New Haven, CT - Senator Richard Blumenthal and Congresswoman Rosa DeLauro today joined representatives of the New Haven Manufacturing Alliance at Buchanan Marine in New Haven. Blumenthal and DeLauro took a tour of the facility and discussed the Manufacturing Reinvestment Account Act that they have introduced to the United States Congress.
The Manufacturing Reinvestment Account Act will enable manufacturers to invest new capital into equipment, facilities, and job training that will make them more competitive and enable them to grow.
"Manufacturers like Buchanan Marine need ready capital to expand capacity and create new jobs, which these new accounts will help provide," said Senator Blumenthal. "Just as individuals have IRA's, manufacturers should have MRA's that enable them to put away cash tax free that can be used to buy equipment and provide training to keep them competitive."
"Connecticut has always been known as a vital center of industry, where new ideas and innovation meet an impressive manufacturing capacity-and businesses like Buchanan Marine are carrying that banner forward. But in today's tough economy, we must make smart, targeted investments to help companies to do what they do best: build, innovate, and hire," said Congresswoman DeLauro. "That is why I drafted the Manufacturing Reinvestment Account Act with the New Haven Manufacturer's Association, which will enable America's manufacturers to invest in their business and get a bigger return on their hard-earned dollars. I am proud to stand here today with Senator Blumenthal, and look forward to working together to make this bill a reality."
The bipartisan Manufacturing Reinvestment Account Act would allow manufacturing firms to establish a manufacturing reinvestment account (MRA), similar to an individual retirement account (IRA), in a community bank and to make annual pre-tax contributions of up to $500,000 that may be held in the MRA for up to 7 years. Amounts distributed from the MRA are effectively taxed at a low 15 percent rate and can be used to purchase equipment and facilities or for job training.
According to the Alliance for American Manufacturing, U.S. manufacturing firms employ 14 million Americans directly and create 8 million additional jobs, contributing $1.6 trillion or 12 percent of U.S. Gross Domestic Product.
Specifically, the Manufacturing Reinvestment Account Act would:
Establish Manufacturing Reinvestment Accounts (MRAs): Allow qualified manufacturing businesses (as defined in Section 199, Internal Revenue Code) to establish a manufacturing reinvestment account (MRA), similar to an individual retirement account (IRA), in a community bank (an institution with total assets of equal to or less than $25 billion).
Set up Parameters for MRAs: Allow manufacturing businesses to make deductible, annual contributions using pre-tax profits from its manufacturing line of up to $500,000 into the MRA. Contributions to the MRA may remain in the account for up to 7 years, at which point they must be used to make investments for the purchase of equipment and facilities or for job training, including workforce development. A business cannot maintain more than one MRA in any taxable year. The bill sunsets after 10 years.
Create IRA-Type Tax Structure: The bill would treat distributions from the MRA as taxable income, at an effective low tax rate of 15 percent, with normal deductions taken for any costs that are appropriate to the qualified investment. The MRA is subject to IRS reporting requirements just as IRAs are, and any withdrawal must include a report to the IRS on what investment is being made. The business would face a 10 percent penalty tax, like an IRA, in addition to regular taxes for MRA savings not reinvested after 7 years or for the use of MRA funds for non-qualified investments. Firms facing financial hardship are allowed penalty-free MRA withdrawals to stave off bankruptcy much as most tax-advantaged retirement savings accounts allow penalty-free pre-retirement withdrawals for special purposes. In the case of a firm that ceases to be a manufacturing business, the firm will have a one-year grace period at which point the balance in the MRA is treated as distributed from the account.
This is the MRA account that was initiated by NHMA member Hugh McCann and has been strongly supported by NHMA and its Legislative committee chaired by Jamison Scott.
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