Tax

The NAM recently interviewed Sen. Maggie Hassan (D-NH) on the importance of reinstating immediate expensing for companies’ research-and-development expenditures. Here’s the full interview:

NAM: Sen. Hassan, Congress is facing a “Tax Armageddon” next year, as crucial provisions from 2017’s Tax Cuts and Jobs Act are set to expire. As a member of the Senate Finance Committee, what is your focus moving into next year’s debate?

Sen. Hassan: Next year, we will need to work to pass a tax cut package to support both American families and businesses. The package should build on the one that was negotiated in the Senate earlier this year, including a restoration of the full R&D tax deduction to support innovative businesses. The R&D tax deduction is an area where I have been particularly engaged in negotiations, and it is vital for our national security and economic competitiveness. We need to ensure that our tax policy fosters innovation, promotes the creation of good-paying jobs and keeps the United States at the forefront of technological advancement. We also need to prioritize a bipartisan expansion of the Child Tax Credit to support hardworking families and a bipartisan expansion of the Low-Income Housing Tax Credit to address our country’s housing shortage. I will continue to push for these critical measures throughout negotiations.

NAM: As you know, for nearly 70 years, manufacturers in the U.S. were able to fully deduct their R&D expenses in the year incurred. Beginning in 2022, however, manufacturers were forced to spread their deductions over several years, greatly harming our ability to grow and compete. What is Congress doing to restore immediate R&D expensing?

Sen. Hassan: I first introduced bipartisan legislation with Sen. Todd Young to restore the R&D deduction back in 2020, and we’ve been pushing for its passage since. The R&D tax deduction has wide bipartisan support—our measure supporting full R&D expensing passed 90–5 in the Senate in 2022. Recently, we had a bipartisan tax cut package that included the R&D tax deduction’s restoration, but unfortunately, it was blocked in the Senate, despite passing the House with an overwhelmingly bipartisan 357–70 vote. It’s disappointing and frustrating.

NAM: During your time as senator, you have seen how impactful R&D is for manufacturers to be able to compete on a global level. As we get closer to next year, what are you hearing from stakeholders on the need for pro-growth tax policy so American businesses can engage and grow around the world?

Sen. Hassan: The message I’m getting is clear—we can’t afford to fall behind in the global R&D race; it’s about American competitiveness and national security. Countries like China are offering massive incentives, including a 200% super-deduction for R&D. That puts American businesses at a real disadvantage, and I’m already hearing from business leaders across New Hampshire about how the expiration of the tax deduction is impacting their ability to plan for and make the investments that drive our economy forward.

There’s a critical national security component here too. We need to be at the forefront of designing, implementing and controlling new technologies, including those used for our national defense.

NAM: Thank you, Sen. Hassan. What else can NAM members do to stay engaged and be a resource for you going into next year?

Sen. Hassan: Your advocacy is crucial. I encourage NAM members to keep speaking up about the ways in which R&D and tax policy specifically impacts your businesses and communities, as well as the need for bipartisan compromise. Doing so is invaluable in shaping effective legislation and getting it across the finish line.

With a “Tax Armageddon” looming at the end of 2025, Sen. Maggie Hassan (D-NH) is gearing up to fight for manufacturers. Sen. Hassan, who introduced the bipartisan American Innovation and Jobs Act (S. 866) with Sen. Todd Young (R-IN) in 2020 and reintroduced it last year, understands the importance of restoring expired manufacturing-critical tax provisions.

What’s going on: One of Sen. Hassan’s top priorities for 2025 is reinstating immediate expensing for companies’ research and development costs.

• For nearly seven decades, manufacturers could fully deduct R&D spending in the year those expenses were incurred. But since immediate R&D expensing was allowed to expire in 2022, manufacturers have been required to amortize R&D expenses over a period of years instead.
• “The R&D tax deduction … is vital for our national security and economic competitiveness,” Sen. Hassan told us in a recent interview for the NAM’s “Manufacturing Wins” campaign, adding that she has “been particularly engaged in negotiations” on the topic. “We need to ensure that our tax policy fosters innovation, promotes the creation of [well]-paying jobs and keeps the United States at the forefront of technological advancement.”

