Input Stories

Nearly one year after Congress passed the landmark tax legislation, cementing essential tax provisions for manufacturers, the NAM continues to speak with congressional champions who helped get it done.

This week we spoke with Rep. Kevin Hern (R-OK) about international tax provisions and immediate expensing for factory construction. Rep. Hern led the Global Competitiveness Tax Team, which played a key role in shaping the international tax policy provisions during the House Ways and Means Committee’s drafting process.

International tax framework: “Before the passage of the 2017 Tax Cuts and Jobs Act, there was a strong incentive for multinational businesses to keep their profits overseas rather than repatriate them for investment and job creation in the U.S.,” explained Rep. Hern.

• “The TCJA eliminated this ‘lockout effect,’ encouraging companies to bring back intellectual property and profits to the United States. However, the 2017 law was not a permanent policy, creating uncertainty for multinational manufacturers who make long-term investment decisions.”
• “The uncertainty about potential increases in GILTI rates and the future of FDII created planning paralysis for U.S.-based multinationals. The permanent international tax code now provides the certainty manufacturers need to invest with confidence.”

Factory expensing: “After the passage of the TCJA, bonus depreciation allowed businesses to immediately deduct the full cost of equipment and machinery. A manufacturer could buy a $200,000 piece of machinery and expense it entirely in the first year,” Rep. Hern noted, when asked about the benefits of a new provision in last year’s legislation for facility expensing.

• “The factory building itself that housed that machinery had to be depreciated over a much longer 39-year schedule. This created a major gap in U.S. tax policy: manufacturers could quickly recover the cost of the machines, but the cost recovery for enormous capital investment in the physical factory lagged far behind.”
• Last year’s tax law “extends accelerated expensing treatment to the structures of new domestic production facilities, allowing manufacturers to recover the cost of the building much faster [and makes] it significantly more attractive for companies to invest in expanding U.S. manufacturing capacity.”

What the NAM can do: “It is vitally important for NAM members to show Congress that the system is working by driving investments, supporting domestic job creation and retention, and remaining competitive on the global stage,” Rep. Hern concluded.

• “Sharing real-world examples and data from your businesses with lawmakers means much more when it comes to creating and implementing policy. Your stories can help us create or change legislation based on what’s working and what needs reform.”

Read the whole Q&A.To share your own story on how this landmark tax law impacted you, please reach out to NAM Senior Director of Tax Policy Connor Rabb.