Do you remember when most product labels said “Made in the USA”? For many decades the U.S. dominated manufacturing, both at home and worldwide, but globalization is relentless. Manufacturers are competing against companies outside the U.S. now more than ever and “Made in the USA” isn’t as prevalent as it once was. Since the 1980s many countries—notably China, Japan, and India—have certainly given domestic manufacturers a run for their money. According to the office of Sen. Chris Coons (D-Del.), the U.S. has lost more than five million manufacturing jobs, and more than 70,000 plants have either shut down or moved overseas, in the last 20 years.
So, what actionable efforts can fabricators take to turn this around?
Congress and industry leaders have agreed on the importance of automation and digitally based concepts such as self-monitoring, analysis, and reporting technology (SMART) in the manufacturing sector. Now under a new administration, decision-makers on Capitol Hill are having regular discussions to reshore business, jobs, and production. Manufacturers are at the forefront in helping take the lead again both domestically and internationally.
Of course manufacturing companies assist the government by paying taxes, and this is the most obvious part of the tax system, but manufacturers shouldn’t lose sight of the rewards it offers. Owing to lucrative tax incentives and COVID-relief efforts, manufacturers now can claim funds that can be reinvested in their businesses. The best part is that some of the new tax provisions are permanent.
Incentives for Manufacturers
The government isn’t always effective in sharing information about these tax incentives, how they work, and who can claim them, so business owners often have to do some research to learn about them. Two big ones are Section 41 and Section 179D.
Section 41. The Research and Development (R&D) Tax Credit has evolved continuously since its introduction in the 1980s to combat offshoring. It has since been made permanent to bring back and introduce more technical jobs in the U.S. One success story involved a manufacturer that was able to claim $1 million in federal and state tax credits for four years’ worth of qualifying projects
Section 179D. The Energy-Efficient Commercial Buildings Deduction was made permanent early in 2021. Those who make energy-efficient improvements to commercial buildings can qualify for this deduction, which allows building owners to receive up to $1.80 per square foot in deductions for eligible projects. Because the average warehouse is 16,400 sq. ft., this could equate to a deduction of $29,520.
Ease Your Pain Points
All businesses in all industries share one common goal—growth. Many share the same hurdles to growth, some of which can be cleared with the extra capital generated by taking all of the available tax credits.
- Workforce Shortages. Having the means to attract and retain the workforce necessary to compete, and especially to innovate, is an ongoing battle. In addition, bringing technical talent to the U.S. to fill important roles can be difficult when trying to secure visas for qualified talent.
- Tariffs. This has been a hot topic since Trump imposed tariffs of 25% on steel and 10% on aluminum in 2018. The next steps under the Biden administration are still unclear, but it just announced that tariffs on aluminum from United Arab Emirates would remain in place.
- Energy Conservation. Owners of commercial buildings can upgrade lighting, windows, and other hardware and systems for better energy efficiency to save money and claim certain credits.
- Equipment Performance. Generating the funds needed to invest in the latest equipment can make the difference in keeping up with your competitors or outperforming them.
- Asset Monitoring and Tracking. Antiquated asset tracking methods are behind us. The most innovative manufacturers are now investing in more efficient ways to track inventory and monitor their resources.
- New Technology. The most consistent barrier two decades into the 21st century is the adoption of technology. Globalization does more than spread jobs. It spreads opportunities, including opportunities to use the latest technologies. For domestic manufacturers, getting ahead and staying ahead of foreign competition is a matter of doing the same.
Although tariffs come and go, the rest of these hurdles are essentially permanent. Getting over them isn’t easy. It takes a lot of energy, and a continuous effort, to move ahead fast enough to outpace the competition. However, manufacturers don’t have to fund it themselves. Funding is available to offset the costs and increase the rate at which the business scales up.