On March 31, President Biden released an overview of his American Jobs Plan, which covers all aspects of U.S. infrastructure. Numerous points in the plan are of interest to the marine industry, particularly the commitment to invest in research and development, and to revitalize manufacturing and small businesses.
It is important to remember that this fact sheet only highlights goals and the direction that the White House would like to move with new legislation. Congress still needs to draft, debate and pass bills that support the American Jobs Plan agenda before the president has the opportunity to sign the legislation into law. Nevertheless, this legislative release signals the president’s plans to move our economy forward by heavily investing in infrastructure.
For most marine manufacturers, investing in research and development is imperative to stay relevant in the high-tech world of boating. The American Jobs Plan calls for a $180 billion investment in research and development, but is largely silent on exactly which U.S. industries would have access to the funds. If the legislation becomes law, it is likely that the current Internal Revenue Code research-and-development statutes would be enhanced to provide access to the funds.
This change would no doubt be a boon to marine manufacturers, which, even with the code as it stands today, can find valuable tax incentives for research and development. (All manufacturers should consider claiming the R&D tax credit to offset the costs of developing new or improved boats, electronics or other marine products.)
The American Jobs Plan also focuses on another non-traditional infrastructure area: manufacturing. The White House says the U.S. manufacturing sector accounts for 70 percent of business research-and-development expenditure, 30 percent of productivity growth, and 60 percent of exports. The plan calls on Congress to invest $300 billion to, among other things, increase access to capital for domestic manufacturers. Specifically to that end, the bill earmarks $52 billion for domestic manufacturers. This change would be made through investing in existing capital access programs, with a focus on supporting rural manufacturing and clean energy.
The president’s plan also includes specific support for modernizing supply chains, such as extending the Section 48C Advanced Energy Manufacturing Tax Credit program, and creating a new financing program to support debt and equity investments for manufacturing. For boat manufacturers, this could be an interesting option in conjunction with other capital investment tax incentives, such as the 179D Commercial Buildings Energy-Efficiency deduction.
While investment in U.S. manufacturing looks to bolster the supply side of the boating world, the bill also aims to improve U.S. waterways and ports where marine products are used and enjoyed. President Biden called on Congress to invest an additional $17 billion in inland waterways, coastal ports, land ports of entry and ferries. This investment would include a Healthy Ports program to mitigate the cumulative impacts of air pollution on neighborhoods near ports.
The plan also calls for $10 billion to create a Civilian Climate Corps to conserve public lands and waters, one of Biden’s campaign promises. Also of interest is the statement that U.S. waterways need “reimagining,” which reads as if it could have far-reaching impacts on recreational boating, as well as the commercial sector. These goals aim to increase the quality of operating on the water across shipping and recreation industries alike. Increased investment would likely have a multiplier effect for companies that provide support services to ports and waterways, contributing to even higher growth in the marine sector.
Alongside the American Jobs Plan, the president is proposing to amend the corporate tax code. His goal is to incentivize job creation and investment here in the United States and, above all, provide a source of funding for the government spending. The legislation would set the corporate tax rate at 28 percent. It would also enact a 15 percent minimum tax on large corporations’ book income — the income corporations use to report their profits to investors — in an effort to ensure that corporations cannot exploit loopholes in the tax code.
Legislation of this size is certainly going to face opposition and concerns from both sides of the aisle. Whether the plan passes as the White House envisions it is doubtful, given how closely Congress is split. However, even a slimmed-down version of the bill could see large amounts of incentives made available to marine manufacturers.
Today, 97 percent of boats on the water in the United States are American-made, and thus the American Jobs Plan could prove beneficial for growth in the marine industry. Companies planning large capital expenditures for expansion or new-product development should keep an eye on bills associated with the American Jobs Plan, to maximize subsidies or credits. n
Ronald G. Wainwright (firstname.lastname@example.org) is partner - tax, national leader credits/accounting methods and Michael C. Laur (email@example.com) is senior manager - credits/accounting methods of Cherry Bekaert’s
Specialty Tax Group.
This article was originally published in the May 2021 issue.