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AMBA Urges Swift Passage of Tax Relief Act to Benefit Manufacturers

The bipartisan bill would allow full, immediate deductions for capital expenses, but it has a very narrow window to pass in time for this tax season.

Bruce Adams

January 24, 2024

4 Min Read
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SeventyFour/iStock via Getty Images

The American Mold Builders Association (AMBA) has urged Congress to quickly pass the Tax Relief for American Families and Workers Act of 2024, which the US House Ways and Means Committee passed Jan. 19 by a vote of 40-3. 

The bipartisan bill includes tax breaks sought by businesses, such as full, immediate deductions for many capital expenses, which the 2017 federal tax law extended through 2022. It also would allow businesses to immediately deduct domestic research and development costs, instead of spreading out the deduction over five years, as the 2017 tax law required.

“The inclusion of the immediate deduction of research and development expenses, bonus depreciation, restoring Section 163(j) and the increase to the Section 179 deduction will help to ease the tax burden on America’s job creators allowing them to invest in and continue to grow their businesses,” AMBA said.

Immediate R&D deductions “critical” for US innovation and jobs

“The loss of full expensing and the requirement to amortize R&D expenses have caused surprise tax bills for small- and medium-sized manufacturers, which many struggle to cover,” said Kym Conis, managing director of AMBA. “Restoring the immediate deduction for R&D expenses will help ensure that manufacturers can continue to utilize this vital tax provision critical to competitiveness, innovation, and US jobs.”

In a March 2023 survey, 77% of AMBA members reported conducting R&D activities in 2022, with an average dollar amount of $1.446 million per company. AMBA members reported that the average increase in tax liability in 2022 due to having to pay tax on R&D as an asset and amortization of expenses was $290,013, the association said. These businesses averaged 56 employees as of April 1, 2023, and a large impact of the tax hike was placed on the shoulders of downstream manufacturers, according to AMBA.

Bill would also increase child tax credit

If passed by Congress, the bipartisan Tax Relief for American Families and Workers Act of 2024 also would increase the maximum refundable child tax credit from $1,600 per child to $1,800 in tax year 2023, $1,900 in tax year 2024, and $2,000 in tax year 2025, along with an adjustment for inflation in tax years 2024 and 2025, according to Cleveland.com.

The bill also would provide tax relief for losses and other situations related to qualified disaster areas or events. In addition, it includes language that would ensure that residents of East Palestine, OH, won’t get hit with a tax bill for payments they received from Norfolk Southern after last year’s train derailment there, according to Cleveland.com.

To pay for the tax cuts over the 10-year budget window, the bill would tighten enforcement efforts and make other changes to the COVID-era Employee Retention Tax Credit (ERTC), which under current law may be claimed on amended returns through April 15, 2025, according to TaxFoundation.org, a leading nonpartisan tax policy nonprofit. “It would apply penalties to ERTC promoters who have failed to comply with requirements for preparing ERTC claims, increase the statute of limitations on assessments of the ERTC, and disallow claims of the ERTC after Jan. 31, 2024.”

Bill’s passage uncertain

Despite its bipartisan bona fides, the bill’s passage is not a certainty. The next stage for the legislation is to gain approval during the Ways and Means Committee markup session. If it gets the committee's approval, the entire US House of Representatives will consider the proposed legislation. The bill might be processed in the House under the rules of "suspension," requiring a two-thirds vote (instead of a simple majority) to progress to the Senate for further consideration.

“It is unclear if the bill will be approved by the House and Senate in its current form or at all,” according to KPMG, a consulting company and international accounting organization. “While Chairman Jason Smith and Senate Finance Chair Ron Wyden came to an agreement, ranking members do not appear to be parties to the recent announcement by Smith and Wyden of a bipartisan framework for proposed tax legislation. A final resolution may be delayed until a government funding bill is enacted in early March or even later.”

Any such delay would mean that Congress will not pass the tax legislation in time for businesses and families to benefit from it in this tax-filing season. 

“AMBA thanks Chairmen Wyden and Smith for their leadership in moving legislation with critical tax provisions for small- and medium-sized manufacturers,” Conis said. “Manufacturers in the United States rely on these critical provisions to help invest in their facilities and employees, and improve their global competitiveness.”

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