Blumenthal, Lieberman Introduce Bill to Aid Connecticut Manufactures
(Washington, DC) – Senator Richard Blumenthal (D-CT) today introduced the Manufacturing Reinvestment Account Act that will make it easier for manufacturers to invest new capital into equipment, facilities, and job training that will make them more competitive and enable them to grow and create more jobs. Senators Joe Lieberman (I-CT) and John Rockefeller (D-WV) are original cosponsors of the bill; it has also been introduced in the House of Representatives by Congresswoman Rosa DeLauro.
“A common refrain from manufacturers to me is they need this kind of boost to amass investment capital. Measures to grow manufacturing are vital to continuing economic recovery in Connecticut and to stronger competition in a global economy,” said Senator Blumenthal. “This bill will ensure that businesses have capital to invest so they achieve better returns. Investments through these funds in machinery and infrastructure will enable Connecticut to grow manufacturing and create new jobs.” “Reinvigorating the manufacturing sector is crucial to the future economic growth of Connecticut and the United States. Consequently, I am proud to cosponsor this bill, which will give small American manufacturers a simple and effective tool to expand their operations and create more jobs,” said Senator Lieberman.
“If we want our nation to continue to be successful and competitive in the global marketplace, we must return to an outlook in America that prizes and supports domestic manufacturing. We need to move away from being a workforce that simply buys things and go back to being a workforce that builds things here in America,” said Congresswoman DeLauro. “Especially in today’s tough economy, we must do all we can do to support our businesses and create jobs, and the Manufacturing Reinvestment Account Act will do this, enabling our manufacturers to invest in their business and get a bigger return on their dollars and helping to create and sustain good jobs for hard-working Americans.” The bipartisan Manufacturing Reinvestment Account Act would allow manufacturing firms to establish a manufacturing reinvestment account (MRA), similar to an individual retirement account (IRA), in a community bank and to make annual pre-tax contributions of up to $500,000 that may be held in the MRA for up to 7 years. Amounts distributed from the MRA are effectively taxed at a low 15 percent rate and must be used to purchase equipment and facilities or for job training.
According to the Alliance for American Manufacturing, U.S. manufacturing firms employ 14 million Americans directly and create 8 million additional jobs, contributing $1.6 trillion or 12 percent of U.S. Gross Domestic Product.
Specifically, the Manufacturing Reinvestment Account Act would:
Establish Manufacturing Reinvestment Accounts (MRAs): Allow qualified manufacturing businesses (as defined in Section 199, Internal Revenue Code) to establish a manufacturing reinvestment account (MRA), similar to an individual retirement account (IRA), in a community bank (an institution with total assets of equal to or less than $25 billion).
Set up Parameters for MRAs: Allow manufacturing businesses to make deductible, annual contributions using pre-tax profits from its manufacturing line of up to $500,000 into the MRA. Contributions to the MRA may remain in the account for up to 7 years, at which point they must be used to make investments for the purchase of equipment and facilities or for job training, including workforce development. A business cannot maintain more than one MRA in any taxable year. The bill sunsets after 10 years.
Create IRA-Type Tax Structure: The bill would treat distributions from the MRA as taxable income, at an effective low tax rate of 15 percent, with normal deductions taken for any costs that are appropriate to the qualified investment. The MRA is subject to IRS reporting requirements just as IRAs are, and any withdrawal must include a report to the IRS on what investment is being made. The business would face a 10 percent penalty tax, like an IRA, in addition to regular taxes for MRA savings not reinvested after 7 years or for the use of MRA funds for non-qualified investments. Firms facing financial hardship are allowed penalty-free MRA withdrawals to stave off bankruptcy much as most tax-advantaged retirement savings accounts allow penalty-free pre-retirement withdrawals for special purposes. In the case of a firm that ceases to be a manufacturing business, the firm will have a one-year grace period at which point the balance in the MRA is treated as distributed from the account.
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