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.
- An economic analysis by Ernst & Young found that a one-year extension of the current 50% rate could help create up to 85,000 jobs and add billions of dollars in GDP.
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.”
Washington, D.C. – Ahead of the midterm elections, the National Association of Manufacturers released its policy roadmap, “Competing to Win,” a comprehensive blueprint featuring immediate solutions for bolstering manufacturers’ competitiveness. It is also a roadmap for policymakers on the laws and regulations needed to strengthen the manufacturing industry in the months and years ahead.
With the country facing rising prices, snarled supply chains and geopolitical turmoil, manufacturers are outlining an actionable competitiveness agenda that Americans across the political spectrum can support. “Competing to Win” includes the policies manufacturers in America will need in place to continue driving the country forward.
“‘Competing to Win’ offers a path for bringing our country together around policies, shared values and a unified purpose,” said NAM President and CEO Jay Timmons. “The NAM is putting forward a plan filled with ideas that policymakers could pursue immediately, including solutions to urgent problems, such as energy security, immigration reform, supply chain disruptions, the ongoing workforce shortage and more. Manufacturers have shown incredible resilience through difficult times, employing more workers now than before the pandemic, but continued resilience is not guaranteed without the policies that are critical to the state of manufacturing in America.”
The NAM and its members will leverage “Competing to Win” to shape policy debates ahead of the midterm elections, in the remainder of the 117th Congress and at the start of the 118th Congress—including in direct engagement with lawmakers, for grassroots activity, across traditional and digital media and through events in key states and districts as we did following the initial rollout of the roadmap in 2016.
The document focuses on 12 areas of action, and all policies are rooted in the values that have made America exceptional and keep manufacturing strong: free enterprise, competitiveness, individual liberty and equal opportunity.
Learn more about how manufacturers are leading and about the industry’s competitiveness agenda at nam.org/competing-to-win.
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 $2.77 trillion to the U.S. economy annually and accounts for 58% 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