Federal Tax Benefits for Manufacturing:
Current Law, Legislative Proposals, and Issues
for the 112th Congress
Gary Guenther
Analyst in Public Finance
September 20, 2012
Congressional Research Service
7-5700
www.crs.gov
R42742
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Federal Tax Benefits for Manufacturing

Summary
Congress is considering numerous proposals to create new forms of targeted assistance for the
manufacturing sector. One of the more contentious issues in the policy debate concerns the role
federal policy should play in the allocation of economic resources to and within the sector.
This report examines a key element of current federal support for manufacturing: tax benefits.
More specifically, it identifies and describes current federal tax preferences that offer significant
benefits for small and large manufacturing firms. To broaden the context for the current policy
debate over federal support for manufacturing, the report also provides a brief overview of federal
non-tax support for manufacturing. In addition, the report identifies bills in the 112th Congress
that would enhance current tax preferences and explains how eligible manufacturers might be
affected. It concludes with a discussion of the chief arguments for and against additional targeted
support for manufacturing and their implications for federal policy.
Current federal tax law contains nine provisions with a strong potential to provide significant tax
relief to firms primarily engaged in manufacturing. A few of them are targeted at manufacturing;
the others tend to benefit manufacturers more than firms in most other sectors. The provisions
include the deferral of the active income of controlled foreign subsidiaries of U.S.-based
corporations, the research tax credit, the expensing of outlays for research and experimentation,
and accelerated depreciation for certain capital assets.
Numerous bills have been introduced in the 112th Congress that would enhance some of these tax
preferences or create new ones. Among the notable proposals are H.R. 10/S. 1237, H.R. 689, H.R.
1036, H.R. 3476, H.R. 3495, H.R. 5727, S. 256, S. 825, and S. 2237. There is considerable
variation among the bills in the extent to which they would benefit manufacturing firms. Several
would extend and enhance the research tax credit, extend the generous depreciation allowances
that were available in 2011, and allow a full exclusion for gains on small business stock.
Proponents of targeted federal assistance for manufacturing make several arguments to back their
stance. First, they say the assistance is needed to help the United States become more dependent
on exports and domestic production as sources of economic growth. Second, a federal
manufacturing policy, in their view, would encourage the creation of more manufacturing jobs,
which pay higher wages and benefits, on average, than do non-manufacturing jobs. Third,
proponents point out that manufacturing industries perform the vast share of private-sector
research and development, and innovation is a primary engine of economic growth. Fourth, they
note that manufacturing plays a critical role in the growth of the green economy. And because
many foreign governments provide assistance to their manufacturers, say proponents, the United
States should do the same to avoid a loss of competitiveness.
By contrast, critics of special federal assistance for manufacturing say it is not warranted on
economic grounds, since there is no discernible market failure that is peculiar to goods
production. They also maintain that promoting job growth in manufacturing would do little to
create the millions of jobs needed to achieve full employment again. Finally, in their view, the
U.S. economy would benefit more from increased efforts by the federal government to dismantle
foreign barriers to expanding U.S. exports of services than from policies aimed at boosting the
competitiveness of U.S. manufacturers.
Congressional Research Service
Federal Tax Benefits for Manufacturing


Contents
Introduction...................................................................................................................................... 1
Manufacturing and the U.S. Economy............................................................................................. 2
Federal Policy Toward the Manufacturing Sector ........................................................................... 6
Current Federal Tax Provisions with Significant Benefits for Manufacturing ................................ 7
Legislative Initiatives in the 112th Congress to Enhance Existing or Create New Tax
Preferences That Benefit Manufacturing Firms.......................................................................... 13
Non-Tax Legislation................................................................................................................ 14
Current Policy Debate Over Whether To Increase Federal Support for the Manufacturing
Sector.......................................................................................................................................... 19
Arguments Made for Special Assistance ................................................................................. 20
Arguments Made Against Special Assistance.......................................................................... 23
Implications of the Arguments for Federal Policy................................................................... 25

Figures
Figure 1. Key Economic Indicators for Manufacturing, 1960 to 2010............................................ 4

Tables
Table 1. Percentage Change in Full-Time-Equivalent (FTE) Employment and Real Value
Addeda for Major U.S. Manufacturing Industries, 1998 to 2010.................................................. 5
Table 2. Federal Tax Provisions That Provide Significant Benefits to Manufacturing
Firms............................................................................................................................................. 9
Table 3. Legislation in the 112th Congress to Create or Enhance Tax Preferences that
Would Benefit U.S.-Based Manufacturing Firms....................................................................... 15

Contacts
Author Contact Information........................................................................................................... 27

Congressional Research Service
Federal Tax Benefits for Manufacturing

Introduction
In his State of the Union speech delivered in January 2012, President Obama stated that his
strategy for economic recovery and growth “begins with manufacturing.1” About two months
later, Gene Sperling, the Director of the President’s National Economic Council, explained the
rationale for this strategy in an address to the Conference on the Renaissance of American
Manufacturing.2 He argued that building a plan to revitalize the economy around manufacturing
is justified by the “outsized” role played by the sector in innovation, the creation of high-wage
jobs, and exports. Further enhancing the sector’s economic importance, according to Sperling,
were the spillover benefits of manufacturing for other firms and the communities where
manufacturing facilities are located and the significant economic harm associated with a lasting
loss of manufacturing production.
Statements such as these have drawn attention to a longstanding debate among lawmakers and
some policy analysts over the economic role of manufacturing and whether there is a justifiable
need for special federal support for companies primarily engaged in manufacturing activities. In
the exchange of views on these issues in the aftermath of the President’s speech, a difference of
opinion has emerged that is reminiscent of the policy disputes that characterized the debate over
industrial policy in the late 1970s and early 1980s. On the one hand, proponents of special
government assistance to promote the growth and competitiveness of manufacturing companies
argue that the sector deserves such support because it contributes more to the performance and
growth of the economy than other sectors do. On the other hand, critics of such assistance
maintain that what matters most for promoting increases in jobs, real wages, and output are public
investments in the main forces that drive growth in the standard of living: namely, worker skills,
public education, research and development (R&D), and economic infrastructure. In their view,
sector-based policies are bound to fail because the federal government cannot do a better job than
market forces in identifying the industries that will grow rapidly in the future and generate large
numbers of well-paying jobs.
The ongoing debate over whether the manufacturing sector deserves targeted government
assistance continues in the 112th Congress. Numerous bills have been introduced to provide new
or enhanced federal support for manufacturing companies. Some of the proposals would do so by
using tax preferences to bolster their competitiveness and encourage increased domestic
production and job creation in manufacturing. These initiatives are attracting attention at a time
when Congress is considering options for reforming the federal tax system as a key element of a
broader plan to eliminate or substantially lower projected federal budget deficits. To critics of the
current federal income tax, proposals for new or enhanced tax benefits for manufacturing
underscore what they regard as a critical problem with the system: it is laden with special benefits
that reduce effective tax rates and act in the same manner as federal spending, except that the
spending is not subject to the scrutiny and oversight built into the appropriations and
authorization processes.

1 See http://www.whitehouse.gov/the-press-office/2012/01/24/remarks-president-state-union-address.
2 For a text of the speech, see http://www.whitehouse.gov/sites/default/files/administration-official/sperling_-
_renaissance_of_american_manufacturing_-_03_27_12.pdf.
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Federal Tax Benefits for Manufacturing

To provide helpful background information for the congressional debate over whether
manufacturing deserves targeted federal support, this report addresses a key component of that
support: tax benefits.3 More specifically, it summarizes the main federal tax preferences under
current law from which manufacturing firms derive significant benefits, identifies the bills in the
112th Congress that would enhance those preferences benefits and how they would affect
manufacturers, and discusses the arguments for and against additional targeted support for the
manufacturing sector and their implications for federal policy. To broaden the context for the
current policy debate over federal support for manufacturing, the report also provides a brief
overview of federal non-tax support for manufacturing. It will be updated as warranted by
changes in tax law or congressional action.
Manufacturing and the U.S. Economy
According to the North American Industrial Classification System (NAICS), the manufacturing
sector is composed of establishments that are primarily engaged in the transformation of
materials, substances, or components into new products.4 Establishments in this case consist of
factories, plants, or mills that use power-driven machines and equipment in the transformation
process. But they also include individuals who transform materials, substances, and components
into products by hand in their homes and small businesses that sell directly to the public items
they make on their premises.
Products made by manufacturing establishments may be finished or semi-finished. The former
are ready for consumption or final use, while the latter serve as inputs for the production of
finished products. For the sake of national income accounting and the collection of detailed
economic data, the manufacturing sector is broken down into a variety of sub-sectors (or
industries) that reflect three critical aspects of the production process: material inputs, machinery
and equipment, and employee skills. The output of some industries becomes the input of others,
and vice versa. For example, makers of machine tools buy many needed materials and
components directly from the producers of these items, while the latter purchase machine tools
directly from the former for use in the production of the materials and components.
Still, the boundaries between manufacturing and other sectors are blurred in some cases. The
uncertainty largely arises from the definition of a new product, which can be subjective. For
example, the bottling and processing of milk and spring-fed water are considered manufacturing

