After months of speculation, the U.S. House of Representatives has released a sweeping ‘proposed’ tax and spending package. The bill aims to extend and enhance a number of business-friendly tax credits. It also seeks to lock in favorable provisions from the 2017 Tax Cuts and Jobs Act.

“This package is more than just an extension of past incentives — it’s a real opportunity for manufacturers to plan for growth,” said Justin Mentele, Pinion’s lead manufacturing advisor.

“The expanded cash method, restoration of depreciation in interest limitation rules, and new production property deduction could all translate to immediate and long-term tax savings.”

Key Highlights for Manufacturers

Pinion tax advisors have analyzed the proposed legislation to uncover the provisions that could have the most impact on the manufacturing sector:

The proposed bill provides relief from sunsetting tax provisions and makes many beneficial policies permanent.

The bill also provides some remarkable new benefits for American manufacturers, which Pinion will be watching closely. Expanded availability of the cash method of accounting will provide significant tax accounting flexibility to manufacturers.

For businesses looking to grow, we will be monitoring the new “qualified production property” deduction, which would effectively allow for full first-year depreciation for new manufacturing facilities if construction begins before January 1, 2030.

  • Expanded Cash Method Availability for Manufacturers: For tax years beginning after December 31, 2025, the gross receipts threshold for determining a manufacturer’s ability to use the cash method of accounting is $80M (the current threshold is $25M).
    • Food and beverage manufacturers may be included: Manufacture of food and beverage products may qualify, but only if the food or beverage is not prepared in the same building as a retail establishment in which a substantially similar product is sold to the public.
  • Qualified Production Property Deduction: The proposal creates a new, bonus depreciation-like first-year depreciation deduction for nonresidential real property that constitutes an integral part of a manufacturing activity, refining activity, or agricultural or chemical production activity. The deduction is 100% of the cost of the property.
    • Targeted to New Construction: Construction must begin between January 20, 2025 and December 31, 2029, and property must be placed in service before January 1, 2033.
    • Purchased property, kind of? Qualified property may be purchased rather than constructed, but is only qualified if the property was not used in a qualified production activity by any person at any time between January 1, 2021 and May 12, 2025.
  • 100% Bonus Depreciation Through 2029: The bill extends 100% bonus depreciation for property (including fruit- and nut-bearing trees and vines) placed in service between January 20, 2025 and December 31, 2029. For property placed in service after 2029, the bonus depreciation percentage is zero.
  • Increased First-Year Expensing Limits: The bill would increase the Section 179 expensing limits, allowing a maximum deduction of $2.5M, with a phase-out limit of $4M.
  • Making Permanent the Qualified Business Income Deduction: The proposal would permanently extend the deduction for qualified business income and increase the deduction from 20% to 23%.
  • Return of Research Expenditure Deductions: For tax years beginning after December 31, 2024 and before January 1, 2030, the bill permits taxpayers to elect to immediately deduct domestic research and experimentation expenditures. Pinion had led the Main Street Innovation Coalition campaign to lobby for restoration of R&D expensing which was terminated in the 2017 tax law. This is a big win for all clients who have significant research and development programs.
  • Restored Interest Limitation Calculation Rule: The proposal would reinstate depreciation in the adjusted taxable income calculation.
  • Permanently Extending Higher Estate and Gift Exemptions: The proposal permanently increases the estate and gift tax exclusion amount to $15M per person, beginning in 2026.
  • Changes to the State and Local Tax (SALT) Deduction Cap: The bill makes two big changes.
    • Increased Deduction Limit: The proposal increases the deduction limitation to $30,000 ($15,000 if MFS) for taxpayers with income below $400,000, with a phase-out down to the original $10,000 cap for high-income individuals.
    • Banning Deductibility of PTE Taxes: The proposal prevents the use of state elective pass-through entity taxes to deduct more than the new threshold by deducting those taxes at the entity level. Instead, those taxes must be passed out to owners and used in computing the owner’s personal deduction limitation.
    • The size of the SALT deduction continues to be a disputed issued within the House Republican conference: Expect this provision to change before the tax legislation becomes law.

Next Steps

While the proposal lays the groundwork for significant tax reform, it remains just that — a proposal.

“The key word here is proposed,” notes Brian Kuehl, Pinion’s Director of Government and Public Affairs. “There are contentious elements that will need to be negotiated before the package can move forward to the Senate. While House leaders are pushing for the package to be completed by July 4, we believe the process will likely not move that fast and that final passage is more likely in September or October.”

Republican leaders are aiming to bring the bill to the floor for a vote as early as next week. First, the House Budget Committee will work to consolidate its elements into a comprehensive package, followed by review from the House Rules Committee.

Impacts on Other Industries

Pinion’s tax advisors have also provided an overview of how the proposed tax provisions will impact businesses in agriculture, biofuels, and other industries:

Pinion’s government and public affairs team will continue to monitor the proposed tax bill and its impact on manufacturing.

Reach out to a Pinion advisor with questions or concerns around your business’ tax strategy.