President Trump’s tax and spending law, plus his tariff policy, represent a mixed bag for plastics processors.
The tax bill has plenty to like even though it stifles the wind and solar energy industries and ends green energy tax credits; the frequently changing tariffs offer fewer benefits because they are impacting processors’ pricing, investment and hiring.
Matt Seaholm, president and CEO of the Plastics Industry Association (PLASTICS), praised the new tax law and said in a news release that it should strengthen domestic plastic production and innovation, and drive continued momentum, investment and job creation across the plastics value chain and the broader U.S. manufacturing industry.
Dean Dorton, a business management, consulting and accounting firm based in Lexington, Ky., said the sweeping tax legislation is designed to encourage manufacturing in the U.S. and that nearly every manufacturer will be impacted by it.
Here are a few provisions that processors should like.
The budget bill permanently reinstates 100 percent deduction of the cost of capital equipment purchases in the year the purchase was made. This is retroactive to equipment acquired beginning Jan. 20, 2025, and now includes manufacturing buildings.
The 100 percent deduction will help small manufacturers who need to invest in new equipment.
The new law introduces accelerated deductions for production buildings, a new approach to incentivizing domestic manufacturing investment, according to the Bipartisan Policy Center. The previous timetable was 39 years, but economic research suggests that immediate depreciation offers the largest incentive when assets have long lifespans, according to the nonprofit group. .The one-year depreciation is set to expire Jan. 1, 2029, and return the deduction timetable for new factory buildings to 39 years.
The new law also allows for deductions in one year for research and experimental or development expenses and provides more favorable rules for interest deductions. Until 2022, manufacturers could deduct 100 percent of their domestic research and development expenses in the year they were incurred, but that rule changed and the costs had to be spread over five years. This was particularly costly for small and medium-sized manufacturers.
Foreign research costs must still be amortized over 15 years. This acts as an incentive to conduct research in the U.S.
The 20 percent qualified business income deduction for pass-through income has now been made permanent. Approximately 96 percent of U.S. businesses are organized as pass-throughs, meaning business owners pay federal income tax on the earnings on their individual personal returns and the business avoids corporate income taxes. This is another provision that is expected to significantly help small businesses.
The 20 percent pass-through deduction decreases the business owner’s effective tax rate.
The new law also changed international tax rates. Foreign-derived intangible income and global intangible low-tax income tax deduction rates were decreased.
The bill restores the original, more favorable EBITDA-type calculation of the business interest deduction limit for tax years beginning in 2025 and beyond. This supports capital-intensive businesses and improves access to financing for growth-oriented firms.
Notably, the bill eliminates most energy-related tax incentives, potentially harming clean energy manufacturers. It remains to be seen how soon and to what extent this might impact OEMs who buy plastic parts.
It also eliminates investment tax credits for wind and solar electricity projects that begin construction after July 4, 2026.
What does this mean for manufacturers? Mike Devereux, a partner with consulting firm Wipfli, wrote that the combination of bonus depreciation and immediate R&D expensing “creates compelling economics for domestic facility expansion and modernization.”
He also said that protective tariffs, combined with tax advantages for domestic production, support supply chain reshoring: “Manufacturers should reassess international supply chain relationships and evaluate opportunities to develop domestic supplier networks.”
Devereux wrote that pass-through benefits and working capital improvements allow for more aggressive strategies, and that a tax professional can help identify the best financing strategies.
Devereux also said that the new tax rules can improve competitiveness. “Enhanced domestic manufacturing economics create opportunities to compete more effectively against imports while maintaining healthy margins,” he wrote on the Wipfli website. “Companies should evaluate pricing strategies that reflect improved cost structures while building market share.”
The rules have changed. Many of these new provisions are effective immediately or are retroactive to the start of 2025.
It is time for plastics processors to schedule a meeting with their tax adviser to talk about long-range plans, capital investments, R&D activity, depreciation schedules and how to best take advantage of the new rules and deal with repealed green credits.
Ron Shinn | Editor
Editor Ron Shinn is a co-founder of Plastics Machinery & Manufacturing and has been covering the plastics industry for more than 35 years. He leads the editorial team, directs coverage and sets the editorial calendar. He also writes features, including the Talking Points column and On the Factory Floor, and covers recycling and sustainability for PMM and Plastics Recycling.
