February 2025 Volume 7

WASHINGTON UPDATE

INVESTING IN AMERICA: WAITING ON WASHINGTON By Omar S. Nashashibi

expensing has cost companies millions of dollars since the changes took effect. Restoring the expired provisions and extending the TCJA is a top priority for President Trump and Republicans in Congress. Many on Capitol Hill, including Speaker Johnson, are boldly predicting that they will pass an extension of the tax cuts, provide funding for the border, overhaul immigration, expand oil development, and strengthen our defense – all by Memorial Day, this year. During his first term in office, President Trump did not sign the TCJA bill into law until December 22, 2017. I note the impor tance of the date as many in Trump administration at the time also predicted that lawmakers would send a final tax bill to the President’s desk by April. In fact, some in the first Trump administration believed that Congress could pass not only one, but two reconciliation bills by April of their first year in office. The reality of working with Congress began to become apparent as the weeks and then months went by before leaders introduced the tax measure in November of that year. At the time, Republicans held the Senate by a 52-48, a margin similar to today’s 53-47 GOP majority. When lawmakers voted on the tax bill in December 2017, House Republicans controlled that lower chamber with 239 seats to 193 for Democrats, a comfortable margin by today’s standards. Twelve members of the House GOP voted against the Tax Cuts and Jobs Act, a number today’s House Republicans cannot afford to lose with only a one seat majority until special elections in the Spring to replace Trump administra tion appointments. The timing of the legislation is often secondary only to its contents. Many of the Tax Cuts and Jobs Act of 2017 provisions took effect days later, on January 1, 2018, not affording companies much time to plan, or celebrate. The FIA is lobbying lawmakers to eliminate the requirement to amortize and capitalize R&D activities, to restore 100 percent expensing, extend the deduction for passthroughs, and maintain the lower C-Corporation tax rate. In our meetings on Capitol Hill, including during the February 2025 Member Fly-in, FIA stressed the importance of timely action on these provisions that have broad GOP support. In all likelihood, the longer lawmakers take to move the measure carrying the tax language, the chances increase that Congress will again make many of the provisions temporary in an effort to reduce the overall cost of the reconciliation package, as they did in 2017. That bill, however, primarily contained tax policy, it was not

A t the end of this year, thirty-four tax provisions will expire or phase out, increasing taxes by over $4 trillion on manufacturers and other tax payers. Those facing these tax increases must rely upon action by the U.S. Congress by December 31st, a date that today may feel far off in the distance, but in Congress-speak, is a deadline rapidly approaching. In 2017, a Republican-led Congress passed the Tax Cuts and Jobs Act of (TCJA), which lowered the C-corporation rate to 21 percent, created a 20 percent deduction for passthrough businesses under Section 199a, allowed for companies to fully deduct their R&D activities, and granted 100 percent expensing for capital expenditures, among other provisions such as increasing the estate tax exemption. FIA members report that the law allowed them to increase their investments in technology and equipment, especially critical when combined with the tariffs President Trump imposed on Chinese imports. These combined policies not only provided incentives for the forging industry to invest, but at the time some stability and certainty. However, lawmakers made many of the most important provisions for manufacturers temporary in an effort to reduce the overall cost of the TCJA. In doing so, businesses lost the ability to fully expense their R&D on January 1, 2022, forcing them to pay taxes on their efforts to innovate and use new technologies. The following year, on January 1, 2023, another section of the law took effect, reducing 100 percent expensing of capital expendi tures to 80 percent. Today, that number stands at only 40 percent, and without Congressional action will fall further to 20 percent next year before being eliminated entirely in 2027. As forging manufacturers seek to develop new technologies and invest in new equipment, the loss of the R&D and 100%

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FIA MAGAZINE | FEBRUARY 2025