August 2025 Volume 7

WASHINGTON UPDATE

FORGING GROWTH What the New Tax Law Means for Your Bottom Line By Omar S. Nashashibi

O n July 4, 2025, President Trump signed into law a major manufacturing investment bill delivering on a promise long championed by the Forging Industry Association: a tax code that puts domestic manufacturing first. After watching trading partners subsidize their industry for decades, this legislation brings permanency and certainty to the tax provisions our industry uses to compete globally. After months of debate, advocacy, and industry pressure from groups such as the FIA, H.R. 1 is now law, and with it comes a suite of tax provisions poised to drive investment, reward domestic operations, and ensure the next generation of manufacturers can take the reins. Our members spoke up. Flew to Washington to lobby on this bill and Congress listened. Now it’s time to put these pro-growth tax tools to work. Tax on R&D Eliminated; Expensing Made Permanent Forgers have long relied on research and development to invest in better processes, improve efficiency, and meet increased demand. The new law FIA lobbied to pass ends the harmful requirement to amortize domestic R&D expenses over five years and restores the ability to immediately deduct these investments retroactive to January 1, 2025. This is a significant win for innovation-driven companies to help them grow and succeed. For smaller manufacturers with less than $31 million in gross receipts, the FIA helped secure an even bigger victory – R&D expensing retroactive to January 1, 2022 – giving these businesses the opportunity to recoup much of the amortized tax payments made over the past three years. The FIA lobbied extensively on this provision to restore and make permanent the expensing of R&D activities to help level the playing field against countries such as China, which offers its manufacturers a super deduction of 175 percent on some eligible R&D expenses. Bonus Depreciation and 179 Expensing: Invest, Modernize, Expand The forging industry is among the most capital intense, requiring our members to spend millions of dollars on their plants, equipment, and machinery. The tax law restores 100 percent bonus depreciation (Section 168) from its current 40 percent rate retroactive to January 2025. Not only does the law restore full and immediate expensing, bonus depreciation is now permanent, allowing businesses to plan their investments rather than rushing to place a machine into service ahead of an upcoming expiration date. New equipment, plant upgrades, and qualifying used assets all remain eligible for immediate expensing. Section 179 expensing also sees a major boost, with the annual limit now locked in at $2.5 million, with a dollar for dollar phaseout after $4 million for qualifying investments. This is an unprecedented opportunity to upgrade presses, invest in next-gen

robotics, or overhaul tooling with upfront tax advantages. For CFOs charting next year’s capital budgets, the directive is clear: you no longer have to defer growth decisions due to uncertainty from Washington. We now have stability to invest today, allowing the opportunity to plan for the future. Section 199A: Relief for S-Corps, LLCs, and Partnerships The majority of manufacturers in the U.S. are structured as a pass-through entity, with the owner paying at the much higher individual tax rate of up to 37 percent. In the 2017 Tax Cuts and Jobs Act, lawmakers made permanent a 21 percent income tax rate for C-Corporations, while allowing for a temporary 20 percent deduction under Section 199A for pass-throughs. The law removes the threat of a tax increase on pass-throughs scheduled for December 31, 2025, and now makes the Section 199A deduction of 20 percent permanent. While C-corporations maintain their 21% rate, this provision ensures S-corps, partnerships, and sole proprietors are not left behind. With many forging operations structured as family-owned or pass-through entities, the Section 199A provision remains a key tool for reducing taxable income and keeping reinvestment capital inside the business. Interest Deduction – Section 163(j): Relief for Growing Companies Capital-intensive manufacturers have struggled under the restrictive EBITDA interest limitation rules that beginning January 1, 2022 could not factor in depreciation or amortization in their deduction calculations. H.R. 1 answers that by restoring the full EBITDA standard, replacing the more restrictive EBIT calculation, and lifting the cap on business interest expense deductions back to 30 percent of EBITDA. This shift improves liquidity for members financing expansions, purchasing equipment, or investing in working capital. For CFOs evaluating financing options, the EBITDA rule means more room to grow without facing punitive tax penalties. Estate Tax: Protecting Family Businesses For family-owned businesses, estate planning and structuring a business transition is not only complicated but can strain familial relations. The makes permanent existing law allowing for individuals to exempt up to $15 million from the estate tax and up to $30 million for those filing jointly. Importantly, H.R. 1 includes indexing to inflation, ensuring these protections don’t erode over time. This ensures founders and family operators can transition ownership without forcing asset sales or triggering estate-tax driven reorganizations. Family businesses can plan for succession with far more confidence than in years past.

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FIA MAGAZINE | AUGUST 2025