During the March 12 Senate Finance Committee hearing, "American Made: Growing U.S. Manufacturing Through the Tax Code," Chairman Ron Wyden (D-OR) called for swift Senate action on the Tax Relief for American Families and Workers Act (H.R. 7024) business tax and Child Tax Credit (CTC) bill, and witnesses emphasized the importance of restoring R&D expensing and the previous calculation for interest deductions, and of maintaining full bonus depreciation. Some Republican Senators also called for action on the business provisions but maintained that there are lingering concerns with the CTC expansion and revenue offset.

Chairman Wyden highlighted the strong bipartisan vote in the House for the bill and said, "The Senate has to get this done." If the Senate sits on this issue until 2025, some business owners say they won't make it, he said, and warned that "this set of policies isn't going to be on the table in 2025 if this bill stalls out," in light of some Republicans suggesting the issues can wait for the TCJA tax cliff. Chairman Wyden later said members would be working hard over the coming weeks to get done what can be accomplished now, ahead of the 2025 tax debate. Ranking Member Mike Crapo (R-ID) said while it is his hope that lawmakers can act quickly on the three business provisions, there are concerns about other aspects of the bill.

Senator Thom Tillis (R-NC), a main detractor of the bill, said there is an honest disagreement about the timing and packaging of the tax provisions, and he has had to explain to several CEOs that he needs to consider the entirety of the bill beyond the business provisions, including the CTC expansion. He said he thinks the Senate would be making mistake a to move forward in its current form due to concerns about the CTC expansion. In terms of process, Senator Tillis said lawmakers need to have a fulsome discussion about the entirety of tax measures that need to be in place, and that he is concerned about setting a precedent on future tax provisions having a pay-for. He asked what that would mean for next year's $2 trillion-$3 trillion worth of TCJA expirations and whether Republicans will face opposition from Democrats over the absence of revenue offsets.

Witnesses:

• Mark Widmar, First Solar, Inc., described beneficial provisions in the Inflation Reduction Act (IRA), and touted the law's economic potential in generating jobs and revenue, but said questions remain on how and when the IRA's regulations, particularly those related to the domestic content bonus, will be finalized.
• Anna Fendley, United Steelworkers, said the IRA's revival and expansion of the IRC Section 48C Advanced Energy Project Credit provides an exciting opportunity to advance decarbonization efforts through the domestic manufacture of an expanded list of energy technologies and their components, processing of critical minerals, and direct efforts to decarbonize industrial processes.
• Shannon Janis, onsemi, whose business includes manufacturing EV components, said ongoing support from the CHIPS Act with its IRC Section 48D Advanced Manufacturing Investment Credit will enable companies like hers to continue to invest in the US, compete with companies that are located offshore, and strengthen the resiliency of critical supply chains.
• Courtney Silver, Ketchie, Inc., said immediate R&D expensing and full expensing were a game changer for the manufacturing industry and need to be restored to allow businesses to compete, and she also raised awareness of the 2025 expiration of the pass-through deduction and other provisions.
• Peter Huntsman, Huntsman Corporation, said it is difficult for US companies to compete with foreign corporations on manufacturing chemicals for EV components, with some overseas competitors slashing their prices in the wake of the IRA.

During Q&A, Chairman Wyden asked about the costs of inaction on the Tax Relief for American Families and Workers Act. Widmar said his company's competition is foreign, R&D and innovation are key for US companies' survival, and the bill is critical from that standpoint because of R&D expensing and bonus depreciation.

Some members noted they have sponsored bills addressing business tax provisions included in the Tax Relief for American Families and Workers Act. Senator James Lankford (R-OK) called for permanency in the tax code and noted his ALIGN Act to make bonus depreciation permanent. Senator Maggie Hassan (D-NH) spoke about the importance of the tax bill's provision to restore R&D expensing, as opposed to five-year amortization, which she has long sponsored in separate legislation. Fendley spoke about dramatic effects of the R&D amortization change and Silver called for making R&D expensing permanent.

Under questioning from Senator Crapo about foreign competition in manufacturing chemicals for EVs, Huntsman agreed that Treasury could singlehandedly make his company competitive with those in other nations if they got the regulations right by including the chemicals in the definition of Buy America and as a domestic component (i.e., if the requirement for the bonus credit went all the way down the supply chain).

Senator Tom Carper (D-DE) asked how the IRA has provided certainty and strengthened the supply chain. Widmar said the IRA provided certainty around a policy environment and created for the first time a value for all participants in the industry.

Senator Catherine Cortez Masto (D-NV) noted the inclusion of critical minerals in the IRC Section 45X Advanced Manufacturing Production Credit and said she is concerned with Treasury regulations excluding mineral extraction and processing costs from qualifying for the credit.

Senator Michael Bennet (D-CO) asked about foreign competition. Fendley said other nations have had long-term industrial policies and the IRA provided long-term US policies that will help domestic companies. Widmar reiterated that certainty provides the ability to move investments forward and the innovation necessary in the US market.

Senator Marsha Blackburn (R-TN) called out the tax increases in the President's Budget, including the proposed increase in the corporate alternative minimum tax (CAMT), and asked about consequences if TCJA provisions were allowed to expire. Silver said TCJA provisions were "rocket fuel for us" and gave the business confidence, cash flow, and liquidity, which was especially important heading into the uncertainty of the pandemic a few years after enactment.

Opening statements and testimony from the hearing are available here.