and brewer in the United States, we’re pleased to see the tax break on brewers large and small reintroduced,” said Anheuser-Busch Chief External Affairs Officer Cesar Vargas. “Thank you to the bill’s bipartisan group of sponsors—Senators Wyden and Blunt and Representatives Kind and Kelly—for fighting to continue the first tax break on brewers and beer importers since the repeal of Prohibition. If passed, this legislation will help us redouble our investments in our industry and the communities where we live and work, and ensure our continued ability to thrive.”
Brewers and importers could use the certainty and permanence of these tax savings to develop new products, upgrade equipment and facilities and hire employees. The law would also enable brewers and importers to be more competitive in the marketplace long-term and encourage the creation of new brewery start-ups by lowering the cost of doing business. Tax relief would have a positive impact on manufacturers and employees across the supply chain, from farmers and bottlers to truckers and distributors.
“This legislation would have a critical impact for a wide range of manufacturers across the United States,” said Randolph L. Burns, Vice President of Global Government Affairs at Ohio-based Owens-Illinois (O-I), the world’s largest glass packaging producer with glass plants in 23 countries. “Businesses like ours are critical to the beer, wine, food and spirits industry, and permanently reducing the cost burden would allow us to strengthen production and support jobs.”
“Small businesses like ours rely on smart policies and reasonable costs to grow and succeed,” said John Little, co-owner and Head Distiller of West Virginia-based Smooth Ambler Spirits. “Making these tax cuts permanent would be an important step towards creating an environment that supports entrepreneurs, encourages ingenuity, and promotes local businesses across the country.”
“Manufacturers are involved in every aspect of the beer, wine and spirits industry in communities across the country, and we know how important it is that these businesses have the opportunity to invest and grow,” said National Association of Manufacturers Vice President of Tax and Domestic Economic Policy Chris Netram. “Making this tax relief permanent would support workers and employers nationwide and provide certainty for the men and women who make things in America.”
Hancock Lumber, a 171-year-old lumber company in Casco, Maine, accelerated its plans to grow and invest in its business thanks to tax reform, and its leadership is making sure employees are the first ones to benefit.
“It’s pretty straightforward,” said Hancock Lumber CEO Kevin Hancock. “As a result of tax reform, our cumulative tax rate fell from 38 percent to 28 percent. We’re keeping a dime-on-a-dollar more of our earnings. And we’ve reinvested 100 percent of that back into the business.”
A component of that reinvestment is providing its employees with additional benefits.
“The first priority of the company is, and always has been, the people who work here,” said Hancock. “In the twelve months following tax reform we increased our employees’ wages. We increased our 401k contribution. We increased our annual bonuses, we increased our holiday bonuses, and we picked up 100 percent of the cost of our annual health insurance increases.”
In addition to the immediate benefit to employees, thanks to the strong business climate, the company is planning for continued growth.
“We’ve been able to accelerate our reinvestment plans,” said Hancock. “Tax reform is allowing us to do in three years what might’ve taken us four to five years to do otherwise. That’s pretty significant.”
Because he’s used today’s tax savings to strengthen the company’s position for years to come, Hancock deems this a “significant long-term benefit.”
“Most importantly, this isn’t a one-time boost. Tax reform’s benefits will show up every single year in the future,” said Hancock. “It’s strengthening our future plans as much as our present plans. Simply put, any time a good company is able to keep more of its own money, good things happen.”
“As Congress developed the 2017 tax reform legislation, we made sure the unified voice of manufacturers was heard,” said Chris Netram, Vice President, Tax and Domestic Economic Policy at National Association of Manufacturers. “Now, with the pro-growth tools provided by that legislation, manufacturers across the country are able to invest more, hire more and pay more. Hancock Lumber’s commitment to its people and operations is a great example of what manufacturers small and large across the country are doing: keeping their promise to pay forward the benefits of tax reform.”
BWX Technologies, Inc., a supplier of nuclear components and fuel to the U.S. government, is hiring more than 170 new employees and further expanding its operations across three manufacturing facilities in Ohio and Indiana over the course of the next four years, investing approximately $210 million in these two states as a result of tax reform.