Why it’s important: “The message I’m getting [from manufacturers] is clear: We can’t afford to fall behind in the global R&D race,” Sen. Hassan continued. “It’s about American competitiveness and national security. Countries like China are offering massive incentives, including a 200% super-deduction for R&D. That puts American businesses at a real disadvantage.”

What she’ll be doing: Though a bipartisan tax cut package that included a restored R&D tax deduction passed in the House earlier this year, the legislation stalled in the Senate. That’s only made Sen. Hassan vow to redouble her efforts in 2025.

• “[L]ooking ahead, I’m committed to working across the aisle to get this done because it’s crucial for our manufacturers, our economy and our national security,” she said.

What you can do: Manufacturer input and engagement are vital as Congress considers tax legislation next year, Sen. Hassan emphasized.

• “I encourage [manufacturers] to keep speaking up about the ways in which R&D and tax policy specifically impacts your businesses and communities, as well as the need for bipartisan compromise. Doing so is invaluable in shaping effective legislation and getting it across the finish line.”

Read the full interview here.
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As part of the NAM’s “Manufacturing Wins” tax campaign, small and medium-sized manufacturers are urging Congress to reinstate the pro-growth interest deductibility standard implemented by the 2017 Tax Cuts and Jobs Act—which was crucial to making debt financing for capital equipment purchases more affordable for manufacturers.

What’s happening: Tax reform allowed companies to deduct the interest they pay on business loans, up to a cap of 30% of their earnings before interest, tax, depreciation and amortization (EBITDA).

• But as of 2022, companies can only deduct interest up to 30% of their earnings before interest and tax (EBIT). This stricter limit raises borrowing costs for manufacturers, making it harder for them to finance job-creating investments in equipment and machinery.

Why it matters: Ankeny, Iowa–headquartered manufacturer Accumold was able to hire the talent it needed because of tax reform’s incentives for capital investment, including the EBITDA-based business interest limitation. “Thanks to tax reform, Accumold was able to increase our capital investment and add to our teams,” said President and CEO Roger Hargens.

• “By excluding depreciation and amortization expenses from the interest deduction calculation, the EBIT standard makes debt financing more expensive—punishing manufacturers with significant investments in depreciable assets like equipment and machinery, as well as valuable intellectual property subject to amortization,” explained Sukup Manufacturing President and CEO Steve Sukup, whose company is based in Sheffield, Iowa.

Supply chain implications: The change has had far-reaching effects on supply chains across the country, hitting small manufacturers—such as Pennsylvania-based Erie Molded Packaging—hard.

• “The majority of my customers buy and sell large pieces of capital equipment that require debt financing,” President Tom Tredway said. “Their inability to deduct interest makes borrowing more expensive, impacting small manufacturers’ economic health and ability to grow. Policy changes cause ripple effects across every level of the supply chain, and small manufacturers often take the biggest hit.”
• Added Sukup: “This change has been damaging to Sukup’s supply chain, as our partners at all levels often use debt financing for investments, including purchasing our products.”
• BTE Technologies President Chuck Wetherington and NAM Executive Committee Member in Hanover, Maryland, agreed. “Many of our suppliers utilize debt financing to expand their operations and invest in growth, yet their ability to do so is limited by the more-restrictive interest deductibility standard,” he said. “Ultimately, this switch to an EBIT standard weakens the manufacturing supply chain.”

Innovation at stake: Simmons Knife & Saw in Glendale Heights, Illinois, has seen a dramatic increase in its tax bill since pro-growth tax policies began to expire in 2022, including the EBITDA-based interest limitation.

• “We sell to over 100 countries and face competition around the globe,” said President and Owner Colin Murphy. “To remain competitive, we need to continually innovate and consistently invest in new machinery and equipment.”
• He added that the company’s higher tax bill “has led to less investment in equipment, fewer jobs and less innovation.”

