Congressman Joe Morelle on Friday introduced legislation to protect investments in America’s manufacturing sector. The Permanently Preserving America’s Investment in Manufacturing Act makes a technical change to the U.S. Tax Code allowing businesses to continue deducting interest expense.
“Across the nation, our manufacturing economy has experienced challenges due to the impacts of the COVID-19 crisis. Now is the time to uplift these businesses, which is why I’m taking action to prevent a tax hike that would further harm this critical industry,” Morelle (D-Irondequoit) said. “My legislation would permanently preserve the current tax formula, allowing for a greater investment in manufacturing firms across the country and strengthening the backbone of our economy.”
Typically, interest on business expenses is tax-deductible but has a cap. At the end of 2021, the formula for calculating the deduction will become more restrictive. Known as the Earnings Before Interest, Taxes, Depreciation and Amortization standard (EBITDA), depreciation and amortization will be removed from the calculation, limiting the ability to deduct interest expenses. The change would have a disproportionate impact on the manufacturing sector, Morelle contends, as manufacturing firms often are required to take out loans to finance large capital investments in their facilities and equipment.
“Preserving the deductibility of interest expense is critical to manufacturers’ ability to invest for the future,” said Chris Netram, vice president of tax and domestic economic policy for the National Association of Manufacturers. “The NAM applauds Reps. Morelle and Smith for working to maintain the EBITDA standard and prevent harmful new interest limitations from taking effect at year’s end. Protecting EBITDA means that the women and men who make things in America will have the financial flexibility to expand their facilities, finance equipment and machinery purchases, and continue leading the economic recovery.”
The legislation has not been assigned a number yet, but the wording mirrors that of a bill introduced by Sen. Roy Blunt (R-Missouri) on April 12 this year. Morelle’s bill was co-sponsored by Rep. Adrian Smith (R-Nebraska).
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