“Due to tax reform, we saw a favorable impact to our tax rate of about 8 to 10 percent,” said Rex Geveden, BWXT’s president and chief executive officer. “This has resulted in significant cash savings that we have used for various needs, including reinvestment of capital into our business and hiring additional employees for future growth.”
BWXT has been manufacturing naval nuclear components and reactors since the 1950s, when it designed and fabricated components for the USS Nautilus, the world’s first nuclear-powered submarine. Today, the company manufactures naval nuclear reactors for every new submarine and aircraft carrier in the U.S. Navy’s fleet. With this new investment, the company expects to fill a variety of different positions including engineers, machinists, quality assurance specialists and frontline supervisors to support the workforce growth.
“Manufacturers are keeping their promise to create jobs and invest right here in the United States,” said NAM Vice President of Tax and Domestic Economic Policy Chris Netram. “Thanks to tax reform, more individuals in Ohio and Indiana will have the opportunity to be a part of a growing industry. Moreover, BWXT’s investment will help it better accomplish its critical job of supporting our United States military, helping not only local communities but our country as a whole.”
BWXT isn’t just hiring workers to fulfill an immediate need. It’s also training young people and aspiring workers to help create a pipeline for BWXT and other employers that need skilled employees now and in the future. Through strategic partnerships with area schools in Ohio (K-12 and post-secondary), company leaders meet with students, parents, career counselors and faculty to discuss manufacturing jobs.
This provides an opportunity to talk about the well-paying careers and generous benefit packages, like education opportunities and tuition reimbursement—and the innovative nature of modern manufacturing. In Indiana, the company is building relationships with five of the area’s local technical schools to help students to learn about the exciting employment opportunities available to them and to provide training that enhances the skills of potential new employees.
“Manufacturers like BWXT aren’t just investing in the jobs of tomorrow—they’re helping young men and women across the country develop the skills they need to build a career in the manufacturing industry well into the future,” said Netram. “Businesses that make things in the United States pushed for tax reform in order to be able to invest in their communities and grow their operations, and BWXT’s announcement is another example of that promise fulfilled.”
Ketchie, a 71-year-old family-owned machine shop based in Concord, N.C., is thriving, thanks to the benefits of tax reform.
Company president Courtney Ketchie Silver is quick to note that tax reform made a transformative impact on its business.
“Because of tax reform, our customers are expanding,” Silver explained. “They’re investing in new equipment, they’re expanding their shopfloors. There’s a general level of confidence, and that’s resulting in increased demand for Ketchie’s products.”
In fact, 2018 turned out to be Ketchie’s best year yet in its seven-decade history. 2018 sales increased a whopping 25 percent year over year.
“Because of this huge demand, Ketchie was able to make a number of capital investments,” Silver said. Overall, Ketchie pumped nearly $500,000 into capital equipment last year, which will help the company continue to meet demand for years to come.
The increased investment led to a hiring boom as well. In 2018, Ketchie expanded its workforce by 20 percent, with all new hiring taking place on the shopfloor rather than in the back office. That sort of single-year growth “has never happened before,” explained Silver. “Employees are excited to see the company grow.”
Existing employees are also benefitting through pay raises and quarterly bonuses. In order to continue to develop their employees, the company has worked with the local community college and has been the recipient of grant funding from the state of North Carolina. Ketchie has also joined the North Carolina Manufacturing Institute to promote manufacturing and help match individuals and employers in the area.
“As we’ve seen for the past year and a half since its enactment, tax reform is giving businesses the ability to reinvest in and expand their operations, and manufacturers are leading the way in this effort,” said Chris Netram, NAM vice president of tax and domestic economic policy, said. “Manufacturers have reported record levels of optimism for nine consecutive quarters in our Manufacturers’ Outlook Survey, and, through increased spending and investment, that optimism is helping fuel our entire economy.”
“It’s such a change from 2008, 2009,” agreed Silver, referring to 2019’s booming economic climate. “For the first time since then, people are confident. And their actions are following that confidence. Overall, I have a positive outlook for the year.”
Manufacturers scored a significant victory with the Treasury Department’s new proposed tax regulations, which would help implement the pro-growth intent of tax reform and save manufacturers from unintended U.S. tax on high-taxed foreign earnings.