The bottom line: “Increasing the cost of debt financing makes it more costly for manufacturers to invest in growth and expansion,” said Sukup. “Policymakers should not impose limitations that inhibit manufacturers’ ability to finance investments.”

• Added Hargens: “I urge Congress to prioritize the future of our working families and our economy by preventing tax increases.”

The NAM recently interviewed Rep. Adrian Smith (R-NE) about the actions that he and congressional colleagues are taking to fight a looming “Tax Armageddon.” The full text is below.

NAM: Rep. Smith, Congress is facing a “Tax Armageddon” next year, as crucial provisions from 2017’s Tax Cuts and Jobs Act are set to expire. As a member of the House Ways and Means Committee, what is your focus moving into next year’s debate?

Smith: The 2017 cuts unleashed economic growth, promoted American business investment and benefitted workers more meaningfully than any policy reforms in a generation. Leading the Ways and Means Rural America Tax Team and as a member of the Main Street Tax Team, I am working hard to gather input from stakeholders, job creators and drivers of our nation’s growth potential. Manufacturing is an overlooked component of rural economies, and Americans know tax policy must encourage investment in their communities.

NAM: As you know, prior to 2022, businesses could deduct 30% of earnings before interest, tax, depreciation and amortization—a deduction standard known as EBITDA. A change in the tax code limits the deduction to only EBIT—excluding depreciation and amortization. This presents an added cost for businesses taking out loans to finance large capital investments in their facilities and equipment and disproportionately impacts the manufacturing sector.  What are you doing to correct this policy?

Smith: American manufacturers are already suffering under inflation, a worker shortage and a sustained high-interest environment in the United States. Bipartisan legislation I have introduced, the AIM Act, would amend the U.S. tax code to increase the cap on deductible business interest to pre-2022 levels. By ensuring capital-intensive industries can deduct more of the cost of interest from their taxes, we can enhance opportunities to develop new products in America, create jobs by making those products here and then sell those products around the world.

NAM: Congressman, you were on the Ways and Means Committee during passage of the TCJA in 2017, so you know how impactful the legislation was for manufacturers to be able to compete on a global level. As we get closer to next year, what are you hearing from stakeholders on the need for pro-growth tax policy so American businesses can engage and grow around the world?

Smith: Ensuring our tax code reflects the cost of doing business is essential for American manufacturing to compete in the global market. Prior to 2017, even President Obama realized our tax code was making American businesses less competitive. The fact there have been no major corporate inversions since passage of the TCJA is a remarkable testament to commonsense policy. Businesses we have heard from widely agree on the importance of keeping these policies in place and sustaining our strong growth.

NAM: Thank you, Rep. Smith. What else can NAM members do to stay engaged and be a resource for you going into next year?

Rep. Smith: Contacting my office with your feedback and how you have been impacted by the TCJA is always welcome. Continue to share stories about why growth-centered tax policies are key to your success and how you would change course should they expire. Together, we can maximize productivity and growth through a tax code that is a net benefit to all.

Rep. Adrian Smith (R-NE) is fighting a looming “Tax Armageddon”—the expiration of crucial pro-manufacturing tax measures scheduled for the end of 2025. As part of its “Manufacturing Wins” campaign, the NAM recently chatted with Rep. Smith—chair of the House Ways and Means Committee’s Rural America Tax Team and a member of the committee’s Main Street Tax Team—about how he and his colleagues are working to avert the potential disaster.

Interest deductibility: One of Rep. Smith’s priorities is restoring a pro-growth standard for interest deductibility. In 2022, a new limitation took effect, setting a stricter cap on how much interest manufacturers can deduct, and thereby increasing the cost of debt financing job-creating investments.

• “Bipartisan legislation I have introduced—the American Investment in Manufacturing Act—would amend the U.S. tax code to increase the cap on deductible business interest to pre-2022 levels,” Rep. Smith told the NAM.
• “By ensuring capital-intensive industries can deduct more of the cost of interest from their taxes, we can enhance opportunities to develop new products in America, create jobs by making those products here and then sell those products around the world.”