3 Federal support for manufacturing is spread among several agencies and lacks centralized control and coordination.
The Department of Defense funds research on new product and process technologies through its Manufacturing
Technologies Program and the Defense Advanced Research Projects Agency. Under its Industrial Technologies
Program, the Department of Energy enters into partnerships with industries to improve their energy efficiency through
the development of new process technologies. The National Institute for Standards and Technology (NIST) devotes
about half of its annual budget to promoting improved competitiveness among small and medium-sized manufacturing
companies through two programs: the Manufacturing Extension Partnership and the Engineering Laboratory. NIST also
supports research in advanced manufacturing technologies through the Advanced Manufacturing Technology Consortia
Program and the NIST Centers of Excellence program. In addition, the Obama Administration is proposing that
Congress appropriate $1 billion through the NIST budget for a competitive grant program to establish a network of
regional institutes for manufacturing innovation. In addition, the National Science Foundation funds a significant share
of the federally supported basic research done at American colleges and universities. Some of the research funded by
NSF has applications in manufacturing; those funds are distributed largely through the Directorate for Engineering’s
Civil, Mechanical, and Manufacturing Innovation Organization.
4 See http://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=31&search=2012 NAICS Search.
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Federal Tax Benefits for Manufacturing

activities, though they involve no transformation of materials or components into new products,
whereas the erection of buildings (including the fabrication performed at construction sites) is
considered a construction activity.
Manufacturing’s role in the U.S. economy has changed considerably since 1960. Back then, it
accounted for 27% of gross domestic product (GDP), 31% of non-agricultural employment, more
than 20% of domestic non-residential fixed investment, nearly 99% of business investment in
research and development (R&D), and 62% of exports. Since the 1970s, however, its
contributions to GDP and employment in particular have declined.
The extent of this shift is sketched using several economic indicators in Figure 1. Basically, it
traces the manufacturing sector’s share of non-agricultural employment, gross domestic product
(GDP), business investment in research and development (R&D), exports, and domestic
investment in capital assets between 1960 and 2010. There was a decline in some measures of
importance. Specifically, manufacturing’s share of exports in 2010 was down 17% from its level
1960; its share of business R&D investment was 29% smaller; and its contribution to non-
agricultural employment decreased by 71%. With the exception of non-agricultural employment,
manufacturing’s share fell because the total contributions of other sectors rose faster than those of
manufacturing. In the case of employment, manufacturing’s contribution declined because it lost
workers while combined employment in other sectors grew, except during recessions.
Every indicator depicted in Figure 1 trended downward except one: employee wages and
salaries. Labor compensation per employee in manufacturing was somewhat larger in 1960 than it
was in most other sectors; the difference grew steadily until the mid-1990s; and in 2010, the gap
was 7% smaller than it was in 1995 but nearly 18% larger than it was in 1960. Wages and benefits
were consistently higher than manufacturing in several other sectors (e.g., construction, mining,
transportation, and utilities) from 1960 to 2010.
What the figure does not show, however, is several related and significant secular trends. First,
among all sectors, manufacturing held the largest share of GDP until 1986, when the government
sector contributed more to overall output of goods and services (measured in current dollars).
Several other sectors have risen in importance since then, and by 2010, government; finance,
insurance, real estate, rental and leasing; and professional and business services held larger shares
than manufacturing. Second, manufacturing had the largest share of non-agricultural employment
among all sectors until 1989, when the government sector employed more persons. Since then,
retail trade, professional and business services, education and health services, and leisure and
hospitality have joined government as larger employers than manufacturing. Finally, although
payroll employment in manufacturing has fallen gradually since 1979, when it reached an all-time
peak of 17.985 million, the sector’s value added (in current dollars), which is a measure of its
contribution to GDP, grew by a factor of 11.9 from 1960 to 2010, when it reached an all-time
peak of $1.702 trillion. These contrasting trends underscore the relatively robust growth in
productivity within the manufacturing sector over that period. From 1988 to 2010, output per
hour of labor rose at an average annual rate of 3.5% in manufacturing, compared to a rate of 2.2%
for all non-farm businesses, including manufacturing.
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Federal Tax Benefits for Manufacturing

Figure 1. Key Economic Indicators for Manufacturing, 1960 to 2010
130
125
120
115
110
105
100
95
90
85
80
75
t
70
en
65
rc
Pe
60
55
50
45
40
35
30
25
20
15
10
5
0
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Value Added in Manufacturing as a % of Gross Domestic Product (current dollars)
Employment in Manufacturing as a % of Domestic Non-Agricultural Employment
Spending on R&D by Manufacturing Firms as a % of Domestic Business R&D Spending (current dollars)
Capital Spending by Manufacturing Firms as a % of Domestic Non-Residential Fixed Investment (current dollars)
Exports of Manufactured Products as a % of U.S. Exports (current dollars)
Weekly Earnings in Manufacturing as a % of Average Weekly Earnings in the Domestic Private Sector (current dollars)

Source: Congressional Research Service using data obtained from the Department of Commerce, the
Department of Labor, and the National Science Foundation
Figure 1 also masks the diversity in the outcomes among manufacturing firms from 1960 to
2010. Depending on how the manufacturing sector is divided into sub-groups, many different
industries could be identified and analyzed. Under the NAICS, which federal agencies use to
report industry data, manufacturing consists of durable goods industries and non-durable goods
industries, and they in turn are further divided into 10 major industries. The performance of these
20 industries can be evaluated using the same indicators of economic importance shown in the
figure.
A comparison of the change in full-time-equivalent (FTE) employment and real value added from
1998 to 2010 suggests that some major industries grew in importance or declined more than
others.5 As the figures in Table 1 show, FTE employment fell in all the industries, but the extent
of the decrease ranged from -9% for food, beverages, and tobacco products to -74.5% for apparel,
leather, and similar products. A wider and more diversified range of results comes into view when
the focus shifts to industry value added. The 20 industries were evenly split between those whose

5 The comparison does not stretch back before 1998 because that is the first year for which the Bureau of Economic
Analysis at the Commerce Department provided an estimate of FTE employment by industry.
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Federal Tax Benefits for Manufacturing

real value added increased and those whose real value added decreased from 1998 to 2010.
Among those whose contribution to GDP shrank, the decreases ranged from -9% for plastics and
rubber products to -46% for apparel, leather, and similar products and -47% for textile mills and
products. Among the industries whose contributions to GDP expanded, the increases ranged from
4% for electrical equipment, appliances, and components to a whopping 10,900% for computers
and electronic products.
Table 1. Percentage Change in Full-Time-Equivalent (FTE) Employment and Real
Value Addeda for Major U.S. Manufacturing Industries, 1998 to 2010

Change in FTE Employment
Change in Real Value Added
Manufacturing -35%
29.5%

Durable Goods Production
-36%
54%
Wood Products
-44%
-8%
Non-Metallic Mineral Products
-33%
-31%
Primary Metals
-45%
-34%
Fabricated Metal Products
-18%
-16%
Machinery -34%
7%
Computers and Electronic Products
-40%
10,900%
Electrical Equipment, Appliances, and
-40% 4%
Components
Motor Vehicles and Parts
-47%
-42%
Other Transportation Equipment
-20%
-13%
Furniture and Related Products
-46%
-20%
Miscel aneous Manufacturing
-24%
60%

Non-Durable Goods Production
-33%
3%
Food, Beverage, and Tobacco
-9% 10%
Products
Textile Mills and Textile Products
64%
-47%
Apparel, Leather, and Similar
-75% -46%
Products
Paper Products
-39%
-28%
Printing and Support Activities
-38%
-15%
Petroleum and Coal Products
-10%
70%
Chemical Products
-20%
10%
Plastics and Rubber Products
-33%
-9%
Source: Compiled by the Congressional Research Service from data obtained from the Bureau of Economic
Analysis, U.S. Department of Commerce, see http://www.bea.gov/iTable/iTable.cfm?ReqID=5&step=1 for more
details.
a. Value added for an industry measures its contribution to gross domestic product. It is equal to the sum of
labor compensation, taxes on production, imports less government subsidies, and gross operating surplus.
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Federal Tax Benefits for Manufacturing