Prior to passage of the Tax Cuts and Jobs Act of 2017, the high U.S. corporate tax rate discouraged companies from bringing their foreign earnings back to the United States. Tax reform moved the U.S. toward a territorial system, which allows businesses to bring foreign earnings back to the United States without an additional layer of U.S. tax. To make sure companies still paid some tax, however, the law also created a provision called Global Intangible Low-Taxed Income, essentially imposing a minimum 13.125 percent tax on foreign earnings.
While the move was intended to target low-taxed foreign income, the way the provision interacts with current international tax rules means that some manufacturers can be subject to U.S. tax on foreign earnings that are already taxed above 13.125 percent—effectively removing the upper limit that Congress envisioned and making the backstop largely meaningless. Manufacturers have repeatedly called on Treasury to integrate the Tax Cuts and Jobs Act and the existing tax system in a manner that achieves congressional intent.
“While there’s still work to be done, there’s no doubt that Treasury’s proposal is an important step in the right direction,” said NAM Vice President of Tax and Domestic Economic Policy Chris Netram.
“Congress intended to make it easier for manufacturers operating globally to reinvest their foreign earnings in jobs, in equipment and in infrastructure in the U.S.,” said Netram. “The proposed regulations provide much-needed certainty on the reach of this provision.”
This new proposed rule, coming after more than a year of hard-fought advocacy by the NAM, partially alleviates the burden through a high-tax exception companies can opt into. The elective high-tax exception offers companies with high-taxed foreign income the ability to avoid paying additional U.S. tax provided that the foreign tax rate is greater than 18.9 percent.
While higher than the intended 13.125 percent rate, the elective 18.9 percent rate still provides meaningful relief for manufacturers operating around the world, offering additional certainty and a chance to invest in further growth.
“This is an important positive development in moving closer to the intent of Congress and in allowing manufacturers to support their workers, grow their businesses and contribute to the American economy,” said Netram.
Ferroloy, a Kansas-based small business that manufactures ductile and gray iron castings, was once on the verge of bankruptcy. But with the help of tax reform, they have doubled the size of their workforce and are in the process of dramatically expanding their facilities.
Mark Soucie, Ferroloy president and owner, bought the company back in 2017 when it had just 20 employees. The business was struggling to break even due to the collapse of the agricultural market, in which most of their customers were involved. Soucie and his team spent much of 2017 stabilizing Ferroloy. It became quickly evident, however, that the supercharged economy could deliver big gains.
“We could tell in early 2018 that activity was picking up, so we added a second shift and more than doubled our workforce by the end of the year,” Soucie explained.
“Now we are in the early stages of adding over 12,000 square feet to our facilities so that we can de-bottleneck the foundry, increase the size of the company’s machine shop and build an in-house pattern shop, which will allow the company to save money while also adding more jobs to their growing workforce,” Soucie said.
Soucie cited tax reform as a significant driver in allowing Ferroloy’s expansion plans to move faster than they otherwise would. More importantly, tax reform has ushered in the strongest economy in more than a decade, which is impacting Ferroloy by increasing demand for their products.
“To me, tax reform is an opportunity to level the playing field,” Soucie explained. “Large businesses have a significant competitive advantage due to scale and capability relative to smaller businesses. Over 50 percent of our working population is employed in small businesses. If you want small businesses to grow and prosper in this country, we need laws, like tax reform, that can drive economic growth and drive business.”
In Soucie’s eyes, keeping tax reform on the books is a no-brainer.
“I don’t understand why some people in Washington want to roll back something that allows small businesses to compete,” Soucie added. “Maybe it’s me being politically naïve, but economically, tax reform that allows small businesses to compete just makes sense.”
2018 was a record-setting year, as manufacturers reported the highest levels of optimism in the 20-year history of the NAM’s Manufacturers’ Outlook Survey.
“With tools like tax reform and regulatory certainty, manufacturing is thriving – and manufacturers are paying it forward,” Chris Netram, NAM vice president of tax and domestic economic policy, said. “Across the country, manufacturers small and large are hiring new employees, expanding operations, raising wages, improving benefits and more. Tax reform has fueled manufacturing, and the industry is propelling the American economy.”