4 New Laws. 1,388 Amendments. $4.1 Trillion Dollars. – Top 3 Takeaways for Small Manufacturers

By Gil Gonzalez, Subcity, Inc.

We don’t blame you if you haven’t been able to read and absorb the 794,620 words and 7,170,735 characters in the four new pieces of legislation.

Here are the top things to be aware of for American manufacturers and what to do about each of them:

1. Changes to the R&D Tax Credit – Talk to your existing R&D Tax credit provider!
   • The Inflation Reduction Act expands the R&D tax credit limit from $250k to $500k by providing an additional $250,000 that can be used to offset the employer portion of payroll tax liability.
   • Sec. 174 capitalization severely complicates the situation for many of our larger clients with NOLs. While it is in place, making the claim that they have R&D to take the R&D tax credit could result in them owing more tax. From one of our expert’s point of view we have put filing their first R&D tax credit on hold with a few clients until the 174 capitalization issue is cleared up.
   • On March 17th, 2023, a new bipartisan research & development (R&D) bill has been introduced by Senators Maggie Hassan (D-NH) and Todd Young (R-IN). This would clarify and fix the biggest issues by ensuring that companies can fully deduct R&D expenses each year and fix provisions for small businesses and startups, which include making the R&D tax credit refundable, raising the credit cap over time, and expanding eligibility.
2. Expanded Access to Loans and Credit for Small Businesses – Visit the list of capital programs and view contacts for your state or territory.
   • The American Rescue Plan Act reauthorized and expanded the State Small Business Credit Initiative )SSBCI) to provide $10 billion to support small businesses and empower them to access the capital needed to invest in job-creating opportunities as the country emerges from the pandemic.
3. Enhanced Incentives for Qualifying Geographic Areas – Type in your commercial address in this mapping tool to see if you are in an eligible census tract area.
   • New Market Tax Credit. Low Income Housing Tax Credit. Most Opportunity Zones are also NMTC-qualified census tracts, so this overlap means the two tax incentive programs could fit nicely together. In addition to the NMTC Program, Opportunity Fund projects may also make use of other tax credit programs, such as the Low Income Housing Tax Credit (LIHTC) and the Historic Tax Credit (HTC).

To recap, here are your three actions to take today:

1. Talk to your existing R&D tax credit provider, especially before you file your annual corporate taxes.
2. Visit the list of capital programs and view contacts for your state or territory.
3. Type in your commercial address in this mapping tool to see if you are in an eligible census tract area.

Obviously there is a lot more to these bills! Any manufacturer working on anything related to clean energy or semiconductors should be paying particularly close attention to the programs, guidelines, and application windows as they are announced.