Basically, value added represents the difference between an industry’s gross output (consisting of sales or
receipts and other operating income, commodity taxes, and inventory change) and the cost of its
intermediate inputs, including energy, raw materials, semi-finished goods, and services purchased from al
sources.
Federal Policy Toward the Manufacturing Sector
Federal support for manufacturing encompasses a number of tax benefits, as well as a variety of
spending programs largely intended to promote advanced technology development. The tax
benefits are discussed in the next section, while this section provides a brief overview of the
programs.
As of April 2011, a total of 10 federal programs targeted assistance to manufacturing firms of all
sizes.6 The assistance involved workforce training, export assistance, business counseling, and
technology development, for the most part. Foremost among current programs are the Department
of Commerce’s (DOC) National Institute of Standard’s (NIST) Hollings Manufacturing Extension
Partnership program (MEP), which provides technical assistance to small and medium-sized
manufacturers to help them become more competitive and productive, and the Advanced
Manufacturing Partnership program, which was launched in June 2011 and uses federal funds to
leverage the creation of partnerships among businesses, universities, and federal, regional, and
state government agencies for the purpose of developing advanced manufacturing technologies. A
variety of smaller programs at DOC, the Department of Energy (DOE), the Department of
Defense (DOD), and the National Science Foundation (NSF) also support manufacturing, mainly
by fostering the development of new manufacturing technologies tailored to the missions of the
funding agencies.
There appears to be no comprehensive, reliable estimate of the amount the federal government is
spending on programs that support the manufacturing sector. That this is the case is not
necessarily a surprise. Generating such an estimate is difficult because such support is delivered
through direct and indirect channels. Direct support comes in the form of programs that either
target or offer the bulk of their assistance to manufacturing firms. A case in point is MEP, which
provides technical assistance to small and medium-sized manufacturing firms only. In general, it
is relatively easy to determine the amounts budgeted or spent for programs like that. But such is
not the case with federal programs that indirectly support manufacturing. The main difficulty lies
in accounting for the value of such support, which can be defined as federal assistance that is not
targeted at manufacturing but still benefits a substantial number of manufacturers. A case in point
is the research tax credit under Section 41 of the federal tax code: although it is not targeted at
manufacturing firms, they are the biggest users of the credit among all sectors. But because the
IRS publishes data on claims for the credit by industry and sector, determining the dollar value of
the extent to which manufacturing benefits from it can be easily accomplished through the IRS
website. A case in point that exemplifies the analytical challenges associated with determining the
amount spent on manufacturing through federal programs not targeted at the sector is the
programs administered by the Small Business Administration (SBA). While it is safe to assume
that numerous small manufacturers have benefited from those programs, it is unclear how much
of the agency’s budget ($918.8 million in new budget authority for FY2012) has been used to
assist such firms.

6 See Nisha Mistry and Joan Byron, The Federal Role in Supporting Urban Manufacturing, Brookings Institution, Pratt
Center for Community Development, April 2011, p. 34.
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Federal Tax Benefits for Manufacturing

Nonetheless, it is possible to get a sense of the magnitude of direct federal non-tax support for
manufacturing by parsing President Obama’s FY2013 budget proposal for relevant programs. He
is asking for $2.2 billion in federal support for research and development (R&D) targeted at
advanced manufacturing technology, or 19% more than the amount enacted for FY2012.7 The
funds would go to programs administered by DOC, DOD, DOE, and NSF. Included in the request
are $1 billion for a National Network for Manufacturing Innovation to be administered by NIST,
$135 million for NIST-sponsored R&D on advanced manufacturing technology, $128 million for
MEP, $21 million for NIST’s Advanced Manufacturing Technology Consortia Program, $20
million for the NIST Centers for Excellence program, $290 million for DOE’s Advanced
Manufacturing Office, $149 million for NSF’s programs to develop new advanced manufacturing
technologies with the involvement of private companies, and $2.8 billion for DOD’s Defense
Advanced Research Projects Agency, which historically has played a critical role in the
development of new products and processes that have had major impacts on the real economy
(e.g., integrated circuits, supercomputers, the Internet).
Current Federal Tax Provisions with Significant
Benefits for Manufacturing
A useful and necessary point of departure for a summary of current federal tax preferences that
offer significant benefits to manufacturing is the definition of a tax preference. Such a preference
(which is also known as a tax break, tax benefit, or tax expenditure) is a provision in the federal
tax code that grants special tax relief to eligible individual or business taxpayers. The relief is
generally intended to promote certain activities, such as the tax credit under section 41 for
increasing research expenditures. In some cases, however, it serves the purpose of assisting
taxpayers facing certain difficult economic or financial circumstances. The tax relief is considered
special because it represents a departure from what the Congressional Budget and Impoundment
Control Act of 1974 (P.L. 93-344) refers to as “normal income tax law.”
Tax preferences assume any of the following forms: (1) exclusions, exemptions, or deductions,
which reduce an eligible taxpayer’s taxable income; (2) preferential tax rates, which apply lower
rates to part or all of an eligible taxpayer’s income; (3) credits, which reduce an eligible
taxpayer’s tax liability; and (4) tax deferrals, which postpone the recognition of current income
for tax purposes or allow deductions in the current tax year that normally are taken in future
years.
Tax preferences also produce revenue losses for the U.S. Treasury, relative to the revenue that
otherwise would be raised. As a consequence, they are viewed as federal spending (for the
intended purposes of the benefits) that is channeled through the tax code. This explains why some
refer to tax preferences as tax expenditures. In addition, some contend that permanent tax
preferences operate as entitlement programs: in both cases, their benefits are distributed or paid to
qualified persons or corporations.8

7 See http://www.whitehouse.gov/sites/default/files/microsites/ostp/fy2013omb_innovation.pdf.
8 U.S. Congress, Senate, Committee on the Budget, Tax Expenditures: Compendium of Background Material on
Individual Provisions, 111th Cong., 2d sess., S. Prt. 111-58 (Washington: GPO, December 2010), p. 3.
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Federal Tax Benefits for Manufacturing

The federal tax code contains numerous provisions granting preferential treatment to companies
in an array of industries. In recent years, congressional oversight of business tax benefits
generally has been limited to legislation to extend certain temporary benefits that have expired or
are about to expire. Permanent business tax benefits have received even less attention.
The business tax preferences from which manufacturing companies tend to derive the most
benefit are listed in Table 2. Since business tax preferences are not always explicitly intended to
benefit manufacturing firms in general, two methods were used to identify the relevant tax
provisions. One was the share of overall use of a tax preference (as measured by the aggregate
amount claimed on federal tax returns) held by manufacturing firms; the other was the nature of
the preference itself, and the extent to which manufacturing firms would be likely to benefit from
it, given the nature of their business. Only one of the tax preferences arguably is designed to
benefit the manufacturing sector more than others: the deduction for “domestic production
activities” income under Section 199 of the federal tax code. Firms in a broad array of industries
benefit in varying degrees from the other preferences, but not to the same extent, on the whole, as
firms primarily engaged in manufacturing activities.
For each preference shown in the table, the following information is provided:
• a brief description of the tax provision,
• its section in the federal tax code,
• its current status: temporary or permanent,
• its estimated revenue cost in FY2012 for all firms (regardless of industry) that
claim it,
• and a summary of its benefits for manufacturing firms.
Several of the provisions in the table are intended to stimulate increased investment in qualified
research (Sections 174 and 41), and in equipment and software (Sections 168 and 179), by
reducing the cost of capital and boosting cash flow. Tax subsidies for investment in research are
considered justified on the grounds that they seek to correct a market failure that leads, in theory,
to underinvestment in research by the private sector. But a similar rationale may not apply to tax
subsidies for capital investment. Economists who have studied the matter have found no evidence
indicating that investment in capital assets like structures and equipment is also prone to some
kind of market failure, as firms are able to capture most of the economic returns. Governments
typically employ investment tax subsidies as a countercyclical measure during economic
downturns. The federal government did so in response to the Great Recession of 2007 to 2009 by
extending and increasing the bonus depreciation allowance under Section 168(k) and enhancing
the limited expensing allowance under Section 179.
With one exception, the other provisions in the table encourage the following activities: increased
domestic investment and expansion by manufacturing firms (Section 199); a larger flow of equity
capital to start-up manufacturing firms (Section 1202); greater cash flow among manufacturing
firms of all employment sizes (Sections 491, 492, and 168(k)(4)); and increased U.S. exports of
manufactured products (Section 861 to 863, 865).
The exception is the first provision shown in the table: the deferral of the active income of
controlled foreign corporations (CFCs) under Section 11(b). It is the only tax provision from
which U.S.-based manufacturing firms derive significant benefits that encourages them to invest
in countries other than the United States. A CFC is any foreign corporation in which U.S.
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Federal Tax Benefits for Manufacturing