Preserving tax reform: By restoring tax reform’s lapsed provisions—including interest deductibility—and preserving policies scheduled to expire next year, Congress can build on the success of the Tax Cuts and Jobs Act, which “unleashed economic growth, promoted American business investment and benefitted workers,” Rep. Smith said.

• “Businesses we have heard from widely agree on the importance of keeping these policies in place and sustaining our strong growth.”

Read the full Q&A with Rep. Smith here.

The NAM recently talked to Rep. Joe Morelle (D-NY) about what he and his congressional colleagues are doing to help manufacturers debt finance important projects. Below is the full text of the interview.

NAM: Rep. Morelle, Congress is facing a “Tax Armageddon” next year, as crucial pro-growth tax policies are set to expire at the end of 2025, and as you know, many have gone into effect already. What is your focus moving into next year’s debate?

Morelle: With provisions of the Tax Cuts and Jobs Act of 2017 set to expire, it is imperative that Congress acts to safeguard tax policies that support and strengthen American manufacturing. My focus remains on measures that enhance our economic resilience and competitiveness for families and small businesses alike. This commitment drives my introduction of the American Investment in Manufacturing Act, which aims to restore the deductible business interest cap to pre-2022 levels, encouraging vital domestic investment while mitigating the pressures of rising interest.

NAM: As you know, prior to 2022, businesses could deduct 30% of earnings before interest, tax, depreciation and amortization—a deduction standard known as EBITDA. A change in the tax code limits the deduction to only EBIT—excluding depreciation and amortization. This presents an added cost for businesses to take out loans to finance large capital investments in their facilities and equipment and disproportionately impacts the manufacturing sector.  What are you doing to correct this policy?

Morelle: This year, I had the privilege of voting to advance the Tax Relief for American Families and Workers Act in the House of Representatives. This bipartisan legislation represents significant progress by expanding the Low-Income Housing Tax Credit, enhancing the Child Tax Credit and incorporating the AIM Act—my own legislative initiative to reinstate the EBITDA deduction standard. Reestablishing this deduction is essential to addressing the current tax code’s disproportionate burden on our manufacturing sector, which relies on loans for substantial investments in critical infrastructure and equipment. I remain committed to reintroducing the AIM Act in the upcoming Congress and to restoring the EBITDA deduction to ensure the continued strength of American manufacturing.

NAM: Correcting this policy would promote further domestic investment while helping address concerns about rising interest rates. As we get closer to next year, what are you hearing from stakeholders on the need for pro-growth tax policy so American businesses can engage and grow around the world?

Morelle: In today’s increasingly competitive global economy, American manufacturing is indispensable to expanding our workforce, enhancing competition and securing long-term economic growth. Unfortunately, the United States stands alone among OECD countries in applying an EBIT-based limitation, placing our industries at a competitive disadvantage. A return to the full EBITDA deduction would significantly enhance U.S. competitiveness and bolster economic prosperity. I am particularly proud that my district of Rochester, New York, was recently designated a Regional Innovation and Technology Hub by the Biden administration—a recognition that strengthens our community’s role in leading the manufacturing sector. As we approach the expiration of the TCJA, I am committed to championing pro-growth tax policies that uplift working families and drive innovation at both local and national levels.

NAM: Thank you, Rep. Morelle. Is there anything else you’d like to share with readers?

Morelle: As we prepare for the new Congress, I am committed to standing with American manufacturers and collaborating with NAM members to advance pro-growth solutions that drive our economy and support our shared vision.

The year may be winding down, but Rep. Joe Morelle (D-NY) is only ramping up his efforts to reinstate a pro-growth tax provision that helps manufacturers debt finance job-creating projects.
 
What’s going on: As part of its “Manufacturing Wins” campaign, the NAM recently interviewed Rep. Morelle about what his congressional colleagues and he are doing to prevent “Tax Armageddon”—the end-of-2025 expiration of several important tax measures—and restore some vital, already expired tax provisions.

