A Sigh Of Relief

The stimulus bill is important. While no one is reporting that huge numbers of manufacturers are skipping merrily through the shop floor because of the new provisions enacted, there are some reasons for optimism.

 

First, there is a 30 percent expensing allowance for new machine tools and other equipment ordered between September 11, 2001 and September 11, 2004. The equipment must be in service before December 31, 2004. When the math is done, this translates to a write-off of 40 percent for equipment in the first year and 57 percent in the first 2 years. Under the old schedule, the numbers were 14 percent in the first year and 39 percent in the first 2 years. Check out the chart below created by AMT—The Association of Manufacturing Technology. It gives a nice example using a transaction to illustrate what this new schedule means.

Another aspect of this bill that has potential impact for shops is an extension for carrying back net operating losses. That has been extended to 5 years. For a company that hasn't been as profitable in recent times, this change will refund some of the taxes paid during more profitable years so they can be applied to the current slower levels. In the form of a cash refund, this tax rebate can be used in tandem with the new depreciation schedule to invest in new, more productive, capital equipment.

The stimulus package is hoped to be proactive. Like a lineup of dominoes, nothing happens until the first one is pushed. In a way, that's very much what the government is trying to do with this stimulus package. It's an incentive to manufacturers to push the capital investment domino and start an economic chain reaction.

For shops that are looking to get better and more profitable, there may never be a better time to make the investments necessary to accomplish those goals.
With the recent passage of the economic stimulus package, also known as the "better late than never" bill, Congress has taken a positive step toward recognizing and reacting to the plight of manufacturing in the United States. The voices in the wilderness have finally been heard.

The stimulus bill is important. It's important because if you're reading this, you're involved in metalworking manufacturing. If you're involved in manufacturing, there are important aspects of this bill that have an impact on your business. While no one is reporting that huge numbers of manufacturers are skipping merrily through the shop floor because of the new provisions enacted, there are some reasons for optimism.

Most of us have heard something about the bill. There have been some wags saying it isn't necessary, it's too late, it will cost too much. For most of us though, the bill is seen as helpful.