shareholders own 50% or more of its total voting power or the total value of its stock on any day
of a tax year. Under current federal tax law, U.S.-chartered corporations are taxed on their
worldwide income. U.S.-based corporations with CFCs are allowed to postpone indefinitely U.S.
taxation of their subsidiaries’ earnings, as long as the earnings remain in the control of the CFCs
and are reinvested abroad. U.S. parent corporations pay federal tax on the earnings only when
they are repatriated as intra-firm dividends or certain other income. That tax can be reduced by a
credit U.S. corporations may claim for income taxes paid by their foreign subsidiaries to their
home countries on the same earnings; the credit is intended to avoid double taxation under U.S.
tax law of the same foreign-source income. The option for deferral and the availability of the
foreign tax credit give U.S. firms an incentive to establish operations with their own profit centers
in countries with relatively low tax rates.
While any U.S.-chartered corporation with CFCs can benefit from deferral, corporations engaged
primarily in manufacturing seem to be major beneficiaries. The corporate response to a
repatriated earnings provision in the American Jobs Creation Act of 2004 (P.L. 108-357)
illustrates this point. Under the provision, U.S. corporations could take a one-time deduction
equal to 85% of any increase in their repatriated foreign-source income in either their first tax
year beginning on or after the date of enactment or their last tax year beginning before that date.
For firms subject to a corporate tax rate of 35%, the deduction lowered the effective rate on the
repatriated profits to 5.25%. Credits for foreign taxes paid on the repatriated earnings were
reduced by the same amount. In order to claim the deduction, firms had to adopt a domestic
investment plan for the repatriated funds. In addition, the deduction was limited to the greater of
$500 million or the amount of earnings shown on a firm’s books of accounts to be permanently
invested outside the United States as of June 30, 2003. According to the conference report on the
act, the tax reduction was intended to serve as a temporary economic stimulus measure that would
not be extended or enacted again in the future.9 In a 2008 report on the one-time dividends
received deduction, the Internal Revenue Service (IRS) found that manufacturing corporations
filed 55% of the returns for the 2004 to 2006 tax years claiming the deduction, and they
accounted for 81% of all qualifying dividends.10 Nearly half of all qualifying dividends were
repatriated by firms in the pharmaceutical, electronic, and computer industries.
Table 2. Federal Tax Provisions That Provide Significant Benefits
to Manufacturing Firms
Total
Estimated
Revenue
Cost for All
Code
Current
Users in
Tax Provision
Section(s)
Status
FY2012
Benefit to Manufacturing Firms
Deferral of
11(d) Permanent
$14.1
billion
•
U.S.-based manufacturing corporations
active income of
account for a substantial share of the
controlled
accumulated earnings and profits held by
foreign
the foreign subsidiaries of U.S.
corporations
multinational corporations.

9 U.S. Congress, Conference Committee on the American Jobs Creation Act of 2004, conference report to accompany
H.R. 4520, H.Rept. 108-755, 108th Cong., 2nd sess. (Washington: GPO, 2004), p. 314.
10 Melissa Redmiles, The One-Time Received Dividend Deduction, Statistics of Income Bulletin, Washington DC,
Spring 2008, available at http://www.irs.gov/pub/irs-soi/08codivdeductbul.pdf.
Congressional Research Service
9
Federal Tax Benefits for Manufacturing

Total
Estimated
Revenue
Cost for All
Code
Current
Users in
Tax Provision
Section(s)
Status
FY2012
Benefit to Manufacturing Firms
•
Provision allows U.S. parent companies
to defer U.S. tax on income earned and
reinvested by their foreign subsidiaries
until the income is repatriated as
dividends.
•
Provides an incentive to establish
subsidiaries in countries with corporate
tax rates lower than U.S. rates.

Research and
41 Temporary:
$3.1 billion
•
Provision allows firms a tax credit equal
experimentation
expired at the
to as much as 20% of qualified research
tax credit
end of 2011
spending above a base amount.
•
As a result, it can lower after-tax cost of
qualified research, encouraging more
investment for that purpose.
•
Manufacturing accounted for 69% of the
total value of claims for the credit by
corporations in the 2008 and 2009 tax
years combined.
Expensing of
174 Permanent
$4.3
billion
•
Provision allows firms to deduct
research and
spending on qualified research as a
experimental
current expense, rather than as a capital
expenditures
expense.
•
This treatment lowers the marginal
effective tax rate on returns to
investment in such research.
•
According to data published by the
National Science Foundation,
manufacturing firms performed or
funded 64% of domestic basic and
applied research in 2007.
Accelerated
168, 168(k), Section 168:
$31.2 billion
•
Section 168 general y al ows firms to
depreciation for
and 179
permanent
recover the cost of qualified assets
certain capital
except, for
sooner than they can be recovered
assets, including
bonus
under the alternative depreciation
bonus
depreciation
system in section 167.
depreciation in
under Section
2012 tax year
168(k), which
•
Section 168(k) establishes a 50%
expires at the
expensing al owance (also known as a
end of 2012
bonus depreciation al owance) for
qualified property bought and placed in
Section 179:
service in 2012; the allowance was 100%
permanent,
in 2011.
though
maximum
•
Section 179 makes it possible for firms
allowance and
to expense a limited amount of the cost
phase-out
of qualified assets placed in service in a
threshold can
tax year.
Congressional Research Service
10
Federal Tax Benefits for Manufacturing

Total
Estimated
Revenue
Cost for All
Code
Current
Users in
Tax Provision
Section(s)
Status
FY2012
Benefit to Manufacturing Firms
vary from year
•
Ful (or 100%) expensing imposes a 0%
to year
marginal effective tax rate on returns to

investment in affected assets.
•
Though data on investment by industry
in equipment and software are not
readily available, it is likely that
manufacturing firms account for a major
share of total investment in those
assets, especial y equipment.
Option to claim
168(k)(4) Option
applies Not Available
•
Provision makes it possible for firms to
a refundable
to eligible
take a refundable tax credit equal to the
accelerated
property
lesser of $30 million or 6% of unused
AMT credit in
acquired after
AMT credits from tax years before
lieu of bonus
March 31, 2008
2006, reduced by (but not below $0)
depreciation
and placed in
the sum of “bonus depreciation
allowance
service before
amounts” from al previous tax years.
January 1, 2013
•
It enables firms in a loss position with
longstanding unused AMT credits to
increase their cash flow by claiming the
optional refundable credit instead of a
bonus depreciation al owance that
would only boost their net operating
loss in the current tax year.
•
Historically, manufacturers have been
among the industries most affected by
the AMT. In 2008, mining companies
accounted for 26.3% of AMT payments,
fol owed by finance/insurance (24.2%),
and manufacturing (16.8%).
Deduction for
199 Permanent
$11.6
billion
•
Provision allows firms to deduct 9% of
qualified
qualified domestic production activities
domestic
income; the deduction is 6% for
production
activities related to oil and gas
activities income
production; the deduction cannot
exceed a firm’s taxable income or 50%
of wages linked to those activities.
•
Qualified activities encompass
manufacturing, mining, film production,
energy, construction, engineering, and
architectural services.
•
Deduction lowers the top marginal tax
rate on income earned from
commercial use of favored property
from 35% to 31.85%.
•
In 2008, according to IRS data,
manufacturing accounted for 66% of the
total value of claims for the domestic
production activities deduction by
Congressional Research Service
11
Federal Tax Benefits for Manufacturing

Total
Estimated
Revenue
Cost for All
Code
Current
Users in
Tax Provision
Section(s)
Status
FY2012
Benefit to Manufacturing Firms
corporations.
Partial exclusion
1202 Permanent
$0.3
billion
•
Provision allows non-corporate
on gains from
taxpayers to exclude from gross income
the sale or
100% of any gain from the sale or
exchange of
exchange of qualified small business
qualified small
stock acquired after September 27,
business stock
2010 and before January 1, 2013; the
exclusion reverts to 50% for stock
acquired on or after January 1, 2013.
•
To qualify for this treatment, a taxpayer
must acquire the stock at original issue
and hold it for a minimum of five years.
•
Qualified small business stock must be
issued by a C corporation with no more
than $50 million in gross assets when
the stock is issued.
•
At least 80% of the assets must be used
in a qualified trade or business (including
manufacturing) during most of the
required five-year holding period.
•
Provision is intended to expand access
to equity capital by smal start-up C
corporations that may otherwise have
trouble attracting such capital. Large
corporations do not benefit from the
exclusion.
Inventory
491 and
Permanent $4.3
billion •
Provision allows taxpayers that must
accounting: use
492
maintain inventory records in order to
of the last-in,
account for the cost of goods sold to
first-out (LIFO)
exclude any increase in the value of
method
goods they buy or produce from taxable
income.
•
LIFO is most beneficial to firms facing
rising costs for the goods in their
inventories.
•
Research indicates that the vast share of
firms that use LIFO for tax purposes are
involved in manufacturing.
•
Provision enables taxpayers to reduce
the tax burden on the difference
between the sales price and cost of
inventories.
•
It also creates beneficial tax planning
opportunities that do not exist with the
first-in, first-out (or FIFO) method of
inventory accounting.
Congressional Research Service
12
Federal Tax Benefits for Manufacturing

