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News & Press: Industry

A Tax Victory for Manufacturers

Thursday, July 30, 2020   (0 Comments)
Posted by: Alyce Ryan
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After a year of pushing back on an IRS rule that would have made it more difficult for manufacturers to invest in new equipment, the NAM can declare a win, according to Bloomberg Government (subscription).

Here’s a recap:

  • Before 2017, businesses could pretty much subtract their full interest payments on debt—but the 2017 tax reform law limited the business interest deduction to 30% of earnings before interest, tax, depreciation and amortization (EBITDA) for tax years starting in 2018.
  • Starting in 2022, the deduction was limited even more, to earnings before interest and tax (EBIT). Excluding depreciation and amortization would make it more expensive for businesses like manufacturers to finance capital equipment purchases.
  • Here’s where it could’ve gotten worse: The Treasury Department had proposed a rule that would have effectively imposed the EBIT standard now instead of two years from now.

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