The American Foundry Society (AFS) opposes a Treasury Department proposal that would make it more expensive for manufacturers, including metalcasters, to finance the purchase of depreciable equipment by limiting interest deductions four years earlier than Congress intended.
Speaking up for the industry, AFS signed a coalition letter, organized by the National Association of Manufacturers (NAM), urging Treasury officials to reverse the proposed rule.
“In order to finance capital equipment purchases, many manufacturers borrow funds. By effectively adopting an EBIT [earnings before interest and tax] standard for manufacturers years earlier than Congress intended, the proposed rule makes it more costly to finance the investments in equipment and machinery that are needed to create additional jobs in the industry,” the letter states.
The letter calls on the Treasury to implement interest limits as intended by Congress by providing an EBITDA base for the calculation of interest deductions.
Under the AFS-backed tax reform law, the simple interest-deduction rule went away. Now, manufacturers can deduct 30 percent of EBITDA through 2021.
Starting in 2022, depreciation and amortization were to be excluded. The Treasury’s proposed rule would eliminate the depreciation and amortization deduction four years ahead of schedule.
A second provision of the tax law creates incentives for manufacturers to invest in capital goods. If they buy and put into service a piece of equipment after September 27, 2017, and before the end of 2022, they can receive a “depreciation bonus” of 100 percent in the first year (up from 50 percent under the previous rules). This new provision has manufacturers purchasing new equipment – now only to find that depreciation doesn’t figure into the new 30 percent Treasury rule outlined above.
“Manufacturing employment fell by 210,000 jobs from 2009 to January 2017,” said Doug Kurkul, AFS CEO. “Since then, it has risen by more than 473,000 jobs. AFS urges the Treasury Department to honor the Congressional intent, and withdraw this ill-conceived proposal.”
The American Foundry Society is a dynamic technical and advocacy organization that serves and represents the $33 billion metalcasting industry. AFS is the only association serving the entire industry, including all metals and processes, with a three-part focus on advocacy, education, and innovation. AFS also publishes Modern Casting and Metal Casting Design & Purchasing magazines and presents Metalcasting Congress and CastExpo, the largest metalcasting trade events in North America. Founded in 1896, the organization is based in Schaumburg, Illinois, with an advocacy office in Washington, D.C. More information is available at afsinc.org.