Total
Estimated
Revenue
Cost for All
Code
Current
Users in
Tax Provision
Section(s)
Status
FY2012
Benefit to Manufacturing Firms
Inventory
861 to 863,
Permanent $6.1
billion •
Provision allows U.S. exporters an
property sales
865
exception to the rule that income is
source rule
sourced according to the residence of
exception
the seller.
•
Under the exception, inventory that is
bought and then re-sold is governed by
a rule known as the “title passage” rule.
•
The rule sources income from the sale
in the country where the sale occurs.
•
Inventory that is made and sold by the
company is treated as having a divided
source: half of the income from a sale is
sourced in the United States and half in
the country where the sale occurs.
•
U.S. companies with excess foreign tax
credits may use them to reduce U.S.
taxes if they can shift income from U.S.
sources to foreign subsidiaries.
•
Companies with excess foreign tax
credits can take advantage of the
inventory sales source rule exception to
increase the amount of their credits that
can be applied against their U.S. income
tax liability. This has the same effect as
exempting from U.S. taxation the
income that was sourced in another
country as a result of the exception.
•
The source rule exception for inventory
sales probably raises the rate of return
from investing in exporting.
•
Manufacturers account for two-thirds of
U.S. exports of goods and services.
Source: Compiled by the Congressional Research Service from figures provided by the Joint Committee on
Taxation and a variety of other sources, including a compendium on tax expenditures released in December
2010 by the Senate Budget Committee. (See http://budget.senate.gov/democratic/index.cfm/files/serve?File_id=
8a03a030-3ba8-4835-a67b-9c4033c03ec4.)
Legislative Initiatives in the 112th Congress to
Enhance Existing or Create New Tax Preferences
That Benefit Manufacturing Firms
A variety of bills to create new tax preferences that would offer significant benefits for U.S.
manufacturing firms, or to extend or enhance existing ones, have been introduced in the 112th
Congressional Research Service
13
Federal Tax Benefits for Manufacturing

Congress. Summaries of these legislative initiatives are shown in Table 3. For each bill, the table
describes the preference(s) it would establish and explains how manufacturing firms might
benefit from it; provisions in the bills unrelated to tax benefits for manufacturing are not
discussed.
Though the policy initiatives to strengthen manufacturing announced by President Obama early in
2012 are not cited in the table, several of the bills would each implement one or more of them.
The initiatives were contained in two proposals: his FY2013 budget request and a framework for
business tax reform. Several tax proposals in the budget request could have significant short-term
benefits for the manufacturing sector, including a one-year extension of the 100% bonus
depreciation allowance that was available for qualified assets placed in service in 2011; a 10% tax
credit for limited increases from 2011 to 2012 in employer payrolls subject to the Social Security
tax; and a doubling of the deduction (from 9% to 18%) for income from domestic production of
certain advanced technology products under Section 199. While lacking in details, the proposed
business tax reform plan would offer several benefits for manufacturers. First, it would lower of
the top corporate income tax rate from 35% to 28%. Second, it would raise the Section 199
deduction for income from the domestic production of manufactured goods to 10.7%. Finally, the
expensing allowance for qualified assets under Section 179 would rise to $1 million in a tax year.
Non-Tax Legislation
Legislation to promote the competitiveness and growth of U.S. manufacturing firms through non-
tax measures is also being considered in the current Congress. Examples include H.R. 1366, H.R.
1912, H.R. 5727, and S. 751.
H.R. 1366 and S. 751 would mandate the development of a federal strategy to strengthen the U.S.
manufacturing sector, but with one notable difference: S. 751 would authorize the Commerce
Department to develop the strategy, while H.R. 1366 would assign that responsibility to a
commission made up of federal and state government officials and industry representatives.
H.R. 1912 would create an “American Block Grant Program” that would authorize the Commerce
Secretary to make grants to governmental entities that in turn would award them to small and
medium-sized manufacturers for several purposes, including investing in plant and equipment,
producing clean energy products, improving their energy efficiency, and retraining employees to
operate new manufacturing technologies. While many manufacturing firms would undoubtedly
benefit from the support provided by bills such as these, they are not discussed here, as they lie
outside the scope of the report.
H.R. 5737 would improve the competitiveness of U.S. manufacturers by requiring the President
to develop and regularly revise a national manufacturing strategy that would pursue several goals,
including increasing the number of manufacturing jobs so that they account for 20% of non-
agricultural employment. It would also authorize the Commerce Secretary to award grants for the
creation of “sectoral technology and innovation centers” to aid small and medium-sized
manufacturers; authorize the SBA to offer limited loan guarantees for small manufacturers with
firm orders; set funding for MEP at $130 million for each fiscal year from 2013 through 2022,
with an adjustment for inflation; extend the research tax credit for three years and increase the
rate for the alternative simplified credit for companies that increase their number of qualified full-
time manufacturing workers; require that legislation implementing trade agreements between the
U.S. government and other countries satisfy certain labor, environmental, and public safety
Congressional Research Service
14
Federal Tax Benefits for Manufacturing

standards; and impose countervailing duties on imports from countries with “fundamentally
undervalued” currencies.
Table 3. Legislation in the 112th Congress to Create or Enhance Tax Preferences that
Would Benefit U.S.-Based Manufacturing Firms
Bill
Number
Tax Provision(s)
Impact on Manufacturing Firms
H.R. 10
•
Would allow manufacturing firms to set up
•
Could lower the after-tax cost of
and S.
manufacturing reinvestment accounts (MRAs) and
investing in new plant and
1237
deduct (under a new Section 199A) up to $500,000 in
equipment and worker training
cash contributions in a tax year.
programs for relatively small
manufacturing firms.
•
Accounts would be managed by designated financial
institutions with consolidated assets worth no more
•
Would add a layer of complexity to
than $25 billion.
the tax code that may deter eligible
firms from taking the deduction and
•
Would tax distributions from an MRA to pay for
increase the cost of tax compliance
qualified reinvestment expenses (QREs) at an effective
for firms that do.
rate of 15%.
•
Would create a form of time-
•
QREs are defined as expenses incurred by an eligible
limited, tax-free savings for firms
firm for investment in new capital assets or job training
that take the deduction.
and workforce development.
•
Would benefit profitable eligible
•
Distributions for other purposes or involving funds
firms planning to expand operations
deposited more than seven years ago would be subject
more than other eligible firms.
to regular income tax and a surtax equal to 10% of the
amount of the distribution included in a taxpayer’s
taxable income.
H.R. 689
•
Would permanently extend the research tax credit
•
Could lead manufacturing firms
under Section 41.
based anywhere in the world to
conduct more qualified research in
•
Would raise the research credit rate from 20% to 25%
the United States than they
for payments for contract research performed by
otherwise would.
manufacturing firms.
•
Could spur an increase in contract
•
Would increase the deduction for qualified production
research conducted by
activities income under Section 199 from 9% to 15%
manufacturing firms located in the
for income from the domestic production of property
United States.
that was developed mostly through research
conducted in the United States.
•
Would give manufacturing
companies that develop new
technologies in the United States a
greater incentive to produce the
technologies here.
•
Would add a layer of complexity to
documenting claims for the Section
199.
H.R. 1036a •
Would allow U.S.-based corporations with control ed
•
Would allow U.S.-based
foreign corporations (CFCs) to deduct 85% of any
manufacturing corporations to
CFC earnings they repatriate in their last tax year
repatriate any amount of the
before, or first tax year after, the date of enactment.
earnings retained by their foreign
subsidiaries at a fraction of the tax
•
For corporations subject to the maximum corporate
rate that normally applies to such a
income tax rate of 35%, the enhanced dividends
transaction.
received deduction would reduce the effective rate to
5.25%: (35% x 15%).
•
They could deduct 85% of the
dividends without any requirement
Congressional Research Service
15
Federal Tax Benefits for Manufacturing