• Among the already expired provisions is tax reform’s standard for interest deductibility, which dictates how much interest on business loans manufacturers can write off. Tax reform capped companies’ interest deductions at 30% of their earnings before interest, tax, depreciation and amortization (EBITDA), but as of 2022, a more restrictive standard has been in place, based on companies’ earnings before interest and tax (EBIT).

What he’s doing about it: Rep. Morelle has introduced the American Investment in Manufacturing Act, “which aims to restore the deductible business interest cap to pre-2022 levels, encouraging vital domestic investment while mitigating the pressures of rising interest.”

• Rep. Morelle also noted that earlier this year he “had the privilege of voting to advance the Tax Relief for American Families and Workers Act in the House of Representatives,” bipartisan legislation that incorporates the AIM Act and would “reinstate the EBITDA deduction standard.”  

Why it’s important: Rep. Morelle explained that the U.S. “stands alone among OECD countries in applying an EBIT-based limitation, placing our industries at a competitive disadvantage.”

• “A return to the full EBITDA deduction would significantly enhance U.S. competitiveness and bolster economic prosperity,” he said.

Manufacturing critical: Rep. Morelle is working to “safeguard tax policies that support and strengthen American manufacturing.” With respect to interest deductibility, Rep. Morelle said that reinstating an EBITDA-based standard “is essential to addressing the current tax code’s disproportionate burden on our manufacturing sector, which relies on loans for substantial investments in critical infrastructure and equipment.”

Read the full interview with Rep. Morelle here.

Congress allowed a pro-growth standard for interest deductibility to lapse in 2022—and manufacturers are already feeling the effects, according to a new NAM explainer.  
 
What’s going on: Thanks to 2017 tax reform, from 2018 to 2021 manufacturers were allowed to deduct interest on business loans up to a cap of 30% of their earnings before interest, tax, depreciation and amortization (EBITDA). As of 2022, however, manufacturers’ interest deductions are capped at 30% of their earnings before interest and tax (EBIT).

• The result: a lower cap on how much interest companies can deduct, which means manufacturers effectively pay more to finance vital investments.   

How it works: “The difference between a company’s EBITDA and EBIT are its depreciation and amortization expenses,” according to the explainer, part of the NAM’s “Manufacturing Wins” campaign.

• “Manufacturers make significant long-term investments in depreciable assets (such as equipment and machinery) and intangible assets subject to amortization (such as intellectual property), so these businesses experience a substantial delta between their EBITDA and EBIT—and thus face a much stricter interest deductibility limit under an EBIT-based standard.”

Why it’s a problem: The more stringent cap has a disproportionate impact on manufacturers, with 77% of the impact falling on manufacturing and related industries—limiting manufacturers’ ability to expand their businesses.

• Also, of the 35 countries with an earnings-based interest limitation, the U.S. is the only one that uses an EBIT-based standard, putting America at a competitive disadvantage in attracting new investment.  

What we need: “Congress must act to restore a pro-growth, EBITDA-based interest deductibility standard,” said NAM Vice President of Domestic Policy Charles Crain. “Reversing the EBIT-based restriction will ensure that manufacturers can avoid increased financing costs and reduced liquidity—enabling capital investments throughout the industry.”

Washington, D.C. – Following the release of guidance by the U.S. Department of the Treasury and the IRS for the Advanced Manufacturing Production Credit (Section 45X of the Internal Revenue Code), National Association of Manufacturers Managing Vice President of Policy Chris Netram released the following statement:

“Manufacturers welcome today’s announcement of final guidance on the 45X Advanced Manufacturing Production Credit and appreciate the administration’s willingness to make improvements that support manufacturing in the U.S. In particular, including critical mineral extraction and materials costs in the credit calculation will help bolster supply chain resiliency throughout the manufacturing sector. This tax credit will help manufacturers build a strong and sustainable domestic advanced manufacturing supply chain—from mining to processing to final product assembly.”

-NAM-

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 nearly 13 million men and women, contributes $2.91 trillion to the U.S. economy annually and accounts for 53% 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.

