On July 3, 2025, Congress passed House Resolution 1 (the Act) following a narrow 218-to-214 House vote. As industries across the country assess the implications of this sweeping legislation, the manufacturing sector emerges as one of most impacted industries.
The Act preserves the 21% corporate tax rate, providing continued certainty for business planning and investment. More notably, it delivers meaningful enhancements to capital expenditure investments. The legislation permanently extends 100% bonus depreciation, providing a full first-year deduction for qualified property placed in service after January 19, 2025. It also introduces a new temporary provision allowing for 100% depreciation for certain nonresidential real property used in domestic manufacturing, production, or refining of tangible personal property through 2030. The original use of the property must generally commence with the taxpayer. If original use did not commence with the taxpayer, the property must not have been used in a qualifying production activity between January 1, 2021 and May 12, 2025 to qualify for this new provision.
Significant improvements were made to Section 179 expense; the maximum deduction increases from $1 million to $2.5 million for property placed in service after December 31, 2024, reduced by the amount by which the cost of qualifying property exceeds $4 million (previously $2.5 million).
The Act reinstates full expense of domestic research and experimental (R&E) costs for taxable years beginning after December 31, 2024, reversing prior changes that required capitalization and amortization. Taxpayers may elect to take a deduction for the unamortized balance of domestic R&E costs previously capitalized. The deduction may be recognized in full in the first tax year beginning after December 31, 2024, or may be recognized ratably over a two-year period starting with the first tax year beginning after December 31, 2024. In addition, taxpayers who qualify as a small business may have the option of filing amended tax returns to claim deductions for their previously capitalized domestic R&E costs in the tax year they were incurred. As was required prior to the enactment of the Tax Cuts and Jobs Act of 2017 (TCJA), the Act will now generally require taxpayers to reduce their deductions by the amount of research and development credit claimed unless the election to reduce the credit amount is made by the taxpayer, in accordance with Code §280C.
Adjustments were made to the business interest expense limitations under §163(j) to raise the threshold from 30% of tax basis earnings before interest and taxes (EBIT) to 30% of tax basis earnings before interest, taxes, depreciation, and amortization (EBITDA), offering broader deductibility for capital-intensive manufacturers.
The legislation permanently extends the 20% §199A Qualified Business Income deduction and preserves most individual tax rates established under the TCJA.
For multi-generational manufacturers, the Act raises and makes TCJA’s estate tax exemption permanent, excluding more taxpayers from the impact of the estate tax.
The Act makes adjustments to international tax provisions, including what was previously known as foreign-derived intangible income (FDII) (now called foreign-derived deduction eligible income (FDDEI)) and global intangible low-taxed income (GILTI) (now called net CFC tested income (NCTI)). For more on international tax changes in the Act, see our FORsights™ article, “International Tax Rebranded: Key Items in the Reconciliation Bill.”
Finally, the Act also made sweeping changes to clean energy tax credits. It increases the §48D advanced manufacturing investment credit from 25% to 35% for qualified property placed in service after December 31, 2025. In addition, the Act made significant changes to §45X, known as the advanced manufacturing production credit. The §45X tax credit is available to manufacturers of certain clean energy components, e.g., certain battery cells, critical minerals, or inverters. Metallurgical coal was added to the list of critical minerals eligible under §45X and will be available for metallurgical coal produced in 2026 through 2029. The Act eliminates the 45X credit for wind energy components produced and sold after December 31, 2027.
Together, the Act broadly impacts those participating in and making investments in American manufacturing.
Forvis Mazars can help you navigate the changing legislatives. For even more details into what is included in the Act, check out our legislative tracker that includes a description of provisions, their effective dates, and categories to help you decide what may be applicable to you. Our Washington National Tax Office has and will continue to provide curated content specific to the Act, focusing on related strategies and unique insights. To contact a member of our team for individual guidance on any of these issues, please contact us here.