Bill
Number
Tax Provision(s)
Impact on Manufacturing Firms
•
The deduction would rise to 100% of repatriated
that the repatriated funds be used
earnings if they are reinvested in a “qualified domestic
for a specific purpose.
reinvestment plan.”
•
If the results from a similar
•
Such a plan must be approved by the U.S. parent
deduction that was available under
corporation’s president (or some comparable official)
the American Jobs Creation Act of
and board of directors (or comparable body).
2004 are any indication, U.S.-based
pharmaceutical, electronic, and
•
The plan must specify that the dividend will be
computer corporations might
invested in the United States within three years of its
repatriate tens of billions of dollars
repatriation, and that it will be used to fund research
under this proposal.
and development, “expansion of facilities, proof of
concept centers, early stage venture capital
investment, or manufacturing start-up costs.”
H.R. 3476
•
Would extend through 2014 the 100% bonus
•
Would temporarily reduce the cost
depreciation allowance that was available from
of capital for investing in new
September 9, 2010 through December 31, 2011.
machinery, equipment, and software
through the extended generous
•
Would also extend through 2014 the option for
expensing al owances.
corporations to exchange any bonus depreciation
allowances they could take for a limited amount of
•
Would temporarily encourage
their unused AMT credits from tax years before 2006.
increased equity investment in small
start-up manufacturing firms
•
Would extend for three years, through 2014, the
through the extended 100% gains
enhanced expensing al owance under Section 179 that
exclusion.
was available in 2010 and 2011.
•
Would encourage increased
•
Would extend through 2014 the 100% exclusion for
investment in domestic research
gains on the sale of qualified small business stock that
that qualifies for the Section 41
was acquired in 2011.
credit through the permanent
•
Would extend the current research tax credit through
extension of the credit and the
2012, raise the rate for the alternative simplified credit
increase in the ASC rate.
(ASC) from 14% to 20%, and permanently extend the
•
And would encourage
ASC beginning in 2013.
manufacturing companies
Would offer a bonus research tax credit to
performing such research to
manufacturers whose domestic production gross
produce in the United States
receipts exceed 50% of their total production gross
property developed through the
receipts; the bonus credit would range in size from
research.
two percentage points for shares between 51% and
60% to 10 percentage points for shares greater than
90%. (H.R. 6329 would make the same change in the
credit.)
H.R. 3495
•
Would allow individual and business taxpayers who
•
Would be likely to stimulate
acquire any of 10 designated manufactured products
domestic demand for the designated
through retail purchases to claim a new non-
products, though some of the
refundable tax credit (under Section 30E) equal to the
increase may come at the expense
specified percentage of the total amount paid for each
of purchases of other products.
product in a tax year during the eligible period for that
product.
•
Would give U.S.-based
manufacturers of designated
•
The specified percentage for each designated product
products an incentive to acquire the
could be no less than 5% and no more than 20%.
capacity to assemble the products in
the United States, perhaps by
•
The eligible period for a designated product could be
transferring production from
no less than five years and no more than10 years.
offshore operations.
•
A product is considered a designated product if a
•
May to boost domestic production
taxpayer acquires it as a new manufactured product
Congressional Research Service
16
Federal Tax Benefits for Manufacturing

Bill
Number
Tax Provision(s)
Impact on Manufacturing Firms
for her use or lease; it was assembled in the United
of affected components and
States; at least 60% of the value of its components and
materials.
materials originated in the United States; and the
Treasury Department has selected the product as one
•
Would add a layer of complexity to
of 10 designated products, in consultation with a
the tax code and increase the cost
commission created under the bill known as the 21st
of compliance for taxpayers claiming
Century American Manufacturing Commission.
the credit and firms that
manufacture designated products.
•
In selecting the 10 designated products, the Treasury
Department should consider the number of domestic
jobs that would be created directly and indirectly
through such a selection, and the speed with which
they would be created.
•
The Treasury Secretary would have the authority to
specify the credit percentage and eligible period for
each of the 10 designated products, in consultation
with the Commission.
•
The credit allowed under the bill would expire 10
years after the date of enactment
H.R. 5727
•
Would extend the research tax credit through the end •
Would give manufacturers based
of 2016.
anywhere in the world that conduct
research that qualifies for the
•
Would modify the ASC to increase the 14% rate by up
Section 41 credit an incentive to
to six percentage points for increases in a taxpayer’s
invest in domestic production.
qualified full-time equivalent (FTE) “manufacturing
employment.”
•
The ASC rate would rise by one percentage point for
every 2% rise in a taxpayer’s FTE during the previous
five tax years.
•
Any increase in the research credit in a tax year would
be capped at amount equal to $5,000 multiplied by the
number of qualified FTE employees.
•
A manufacturing employee is defined as an employee
engaged in ful -time work in qualified production
activities under Section 199(c), except for the
extraction of oil and minerals and agriculture.
H.R. 6240
•
Would extend the research credit through 2016 and
•
Would reduce the after-tax cost of
increase the rate for the ASC to 25%.
qualified research.
•
Would extend the 100% bonus depreciation al owance •
Would lower the marginal effective
under Section 168(k) that was available in 2011
tax rate on the returns from
through 2013.
investments in assets eligible for
bonus depreciation made in 2012
•
Would extend through 2012 the $500,000 expending
and 2013 to zero.
allowance and $2 million phaseout threshold under
Section 179 that were available in 2010 and 2011.
•
Would cut by 10 percentage points
the top corporate tax rate for 2013,
•
Would reduce the maximum corporate tax rate to
increasing cash flow and the after-
25% for the 2013 tax year.
tax returns on certain previous
•
Would extend by one year, through 2013, the Bush-
investments.
era tax cuts for individuals.
•
Would prevent in 2013 an increase
in the taxation of the profits earned
by businesses organized as
passthrough entities.
Congressional Research Service
17
Federal Tax Benefits for Manufacturing

Bill
Number
Tax Provision(s)
Impact on Manufacturing Firms
S. 256
•
Would al ow an accredited investor, an investor
•
Would be likely to increase access
network, or an investor fund to claim a new non-
to needed capital for some small
refundable tax credit (under Section 30E) equal to 25%
start-up firms.
of equity investments in qualified domestic
corporations or partnerships.
•
Unlike the gains exclusion under
Section 1202 for qualified business
•
The total credit available to all eligible businesses
stock, there would be no required
would be capped at $500 million for the period from
holding period for the equity eligible
FY2011 to FY2013.
for the credit.
•
The credit would be part of the general business credit •
Would add a layer of complexity to
under Section 38 and thus subject to its limitations.
the tax code that would have
implications for the cost of
•
A qualified investor must acquire the equity or capital
compliance and information
interest at its original issue.
reporting for qualified investors and
•
To qualify for the credit, the investment must be made
the firms they invest in, as well as
in a domestic corporation or partnership
the cost to the Internal Revenue
headquartered in the United States. In addition, it must
Service of enforcing tax law.
engage in a trade or business related to advanced
materials, nanotechnology, precision manufacturing,
aerospace, defense, biotechnology and
pharmaceuticals, electronics, computer technology
(including software), semiconductors, clean energy
technology, forest products, agriculture, information
and communication technologies, life and medical
sciences, marine technology, and transportation.
Moreover, the corporation or partnership has to be
less than five years old and cannot have more than 99
full-time equivalent employees (more than half of
whom are performing their services in the United
States) on the date of an equity investment.
•
The equity investments eligible for the credit would be
capped at $10 million for a single qualified business in
its lifetime; $2 million for a single qualified business in a
tax year; and $1 million for a single qualified investor in
a tax year.
S. 825
•
Would permanently extend the research credit under
•
Might allow more manufacturing
Section 41, retaining only the alternative simplified
firms to benefit from the Section 41
credit and increasing its rate from 14% to 20%.
credit.
•
Would allow domestic manufacturers that derive
•
Would encourage manufacturers
more than 50% of their total production income from
conducting qualified research in the
domestic production to claim a bonus credit under
United States to invest more in
Section 41; the increase in the bonus credit would
domestic production and hire more
range from two percentage points for shares between
U.S. workers.
51% and 60% to 10 percentage points for shares
greater than 90%.
•
Would make the Section 41 credit refundable for firms
with an average of 500 or fewer employees in the
current tax year.
S. 2237
•
Would allow employers that increase their total
•
Would encourage manufacturing
payrol subject to the Social Security tax in 2012
firms to expand their payrol in
relative their payrol in 2011 to claim a non-refundable
2012 through wage increases and
credit equal to 10% of the excess, which would be
new hiring by reducing the after-tax
capped at $5 million for a single taxpayer, making the
cost of doing so.
Congressional Research Service
18
Federal Tax Benefits for Manufacturing

