Last September, NTMA spoke with manufacturing advocate Omar Nashashibi, founder of Inside Beltway, about the implications of the One Big Beautiful Bill Act. Now, as we are in the middle of tax filing season, the focus of the conversation around the bill shifts from policy discussion to implementation.
According to Omar, “This is not the year to simply send your financials to your tax preparer, sign the return, and ask where to mail the check.” Instead, this is the year to think differently (and strategically) about your tax position.
This law’s scope and complexity mean that even seasoned tax professionals can become overwhelmed. Owners, C-suite leaders, and even HR teams should approach this filing season with a deeper understanding of how federal tax policy intersects with manufacturing growth.
The legislation can be viewed in three primary buckets:
- Investing in the manufacturing process
- Investing in the facility
- Investing in people
Investing in the Manufacturing Process
R&D expensing
One of the most urgent areas involves research and development (R&D) expensing.
When 100% R&D expensing expired on January 1, 2022, many manufacturers paid taxes on activities that previously would have been deductible. Under the new law, businesses with under $31 million in gross receipts now have a short window to seek partial or full refunds for taxes paid on qualifying R&D activities in 2022, 2023, 2024, and part of 2025.
Manufacturers must work backward from statutory deadlines and actively pursue amended returns if eligible. If your shop engages in process improvements, tooling upgrades, automation development, or prototype refinement, you may have qualifying R&D activity.
Ask your CPA: “Have we evaluated our eligibility for R&D refunds under the updated expensing rules?”
Or you can contact NTMA’s exclusive tax credit and incentive partner, Alliant Global, for support.
Bonus depreciation and Section 179
The bill restored 100% bonus depreciation for qualified property placed into service beginning January 20, 2025. Additionally, Section 179 expensing was doubled to $2.5 million.
At first glance, full expensing sounds like an obvious win.
But the IRS issued guidance in January clarifying that businesses may elect not to take 100% bonus depreciation in the first year. In some cases, taking only 40% (for example) may provide better long-term tax positioning, especially if future profitability or loss utilization is a concern.
This is where strategic tax planning matters.
Ask your CPA: “Should we fully depreciate this new machine now? Or would spreading deductions across future years better stabilize taxable income?”
Investing in Facilities
Section 179D: A deadline you cannot miss
Section 179D provides deductions for energy-efficient facility retrofits. However, this provision is scheduled to expire this summer.
If you upgraded lighting, HVAC systems, insulation, or other qualifying energy-efficient improvements, you may be eligible.
Consider the following: Did we make qualifying facility improvements in the past year that we have not yet claimed?
Qualified production property deduction
Another major provision is the qualified production property deduction, allowing full expensing for the construction of new manufacturing facilities if:
- Construction begins by January 19, 2025
- The facility is placed into service by January 1, 2031
While we are still awaiting official IRS guidance, we expect to receive clarifications on whether retrofits or expansions qualify before the April 15 filing deadline. Current understanding suggests that production areas will likely qualify, while warehouses and offices likely do not. Meanwhile, some grey areas, such as quality control rooms or hybrid spaces, remain under review.
This provision could represent hundreds of thousands of dollars in tax savings. This is why monitoring IRS guidance is so important.
Investing in People
No tax on overtime
Recent IRS guidance clarified the “no tax on overtime” provision. Under federal income tax rules, the half portion of time-and-a-half overtime compensation is not subject to federal income tax.
This means employees may be more willing to accept overtime, allowing employers to meet production demands more efficiently. This provision could create a win-win for both the employer and employee.
Section 127 and 529 expansion as recruitment tools
Employers may now provide up to $5,250 annually in education assistance under Section 127 without it counting as taxable income to the employee.
Combined with expanded 529 plan flexibility for industry-recognized credentials, manufacturers now have stronger tools to support upskilling, credentialing, and other workforce development activities.
As graduation season approaches and you’re looking to recruit new team members, these provisions can enhance your talent acquisition strategy.
Approach This Filing Season with a Different Mindset
If you take one piece of advice from this blog, let it be this: Do not assume your tax professional will automatically identify every opportunity available to you. There are simply too many moving parts involved in this law.
Instead, take the following approach:
- Ask direct questions about R&D refunds
- Discuss depreciation strategy before making elections
- Review facility upgrades for expiring deductions
- Engage HR about overtime and education provisions
- Monitor pending IRS guidance on production property
This filing season offers an exciting opportunity to position your business for resilience and growth. According to Omar, manufacturers who proactively engage with these provisions will be the ones to fully realize the benefits of this bill.
And as always, NTMA will continue to monitor guidance and advocate on your behalf. Don’t hesitate to reach out to our team if you have any further questions, or tap into your NTMA community to learn how they’re approaching this tax season.