Congress moves to reinstate manufacturing tax provisions

Bi-partison support exists to make the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024), introduced in January, law by April 15, so manufacturers and metal fabricators can take advantage of key tax deductions. designer491/iStock/Getty Images Plus

Metal product manufacturers are strongly behind congressional legislation that would restore some important manufacturing tax benefits that have expired.

The good news is it appears from the 357-70 vote in the House on Jan. 31 that very strong bipartisan support exists for the Tax Relief for American Families and Workers Act of 2024 (H.R. 7024). Supporters of the bill, introduced on Jan. 17, want to enact the legislation and make it law before April 15 so the Internal Revenue Service can adjust forms to reflect the new tax law changes. The only potential flies in the ointment are possible amendments on the Senate floor that might peel away support from members of one or both parties.

The National Tooling and Machining Association and the Precision Metalforming Association (PMA) consider the following favorable provisions of the legislation:

• R&D expensing retroactive to Jan. 1, 2022, and through 2025, while eliminating the requirement to amortize and capitalize R&D activities.
• 100% full expensing (bonus depreciation) retroactive to Jan. 1, 2023.
• Full EBITDA standard for 163(j) business interest loan deductions retroactive to Jan. 1, 2023.
• Increases to Section 179 small business expensing.

“The lapse of R&D expensing alone is costing U.S. manufacturers millions,” said PMA President David Klotz.

House Ways and Means Committee Chairman Jason Smith (R-Mo.) and Senate Finance Committee Chairman Ron Wyden (D-Ore.) are leading the charge as it relates to the proposed legislation. To have members of the two tax writing committees who are from different parties come together on an important bill like this is somewhat unusual, particularly in this partisan Congress. The reason for their teamwork is the Republicans get important tax provisions and the Democrats get an expansion of the Additional Child Tax Credit, which adds a small, temporary cost-of-living adjustment to the Child Tax Credit amount, while also expanding the Low-Income Housing Tax Credit.

The conservative Heritage Foundation is arguing that the business tax provisions are fine as far as they go, which is not far because the provisions are “retroactive and temporary” and would result in “negligible long-run economic growth.” Maybe worse, from Heritage’s standpoint, is that the “bill weakens welfare work requirements and continues a long-standing push by Congress to dress up welfare benefits as ‘tax relief.’”

According to the congressional Joint Committee on Taxation (JCT), the proposed changes in tax law would result in a 10-year deficit impact of only $399 million. However, the 10-year aggregate estimate obscures the uneven distribution of the bill’s deficits. According to the JCT, the bill would generate increased federal deficits of $117.5 billion in fiscal year 2024 and an additional $37.8 billion in fiscal year 2025.

EPA Move Against Solvent Would Affect Metalworkers

A long list of metal fabricating sectors would be negatively affected by the Environmental Protection Agency’s plan to eliminate the use of trichloroethylene (TCE), a chemical widely used as a solvent in a variety of industrial, commercial, and consumer applications including for vapor and aerosol degreasing. TCE also is found in lubricants, greases, adhesives, and sealants.

TCE is a neurotoxicant and is carcinogenic to humans by all routes of exposure. Here are a few of the sectors which could be affected according to the EPA: machine shops, precision turned product manufacturing, metal can manufacturing, iron and steel pipe and tube manufacturing, rolled-steel shape manufacturing and electroplating, polishing, and anodizing and coloring.

David Crandell, president, Parts Cleaning Technologies, said that eliminating TCE would hurt those companies that have not been able to switch to alternatives for parts cleaning, as is the case with his company, which manufactures very narrow metal tubes for the medical industry. New-generation solvents have lower operating temperatures impeding their cleaning effectiveness, he added.

If TCE were banned, Crandell said he would have to purchase a new solvent vapor degreaser for about $300,000. Instead of an annual cost of $34,000 for TCE, Crandell said he might have to spend as much as $200,000 annually for a fluorinated/trans-1, 2-dichloroethylene parts cleaner.