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VI Urges U.S. Treasury to Reverse Proposed Rule Making It More Expensive to Purchase Equipment and Machinery

Mar 2019

VI has joined the National Association of Manufacturers (NAM) in urging the U.S. Treasury Department to reverse a proposed rule that would make it more expensive to finance the purchase of equipment and machinery.

In a recent blog post by NAM’s Senior Director, Tax Policy, David Eiselsberg, the proposed rule implements new limits on the ability of businesses to deduct interest on their debts.

Eiselsberg notes, “For tax years beginning in 2018 through 2021, the tax reform bill limited interest deductions to 30 percent of a company’s earnings before interest, tax, depreciation and amortization (EBITDA). Beginning in 2022, an EBIT standard takes effect, further limiting available interest deductions for capital-intensive industries by excluding depreciation and amortization from the base upon which allowable deductions are calculated.

Treasury’s proposed regulations would effectively impose the stricter EBIT today – four years earlier than expected. Doing so would disproportionately harm manufacturing by making it more expensive to finance capital equipment purchases. Moreover, the proposed rule acts as a disincentive to utilizing full expensing (also known as bonus depreciation), a key pro-growth incentive in tax reform which reduces after-tax costs by providing a 100 percent deduction for the purchase of equipment and machinery. Given that for every one dollar spent in manufacturing, nearly two dollars is added to the economy, this proposed regulation would hurt manufacturers and slow our country’s economic growth.”