The Fabricator - for the original article go HERE.
Congress passed the Coronavirus Aid, Relief, and Economic Security Act
to help private businesses during this economic slowdown. Perhaps the
most anticipated part of the relief package is the $350 billion Paycheck
Protection Program for small businesses with fewer than 500 employees.
The manufacturing community
did not get everything it wanted in the Coronavirus Aid, Relief, and
Economic Security (CARES) Act and is watching expectantly as Congress
considers a follow-on stimulus bill. That next package may headline
major infrastructure spending and additional tax concessions, but its
passage, or even its development, by Congress is anything but certain.
The National Association of Manufacturers (NAM)
had called for a $1.4 trillion COVID-19 Resiliency Fund. The CARES bill
did not include such a fund but did provide $350 billion in the form of
a Paycheck Protection Program, which is meant to help small businesses,
and $454 billion in emergency lending to businesses, states, and cities
through the U.S. Treasury’s Exchange Stabilization Fund. But that total
is well short of the $1.4 trillion the NAM sought.
In
accentuating the positive, NAM CEO Jay Timmons said, “The bill also
takes key steps from the NAM plan by increasing the maximum amount of
tax deductions for interest on business loans and by creating an
incentive, through loan forgiveness, for small manufacturers to retain
their employees during this crisis.”
In addition to the tax
benefit on business loans, the CARES Act allows companies to take net
operating losses (NOLs) earned in 2018, 2019, or 2020 and carry back
those losses five years. The NOL limit of 80% of taxable income is
suspended, so firms may use NOLs they have to fully offset their taxable
income. The net interest deduction limitation, which currently limits
businesses’ ability to deduct interest paid on their tax returns to 30%
of earnings before interest, tax, depreciation, and amortization
(EBITDA), has been expanded to 50% of EBITDA for 2019 and 2020.
However,
the NAM wanted any bill to adopt a federal designation that deemed the
manufacturing supply chain “essential.” That designation would be
important with regard to state and federal laws allowing essential
companies to remain open during the coronavirus emergency. The federal Department of Homeland Security (DHS)
issued some guidance—which has no legal standing—on March 19, and it
did include some manufacturers as part of its list of “essential
critical infrastructure workers.”
The Precision Metalforming Association (PMA) said on March 20 that the guidance covers approximately 2,500 companies in its association and companies belonging to the National Tooling and Machining Association.
The DHS guidance explicitly covers manufacturers making medical
devices, food equipment, and packaging equipment, for example, but it
makes no mention of metal fabricators that supply parts to industries
such as automotive, appliances, railroads, energy, and many others.
The
DHS later clarified in update guidance on March 29 that workers who
support crucial supply chains and enable functions for critical
infrastructure should be included in the grouping of essential
personnel. “The industries they support represent, but are not limited
to, medical and health care, telecommunications, information technology
systems, defense, food and agriculture, transportation and logistics,
energy, water and wastewater, law enforcement, and public works,” the
guidance stated. But the 12 pages of detailed listings of “covered
employees” in those industries included very few references to
“manufacturers.”
Christie Carmigiano, PMA spokeswoman, argues the DHS guidance is by end product, not supplier. “PMA
believes that focusing on the end product, while not a clear directive
for the industry, does provide for maximum flexibility as governments
cannot be expected to become experts in the manufacturing process as
they will exclude critical industries, such as stampers who supply those critical products,” she said.
Many metalworking companies
view the $350 billion Paycheck Protection Program for small businesses
with fewer than 500 employees as the most important provision in the
bill. The small-business loans, with a maturity of two years and a 1%
interest rate, are available through any bank approved as a Small
Business Administration lender. The loans can be as much as $10 million
to cover payroll costs, mortgage, and rent payments and health care
benefits for employees, including paid sick leave. In some cases, they
also can cover interest on other debts.
The new loans apply to
costs incurred retroactive to Feb. 15 through June 30. The CARES Act
includes loan forgiveness for companies able to keep employees on
payroll or continue paying bills throughout the coronavirus crisis. The
amount of loan forgiveness will include payroll costs for individuals
below $100,000 in annual income and mortgage and rent obligations,
including interest and utility payments.
Both Democrats and
Republicans in Congress have been talking about another stimulus package
focusing on infrastructure, which manufacturing and construction
companies have been clamoring for since President Donald Trump’s
election in 2016. For example, the chair of the House Committee on
Transportation and Infrastructure, Peter DeFazio, D-Ore., said the next
step should be “a true stimulus that creates jobs and rebuilds our
decaying infrastructure.”
Author Bio:
Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.