The NAM recently talked to Sen. James Lankford (R-OK) to learn what he and his colleagues on the Senate Finance committee are focused on as critical provisions of the Tax Cuts and Jobs Act are set to expire next year. Here’s the full interview:

NAM: Senator Lankford, Congress is facing a “Tax Armageddon” next year, as crucial provisions from 2017’s Tax Cuts and Jobs Act are set to expire. As a member of the Senate Finance committee, what is your focus moving into next year’s debate?

Sen. Lankford: Extending the TCJA is crucial for American families and it creates certainty for businesses, particularly those policies encouraging investment and innovation. Failure to act will result in a tax increase for most American households and 96% of businesses. For greater predictability, Congress should push for as many permanent pro-growth policies as possible. One such policy is the full expensing of new investments, which allows businesses to deduct the cost of machinery and equipment in the year they are purchased. This measure has significantly incentivized capital investment, leading to job creation and economic expansion.

NAM: The 2017 tax reform package implemented full expensing for capital equipment purchases, which manufacturers overwhelmingly utilized in the years following. However, full expensing began to phase out in 2023 and will be completely eliminated from the tax code in 2027. What are you doing to protect this crucial policy?

Sen. Lankford: For the past 20 years, under Republican and Democratic administrations, bonus depreciation has been an essential element of good business tax policy. Bonus depreciation acknowledges that business expenses are not business profits, so they should not be taxed as profits. The 2017 tax bill expanded on that nonpartisan tax policy by allowing businesses to depreciate 100% of their capital and equipment during the purchase year, instead of over years and years of tax returns. That change doesn’t alter how much tax a business can deduct; it simply changes when they can deduct it. With 100% depreciation, a business can deduct its tax in a single year, instead of over several years. That allows a business to invest more capital, hire new employees faster and expand their business. My ALIGN Act will make bonus depreciation a permanent and predictable tax policy for our businesses and manufacturers, and it will encourage economic growth for decades to come.

NAM: As a Senator who was there during the Tax Cuts and Jobs Act, you know how impactful the legislation was for manufacturers to be able to compete on a global level. As we get closer to next year, what are you hearing from stakeholders on the need for pro-growth tax policy so American businesses can engage and grow around the world?

Sen. Lankford: I have connected with Oklahoma businesses—both large and small—to discuss tax policies that affect them and how we can ensure our tax system provides certainty while keeping the U.S. competitive internationally. We must not lose sight of how a competitive tax code drives American investment, which, in turn, strengthens our economic and national security. The TCJA struck a competitive balance with a 21% corporate tax rate and a 20% rate for pass-through businesses.

Some are calling for an increase in the corporate rate to 28%. However, the average corporate tax rate in the EU is 21.3%, with a global average of 23% across 181 jurisdictions. China has a corporate tax rate of 25%, with a reduced 15% rate for new sectors. Moreover, China has significantly expanded its R&D deduction, while the U.S. is shrinking ours. We should reverse the decline of our R&D deduction and permanently encourage businesses of all sizes to remain innovative here in America.

As the Senator from Oklahoma, I’m keenly aware of the connection between a competitive tax code and energy security. As we work to strengthen our national security, now is not the time to target American oil and gas producers. Looking ahead to 2025, I will fight to protect the current treatment of intangible drilling costs (IDCs) in the tax code. IDCs allow oil and natural gas companies to recover these costs more quickly, freeing up funds for reinvestment in development. This not only creates more jobs but also enhances our energy security and keeps energy prices low for American families.

NAM: Thank you, Senator. What else can NAM members do to stay engaged and be a resource for you going into next year?

Sen. Lankford: I encourage everyone to regularly communicate with their congressional delegation about the impacts a lapse in the TCJA would have on their businesses and communities. For example, full expensing drives investments in sectors ranging from rural broadband and agriculture to energy security and manufacturing. These investments directly boost local economic output, create jobs, and enhance the competitiveness of communities in the market. It’s important to share this story as Congress works on a tax bill in 2025.