Bill
Number
Tax Provision(s)
Impact on Manufacturing Firms
maximum credit per taxpayer $500,000.
•
Would stimulate demand for capital
•
Would extend through 2012 the 100% bonus
equipment, boosting the output of
depreciation allowance that was available for qualified
domestic makers of the equipment.
assets acquired and placed in service in 2011.
•
Would reduce the cost of capital
•
Would also extend through 2012 the option for
and increase cash flow for
corporations to exchange any bonus depreciation
manufacturers acquiring assets
al owances they could take that year for a portion of
eligible for full expensing in 2012.
any of their unused AMT credits from tax years before
2006.
S. 3217/
•
Would permanently exempt from taxation any capital
•
Smal startup manufacturing firms
H.R. 5893
gains on the sale or exchange of small business stock
would among the main beneficiaries
under Section 1202.
of the two tax benefits.
•
Would create a limited refundable research tax credit
for relatively young small businesses.
Source: Congressional Research Service
a. At least 10 other bills would reinstate a dividends received deduction for repatriated foreign earnings: H.R.
937, H.R. 1834, H.R. 2862, H.R. 3400, H.R. 3448, H.R. 3460, S. 727, S. 1671, S. 1837, and S. 2091. Some are
more generous than the deduction proposed in H.R. 1036; others less so. Some would impose stringent
requirements on the use of the repatriated funds as a condition of claiming the enhanced dividends received
deduction.
Current Policy Debate Over Whether To Increase
Federal Support for the Manufacturing Sector
Today’s policy debate over the need for more federal support for manufacturing has a precedent:
the debate over industrial policy that at times dominated U.S. economic policy discussions in the
first half of the 1980s. In both cases, a primary concern was (and is) the long-term economic
consequences of a shrinking domestic manufacturing base in the face of growing foreign
competition in global markets for advanced technology products.
In the 1970s and early 1980s, U.S.-based companies in an broad expanse of industries (e.g., steel,
automobiles, textiles, footwear, consumer electronics, semiconductors, and machine tools)
experienced intensifying and adaptive competition from companies based in Japan, South Korea,
France, Canada, Italy, West Germany, and Great Britain. As a result, major U.S. companies lost
market share at home and abroad, leading to declines in revenue, profits, and company budgets
for critical investments like R&D. Of particular concern to many lawmakers and analysts at the
time was the rising competitiveness of European and Japanese companies in commercial markets
for advanced technologies in aerospace, telecommunications, computer software, electronics,
semiconductors, and the equipment used to produce integrated circuits. Their gains in market
share worldwide gave rise to bipartisan support in Congress for several new federal initiatives to
bolster the competitiveness of U.S. producers of these products, including the research tax credit
that was enacted in 1981. These initiatives were predicated on the belief that some industries were
more valuable or mattered more than others to sustained growth in U.S. output of goods and
services and income per capita. Such a view implied that the federal government should adopt
whatever policy measures are needed to uphold and strengthen the competitiveness of American-
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based companies in high-technology industries. The industries targeted for federal assistance in
the 1980s were all part of the manufacturing sector.
Fast forward to the present. Manufacturing accounts for smaller shares of GDP and employment
and was hit hard by the severe recession that began in December 2007 and ended in June 2009.
The sector again is the focus of a lively policy debate. This time the main concern is not so much
the potential long-term economic losses from intensified foreign competition, but the potential
long-term economic gains that might arise from the federal government taking a strategic
approach to fostering the growth of U.S. manufacturing companies, especially those that develop
and produce domestically advanced technology products like smartphones, the latest generation
of video games, and the sophisticated electronic components that enable these products to
perform the way they do.
So as Congress debates the merits of proposals to boost federal support for manufacturing, it may
find it useful to consider the main arguments for and against targeted federal support for the
manufacturing sector and their implications for public policy.
Arguments Made for Special Assistance
Proponents of special assistance for manufacturing offer several arguments in support of their
position. The arguments relate to the contribution of manufactured products to U.S. exports, the
wages and benefits available in the manufacturing sector, the role of manufacturing in
technological innovation, the links between manufacturing and the development and production
of so-called green technologies, and policies supporting manufacturing adopted by other
countries.
First, proponents point out that most economists think the United States would be better off
relying less on consumption and imports financed by foreign borrowing to grow its economy and
relying more on domestic production of goods and exports. Manufactured products (mainly
chemicals, transportation equipment, computers and other electronic products, and machinery)
account for around 65% of U.S. exports of goods and 73% of U.S imports of goods,11 and trade in
goods is responsible for about 130% of the U.S. trade deficit. As proponents like to emphasize,
these shares demonstrate that manufacturing would play a leading role in any sensible policy
option for reducing the U.S. trade deficit. Therefore, say proponents, the federal government
should launch renewed efforts to dismantle the remaining foreign barriers to exports of U.S.
manufactured products and persuade major exporting nations like China to adopt more flexible
exchange rate regimes. They also call for the adoption of federal policies to bolster the
competitiveness of U.S. manufacturers through coordinated investments in workforce
development, equipment, software, and R&D.
Second, proponents point out that wages and benefits provided by manufacturing firms are larger,
on average, than wages and benefits provided in other non-agricultural industries, as shown in
Figure 1, though the gap has been shrinking over time. For instance, between 2005 and 2010,
according to data reported by the Bureau of Labor Statistics, average weekly earnings in
manufacturing were 21% greater than average weekly earnings in all private non-agricultural

11 These figures represent the average shares for the first three months of both 2011 and 2012 and are based on the
latest report by the U.S. Bureau of the Census on U.S. international trade in goods and services. See
http://www.census.gov/foreign-trade/Press-Release/2012pr/03/ft900.pdf.
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industries. And a recent study by Mark Price of the Keystone Research Center, which controlled
for the key factors affecting wages such as the nature of the job and characteristics of workers,
found that manufacturing workers earned 8.4% more each week than non-manufacturing workers
from 2008 to 2010.12 Not all non-manufacturing industries pay less than the average wage in
manufacturing. The ones that do pay more, according to Price’s research findings, such as mining,
utilities, telecommunications, finance, insurance, professional and technical services, hospitals,
and public administration, accounted for only 21% of total non-manufacturing workers. Price also
found that low-wage workers benefitted the most from manufacturing jobs and high-wage
workers benefitted the least, suggesting that manufacturing has a significant potential to lower
wage gaps among workers. Proponents also note that manufacturing jobs are more likely to
provide fringe benefits than non-manufacturing jobs, and that a higher share of manufacturing
workers (48%) have no formal education beyond a high-school diploma than do non-
manufacturing workers (37%).13 These considerations, proponents say, demonstrate that added
federal support for manufacturing could contribute to greater middle-income job opportunities
and less income inequality among domestic workers.
Third, proponents cite the critical links between manufacturing and technological innovation as
yet another reason why federal policy should offer special support for manufacturing firms.
According to data reported by the National Science Foundation (NSF), manufacturing firms as a
whole were responsible for 70% of the business R&D conducted in the United States and paid for
by companies in 2009,14 and they employed 34% more research scientists and engineers per 1,000
employees than did non-manufacturing industries in 2007.15 Since technological innovation is
thought to be the principal engine of long-term growth in living standards and the economy,
proponents maintain that the federal government should adopt policies that encourage U.S.-based
multinational manufacturers to conduct more of their R&D in the United States than they already
do. Commerce Department data show that U.S.-based multinational companies in all lines of
business conducted an average of 84% of their R&D in U.S. facilities in 2007 and 2008.16 But
this share has been declining in recent years, as these companies have transferred some of their
R&D operations to Asia in response to growing markets, ample supplies of well-educated and
well-trained researchers and engineers willing to work at salaries below what is paid for similar
work in the United States, and generous government subsidies.
In addition, proponents say the manufacturing sector makes a “disproportionately large”
contribution to the development and production of goods and services with clear environmental
benefits. A recent report by the Brookings Institution estimated that 26% of the 2.7 million jobs in
the “clean economy” are in the manufacturing sector, even though those jobs represent only 9%
of private-sector jobs.17 Proponents go on to note that a number of critical green technologies and

