Labor & Employment

Business Operations

Small Manufacturer Leverages Tax Reform to Weather Tough Times

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Rex Heat Treat, a commercial heat treatment company serving industries from aerospace and transportation to construction and defense, is tapping its tax reform benefits to support its workers, strengthen its business and invest in its future. A family-owned company since 1938 with facilities in Lansdale and Bedford, Pennsylvania, and Anniston, Alabama, Rex Heat Treat has been able to keep employees on board and purchase critical new equipment, even in challenging times.

“Without the benefit of tax reform, we might not be sitting in as good of a situation as we are,” said Rex Heat Treat General Manager Johnathan Rex. “We’d be a lot leaner in our bank account, possibly needing to draw on a line of credit to make payroll otherwise. As we weather the effects of COVID-19, these benefits will help us. Our business has more time to maintain our critical infrastructure workforce should this current situation continue on.”

In particular, the manufacturer has been able to use “full expensing,” which allows businesses to take a tax deduction for the cost of new equipment in the year it is bought, rather than taking smaller tax deductions over several years. This reduces the cost of buying capital equipment and accelerates depreciation deductions for manufacturers and business owners, which decreases the company’s tax bill in the year of purchase and frees up cash for that purchase. For a capital-intensive industry like manufacturing, where the latest technology is key to production, this kind of support can be vital, especially among smaller manufacturers with tighter margins.

“Full expensing allows us not just to accelerate the last investment we made but to accelerate the next one—because it’s cash in hand,” said Rex. “We want to do this as quickly as possible, but you can also run your business into the ground if you invest too quickly. Allowing a company to aggressively invest in itself and maintain some cash is a big help.”

As manufacturers around the globe deal with the challenges posed by COVID-19, tax reform has helped give small businesses the resources to protect their employees and their customers.

“Tax policies that allow manufacturers to keep and invest more of their earnings are critically important in uncertain times,” said National Association of Manufacturers Vice President of Tax and Domestic Economic Policy Chris Netram. “As we respond to today’s challenges and prepare for the future, building upon pro-growth policies like these can help support workers, businesses and communities nationwide.”

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