U.S. Lawmakers Are Nearing A Tax Deal That Could Extend Important Credits For Metals Companies

According to several news sources, U.S. lawmakers are narrowing in on a deal to revive some expired tax benefits for businesses. Bipartisan negotiations spearheaded by House Ways and Means Committee Chair Jason Smith (R-Mo.) and Senate Finance Committee Chair Ron Wyden (D-Ore.) have been active in recent days, and sources say they are increasingly optimistic the two lawmakers could produce an agreement as early as this week.

If an agreement is reached, lawmakers could try to attach it to a government funding deal that must be negotiated by later this month.

In exchange for expanding the child tax credit, the bill also would address business benefits that recently lapsed for research and development spending, purchases of assets that lose value over time, and interest expenses. To show support for this potential deal, MSCI recommends readers call their member of Congress to ask that they weigh in with Chair Smith and Chair Wyden in support of the business tax provisions, which would:

• Ensure the tax code supports innovation by allowing for immediate research and development (R&D) expensing. The private sector accounts for more than 75 percent of total R&D spending, with small businesses alone accounting for approximately $90 billion in all private sector R&D investments. With wages and salaries comprising approximately 75 percent of R&D spending, allowing R&D amortization is, first and foremost, a jobs issue.
• Enabling businesses to finance growth by setting a pro-growth interest deductibility standard.Before January 1, 2022, businesses’ interest expense deductions were limited by section 163(j) to 30 percent of their earnings before interest, tax, depreciation, and amortization. Interest deductions are now limited to 30 percent of earnings before interest and tax. By excluding depreciation and amortization, the stricter standard acts as a tax on investment, making it more expensive for capital-intensive companies throughout the supply chain to finance job-creating growth.
• Making permanent a key incentive for capital equipment purchases. From 2017 through 2022, the federal tax code allowed for a 100 percent deduction for the purchase of equipment and machinery in the tax year purchased. That provision began to phase out this year and will completely disappear by 2027. Congress enacted full expensing to spur investments and ensure that the United States is well-positioned to attract capital in a competitive global marketplace. It must reverse the phaseout and restore the 100 percent deduction.

The National Association of Manufacturers (NAM) has launched online action centers that provide information about each of these tax policies. These portals also allow individuals to send letters to the representatives in Congress asking them to reduce the tax burden on manufacturing companies. Click here to learn more about the R&D tax credit, here for interest deductibility, and here for full expensing.

As a reminder, last fall, MSCI joined NAM and more than 1,300 other organizations in sending a letter to House and Senate leaders asking them to schedule votes on legislation that would extend these provisions. That letter is available here.