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Key Takeaways:
- OBBBA restores 100% bonus depreciation and R&D expensing — boosting cash flow potential.
- Tariff volatility is shifting sourcing, pricing, and supply chain strategy in real time.
- Tax teams must be engaged early to guide capital and compliance decisions effectively.
Manufacturing and distribution CFOs are navigating a rapidly changing environment shaped by new legislation, tariff volatility, and shifting global supply chain dynamics. To help you stay ahead, we've compiled answers to frequently asked questions (FAQs) relevant to industry finance leaders. Below, you'll find clear, practical guidance on the tax and trade developments shaping your capital strategy, compliance priorities, and operational decisions.
What is the One Big Beautiful Bill Act (OBBBA) and why does it matter to manufacturers?
The OBBBA introduces permanent changes to depreciation, research expenses, interest deductions, and clean energy credits. These shifts directly affect cash flow, capital planning, and profitability — putting CFOs in a pivotal role for decision-making.
How does the return of 100% bonus depreciation change our capital strategy?
With the return of 100% bonus depreciation, manufacturers can fully expense qualifying equipment and production-related property placed in service after January 19, 2025. This accelerates deductions, reducing after-tax investment costs and improving ROI on expansion and modernization projects.
Can we fully expense research and development (R&D) costs again?
Yes. Domestic research costs can now be deducted upfront rather than amortized. This benefits companies investing in innovation, process refinement, or product engineering.
What changed with interest expense deductions under Section 163(j)?
The OBBBA removes depreciation and amortization from the adjusted taxable income (ATI) calculation — allowing more interest to be deducted. For debt-financed growth, this boosts net cash flow and lowers taxable income.
Are clean energy credits still available for plant upgrades or sustainability projects?
Some credits are still but are narrowing. Solar, wind, and energy storage projects must meet stricter deadlines and sourcing rules. Manufacturers should reassess project timelines and eligibility before committing to new energy investments.
How are manufacturers responding to escalating tariffs?
CFOs are taking tactical — not transformational — steps:
- Renegotiating supplier terms
- Reworking transfer pricing to reflect tariff impact
- Sharing costs via surcharges or rebates with vendors and customers
Large-scale onshoring has slowed in favor of flexible routing and sourcing strategies.
Do changing tariffs affect transfer pricing and audit risk?
Yes. Altered cost structures may raise audit exposure with global tax authorities. Strengthening documentation and pricing methodologies is critical as the Department of Justice (DOJ) signals increased enforcement on tariff-related compliance.
Tip: Update transfer pricing frameworks to reflect tariff-driven cost shifts without disrupting operations.
Should we still consider onshoring operations?
Onshoring is still practical, but current tariff volatility favors agility over major relocation. Many manufacturers now prioritize nearshoring, dual sourcing, or alternative shipping routes instead of large capital moves.
Where does technology fit into our tax and finance planning?
While many tax teams are testing AI tools, over half lack foundational data systems. Without clean, governed data, scenario planning and automation efforts fall short.
Tip: Assess data readiness and develop tax technology roadmaps aligned with finance strategy.
How do we better integrate tax into strategic decision-making?
Involve tax leadership early in planning, especially when evaluating capital investments, pricing, or supply chain changes. Tax is now a strategic lever — not a post-decision reviewer.
Tip: Connect tax policy insights to financial resilience, translating legislation into business strategy.
How do these changes affect tax provision and financial forecasting?
With permanent changes to depreciation, interest deductibility, and R&D expensing under the OBBBA, your tax provision will look significantly different starting in 2025. Forecasting must account for these updates to avoid surprises in effective tax rate (ETR), deferred tax assets, and cash tax payments.
CFOs should work closely with both tax and financial planning and analysis (FP&A) teams to:
- Adjust quarterly provision models
- Incorporate new bonus depreciation rules into long-range plans
- Evaluate the timing of capital expenditures and debt financing
- Recalculate R&D ROI under the new expensing framework
Tip: Integrate tax developments into financial forecasts and provision models, aligning planning with compliance and strategic goals.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
