Invent and Manufacture in America Act: the bipartisan, bicameral bill that could change the landscape of R&D Tax
Since 2000, the United States has lost over five million manufacturing jobs, more than 70,000 manufacturing plants, and only 1 in 10 Americans work in manufacturing compared to 1 in 4 back in the 1960s. The causes for the depreciating manufacturing sector stem from outsourcing labor to other countries as well as the increased use of automation to replace workers. In an effort to revive the industry, a bipartisan, bicameral bill was introduced earlier this year: the Invent and Manufacture in America Act.
The bill was introduced by U.S. Senators Chris Coons (D-DE) and Pat Roberts (R-KS) in June 2017, and U.S. Representatives Mike Kelly (R-PA) and Ron Kind (D-WI) brought a companion bill in the House. If passed, the Invent and Manufacture in America Act would offer an increased tax cut for companies conducting research and development in the United States and who manufacture their products domestically. According to Representative Kelly, “If you want to do something, you usually incentivize any good behavior. So, we’re looking at the loss of jobs we’ve had — manufacturing jobs, the number of manufacturing plants have closed, and when you ask them why is it that you’ve closed … why did you choose to actually assemble it someplace else, it’s usually because of a more favorable tax situation.”
The Invent and Manufacture Act has significant ramifications for the R&D Tax Credit in creating this favorable tax situation. While the R&D Tax Credit is still under-claimed for most industries, the manufacturing sector has been shown to benefit the most from the R&D Tax Credit, comprising 39.5% of the credit’s claimants and receiving nearly 61% of the total amount claimed from the credit across all industries. Coupled with the fact that innovation prompts nearly 50 percent of economic growth in the United States, the manufacturing industry has much to benefit from more investment in R&D. If passed and made into law, the Invent and Manufacture in America Act would increase the R&D Tax Credit up to 25 percent for companies that engage in R&D and manufacture domestically.
The proposed bill has been lauded by most innovators in the country. Keith Roe, president of American Society of Mechanical Engineers, said, “When American innovations are manufactured abroad, we surrender our competitive advantage. This bill will strengthen innovation at home and make the United States more competitive globally by encouraging more domestic R&D and manufacturing.”
Still Have Questions about the New Tax Changes?
Swanson Reed regularly hosts free webinars and provides free IRS CE credits as well as CPE Credits for CPA’s. For more information please visit us at www.swansonreed.com/webinars. To find out more, please contact a Swanson Reed R&D Specialist today.