Commercial Businesses Articles

OBBB has made the Qualified Opportunity Zone (QOZ) program permanent and introduced enhanced tax incentives for manufacturers building in rural QOZs, including the creation of Qualified Rural Opportunity Funds (QROFs) that offer a 30% basis step-up after five years. These changes make rural QOZs especially attractive for manufacturers seeking funding and long-term tax savings, with additional advantages such as a lower improvement threshold and extended capital gains exclusions.

Accrual-basis businesses can reduce their 2025 tax liability by recognizing expenses incurred this year, even if payment occurs in 2026 including wages, taxes, and utilities. Reviewing prepaid expenses, writing off uncollectible receivables, and properly timing income and deductions are key strategies for year-end tax planning.

QIP offers businesses a way to accelerate deductions on nonresidential building improvements through bonus depreciation and Section 179 expensing. Recent legislation under the OBBB permanently reinstates 100% bonus depreciation for qualifying assets placed in service after January 19, 2025, while also increasing Section 179 limits. Strategic planning is essential to balance immediate tax benefits against potential future implications like depreciation recapture and excess business loss rules.

Ransomware attacks pose a significant threat to manufacturers, disrupting operations and jeopardizing supply chains. Implementing proactive measures such as robust backups, network segmentation, employee training, and incident response planning can dramatically reduce risk. Strengthening cybersecurity across IT and OT environments helps safeguard business continuity and protect critical assets.

The Historic Rehabilitation Tax Credit (HTC) offers financial incentives for preserving historic buildings. It provides insights into the application process and potential challenges, helping to enhance the value of historic properties.

Digital twins, virtual replicas of physical systems, are revolutionizing manufacturing by enabling real-time monitoring, predictive maintenance, and smarter decision-making. Originally developed by NASA, this technology is helping manufacturers optimize operations, reduce costs, and accelerate innovation. While implementation can be complex, the potential benefits make it a compelling investment for forward-thinking companies.

Manufacturing companies expanding across borders must understand transfer pricing to value intercompany transactions and comply with tax regulations. Proper documentation and adherence to IRS and OECD guidelines are crucial to avoid penalties and ensure accurate tax reporting. Proactive management of transfer pricing can also optimize global tax positions within legal boundaries.

The OBBBA includes significant tax provisions that impact the U.S. manufacturing industry, such as resetting bonus depreciation to 100%, increasing Section 179 expensing limits, and making the QBI deduction permanent. Manufacturers should stay informed about these changes as the bill progresses through the legislative process. Please note that the tax law discussed in this article is currently proposed and has not yet been enacted.

Owners of small manufacturing businesses structured as S corporations must ensure they receive reasonable compensation for their work to comply with IRS rules. While distributions can offer tax advantages, they must follow fair salary payments based on the owner’s role, responsibilities, and industry standards. The IRS evaluates compensation by analyzing how business income is generated and expects thorough documentation to support salary decisions, especially when owners perform multiple roles within the company.

Manufacturing companies face the challenge of attracting and retaining skilled employees in today's competitive labor market. To stand out, they must build a compelling employer brand that emphasizes career growth opportunities, investment in technology, and a commitment to employee well-being. Strategies such as fostering a positive work culture, establishing clear career paths, highlighting technological innovation, and recognizing employee achievements can significantly enhance job satisfaction and productivity.