What the American Jobs Plan Could Mean for Manufacturers
Much of the attention around the recently announced American Jobs Plan (Plan) has focused on how the federal government intends to pay the massive $2.3T price tag. As outlined in the plan, corporate taxes would be increased to 28%, enforcement activities expanded, and several new taxes on large companies would also be implemented. This has shifted attention away from the legislation’s purpose: to upgrade, repair, and bolster the nation’s physical and digital infrastructure. Given the breadth of investment, several industries will stand to benefit significantly, including manufacturing. This is especially true given the intense focus on energy efficiency and technology investments. Although the legislation is currently being negotiated in Congress, the proposal provides important insights into where the Biden Administration will focus for the coming years, the key details of which we have summarized below.
Opportunities for the Manufacturing Industry
There are several opportunities in the Plan for manufacturers, including those focused on semiconductors, electric vehicles, pharmaceuticals, and more. Key provisions include:
- Clean energy, achieved through various tax credits and incentives, federal procurement of clean energy products, including electric vehicle manufacturing to replace diesel transit vehicles, government vehicles (like postal trucks), and 20% of the yellow school bus fleet.
- Medical manufacturing, primarily to shore up the U.S. stockpile for pandemic preparedness over four years.
- Semiconductor manufacturing, which should help to partially offset the global shortage in semiconductors.
- Small and mid-size manufacturer support programs, including access to credit, venture capital, and R&D funding. Money is set aside for “community-based small business incubators and innovation hubs” to spur entrepreneurship in poor communities.
- The National Science Foundation for $50B in semiconductors, advanced computing and communications technology, advanced energy tech, and biotechnology.
- Regional manufacturing, for which $20B will be used to create ten regional innovation hubs as well as quadrupling the Manufacturing Extensions Partnership.
- Workforce development for low-income and impoverished communities primarily focused on dislocated workers, underserved communities, and worker protection.
Also, $180B is set aside for research and development in modern technologies, including artificial intelligence, computing, and biotechnology. Considering that at least 60% of private-sector R&D happens in the manufacturing sector, this will be a valuable cash infusion to spur additional investments and innovation.
Part of the Plan will also be used to secure and modernize supply chains. Manufacturing is especially vulnerable to supply chain disruptions, which have been caused by COVID-19, extreme weather, port delays, and more. $50B would be used to create a new office at the U.S. Department of Commerce to “monitor domestic industrial capacity and fund investments to support the production of critical goods.” The 48C tax credit would also be used to encourage modernizations to the supply chain.
A month before the Plan was introduced, two Senators announced the American Jobs in Energy Manufacturing Act of 2021 (Act). The Act concentrates on expanding tax credits for specific manufacturers, though there are still several parallels to the American Jobs Plan. If passed, the Act combined with the Plan would significantly boost the entire manufacturing industry. Presumably, this could be why the Plan does not include specific tax credits for manufacturing.
After a long year struggling through the restrictions and economic conditions created by the COVID-19 pandemic, the American Jobs Plan offers a source of optimism for the future of manufacturing companies. If you have questions about the information outlined above or need assistance with a tax or accounting issue, Klatzkin can help. For additional information, click here to contact us. We look forward to speaking with you soon.
©2021 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and does not constitute accounting, tax, or financial advice. Please consult your advisor concerning your specific situation.