12 Susan Helper, Timothy Krueger, and Howard Wial, Why Does Manufacturing Matter? Which Manufacturing
Matters?, Metropolitan Policy Program, Brookings Institution, February 2012, p. 4.
13 Ibid., p. 5.
14 Raymond M. Wolfe, Business R&D Performed in the United States Cost $291 Billion in 2008 and $282 Billion in
2009, National Science Foundation, National Center for Science and Engineering Statistics, InfoBrief, NSF-12-309
(Arlington, VA: March 2012), p. 2.
15 National Science Foundation, National Center for Science and Engineering Statistics, Research and Development in
Industry: 2006-07, detailed statistical tables, NSF 11-301 (Arlington, VA: June 2011), Table 68.
16 Kevin B. Barefoot and Raymond J. Mataloni, Jr., “U.S. Multinational Companies: Operations in the United States
and Abroad in 2008,” in Survey of Current Business, Department of Commerce, Bureau of Economic Analysis, vol. 90,
no. 8, August 2010, Tables 15, 16.1, and 16.2 (pp. 221-223).
17 Helper, Krueger, and Wial, Why Does Manufacturing Matter? p. 14.
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products are made by manufacturing firms, including electric vehicles, water-efficient products,
energy-efficient appliances, and environmentally friendly chemical products. So in their view, a
competitive, growing manufacturing sector is needed to provide the United States with the
workforce skills, engineering talent, and innovative capability required to meet the twin
technological challenges of producing more clean energy and reducing the consumption of energy
made from fossil fuels. Proponents say that special federal assistance might make that happen.
Yet another argument made in support of federal policies to assist manufacturing is that many
other countries do so, some with notable success.18 According to proponents, the exemplar is
Germany. They maintain that the federal government would do well to emulate German policy
toward manufacturing, the constraints imposed by the current U.S. political climate
notwithstanding. Compared to the United States, Germany has achieved better outcomes in
manufacturing in recent years, as exemplified by higher wages, a slower rate of job loss, and
large trade surpluses. Research indicates that these results are due in part to public policies that
have fostered the emergence of dense R&D networks that cut across industry boundaries,
supported a system of continuous vocational training tied to industry needs, promoted stable
access to finance for small and mid-sized German companies, and encouraged the rise of a
collaborative system involving unions and companies for making important decisions on issues
not subject to collective bargaining. In view of proponents, the German example proves that
public policy can address the basic challenges facing the manufacturing sector in ways that allow
a country to achieve such critical policy objectives as relatively high wages, increased
technological innovation, greater trade surpluses, improved environmental protection, and greater
energy conservation.19
It should be pointed out that not all proponents call for special assistance to any and all firms
classified as manufacturing, regardless of their size and the impact of their performance on other
firms and consumers. Some argue that federal policymakers should take into account the
differences in performance and external benefits among industries involved in goods production
so they can devise policies that effectively encourage the migration of workers to current and
future high-growth industries, remedy market failures that permit relatively inefficient firms to
remain in business, and help firms with relatively low productivity to raise it.20 To provide special
assistance to manufacturing firms that are hopelessly uncompetitive, say these proponents, would
end up wasting taxpayer money. Others tweak this line of reasoning by contending that the
federal government and companies operating in the United States should make needed changes in
their investment strategies to restore the “ability of enterprises to develop and manufacture high-
technology products in America.21” Still others contend that government policy should provide
special assistance to small and medium-sized manufacturers only since they serve as “key drivers
of employment and technology growth” but lag behind large firms in adopting “new technologies
that would make them more productive.22” Proponents of this approach also maintain that small

18 For an assessment of the support for manufacturing offered by Australia, Canada, Germany, Japan, Spain, and the
United Kingdom, see Information Technology & Innovation Foundation, International Benchmarking of Countries’
Policies and Programs Supporting SME Manufacturers (Washington: September 2011). Available at
http://www.itif.org/publications/international-benchmarking-countries%E2%80%99-policies-and-programs-supporting-
sme-manufacturer.
19 Helper, Krueger, and Wial, Why Manufacturing Matters, p.28.
20 Ibid., p. 15.
21 Gary P. Pisano and Willy C. Shih, “ Restoring American Competitiveness,” Harvard Business Review, July-August
2009, p. 114.
22 Stephen Ezell, “Revitalizing U.S. Manufacturing,” Issues in Science and Technology, Winter 2012, available at
(continued...)
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and medium-sized manufacturers deserve targeted assistance because they face special difficulties
in gaining needed public information and advisory services and play “critical roles” in supporting
the competitiveness of a country’s large manufacturers.
Arguments Made Against Special Assistance
Not everyone agrees special government assistance for manufacturing is the key to laying a solid
foundation for sustained economic growth with relatively high wages for lower- and middle-class
workers. In fact, some analysts and lawmakers question the need for such support. Their doubts
rest, in part, on several arguments that critics of special assistance for manufacturing have been
making at least since the early 1980s. The arguments concern the lack of any market failures
linked to manufacturing, the seemingly irreversible shrinkage in the contributions of the
manufacturing sector to job creation and GDP over the past 50 years or so, and the untapped
potential for growth in U.S. exports of services in which the United States may have a
comparative advantage.
One argument rests on the absence of market failures in manufacturing. In general, a market
failure is a condition that prevents or hinders the emergence of an efficient allocation of resources
within a particular market, such as the market for health insurance or passenger cars. Most
economists would agree that government intervention is justified when the workings of the free
market do not lead to efficient or equitable outcomes in particular markets. For instance, if
competition in a market is limited, antitrust laws can be used to lessen any welfare loss by
curtailing the market power of the leading sellers. The main market failures involve the following
conditions: public goods, externalities (positive and negative), a lack of competition, the absence
of a market, incomplete and asymmetric information, and the so-called principal-agent dilemma.
In the case of manufacturing, such a view implies that federal support is warranted only if a
market failure is causing inefficient resource allocations within the sector, such as sub-optimal
investment in R&D or capital assets like structures and equipment. Yet some economists and
other analysts would argue that there is no evidence of such a problem that is peculiar to the
sector as a whole. Though they recognize there is a market failure in the form of positive
externalities associated with investments in R&D that broadly affects manufacturing, they point
out that these externalities have the potential to affect R&D investments across all sectors. As
these critics of targeted government assistance for manufacturing note, some non-manufacturing
firms, such as those involved in software development, also invest substantial amounts in R&D
and thus are just as likely as manufacturing firms to underinvest in R&D relative to its overall
social benefits. In their view, the preferred approach to correcting such a market failure is to do
what the federal government already does: provide subsidies for R&D investment that firms in all
lines of business could benefit from if they qualify.
The same point can be made about the clustering of businesses from the same industry in specific
geographic areas. According to critics, there is reason to believe that clusters of manufacturing
firms can be more productive than individual ones. As a result, when an investor builds a plant in
an area where such clustering exists, some of the returns on investment are likely to accrue to
other firms in the area. These leakages could justify government subsidies or tax benefits for the

(...continued)
http://www.issues.org/28.2/ezell.html.
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investor. But critics say that research on the economic benefits of clustering has failed to uncover
such effects on a large scale.23 They also point out that whatever external benefits arise from
clustering are likely to apply in industries outside manufacturing as well, such as software
development, insurance, and entertainment.
A similar objection applies to learning by doing as a source of market failure, say some critics.
They note there is no evidence that the process, which encompasses the time, analysis, and
adjustments required to make a new production process work efficiently, tends to prevent
companies developing new production methods from reaping most of the eventual returns from
those investments. If the opposite were true, then government subsidies or tax benefits might be
needed to ensure that private firms continue to invest in process innovations in optimal or near-
optimal amounts. But such is not the case, say critics. To prove their point, they cite a study of the
U.S. semiconductor industry that found that while learning by doing was a substantial cost of
investing in new production methods, most of the rewards went to the companies making the
initial investments.24
Nor is it the case, in the view of critics, that the external benefits associated with national defense
spending justify special treatment for all manufacturers. They contend that not all such firms are
equally critical to a war effort. In addition, they say there is no reason why the existing U.S.
production base for defense goods, supplemented by military supply arrangements with allies,
would necessarily be incapable of providing adequate supplies of weapons and other needed
materials during a war.25
Critics argue that the appropriate policy response to any underinvestment caused by positive
externalities is a subsidy intended to boost investment. Federal policy does this in the case of
R&D investment by funding research that most companies are loath to undertake on their own
and providing tax subsidies for private-sector spending on qualified research. In the view of
critics, to channel financial support to manufacturing in the absence of market failures would be
to distort the allocation of economic resources among sectors, leading to lower levels of social
welfare.
A second argument raised against special assistance for manufacturing concerns job creation.
Some critics say it would be misguided for the federal government to direct special assistance at
manufacturing in the expectation that it would trigger large employment gains over time.
Domestic employment in the sector has been gradually shrinking (with a few temporary upturns)
since 1979 and now accounts for 9% of total U.S. non-farm employment. In the view of critics,
most of the factory jobs lost over the past three decades are gone forever. Moreover, even if all
U.S. multinational companies were to stop outsourcing production and imports of manufactured
products were denied entry into the United States, they maintain that growth in domestic
manufacturing employment would be likely to continue to fall relative to other sectors for a
simple reason: Americans are spending less of their disposable incomes on goods and more on
services, a trend that has been gaining momentum since the late 1970s. Critics also note that the
main cause of the sluggish U.S. job growth since the end of the Great Recession in June 2009 has
been persistently weak aggregate demand. Thus, increasing assistance to manufacturing firms
would do little to boost job creation in the short run, since it would have little effect on overall

23 Christina D. Romer, “Do Manufacturers Need Special Treatment,” New York Times, February 4, 2012.
24 Ibid.
25 Ibid.
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demand. A more cost-effective policy option for spurring faster job creation, say critics, would be
to enact measures that increase total spending right away, such as tax cuts for low- and middle-
income households, increased aid to state and local governments, or large public investments in
infrastructure modernization and expansion.
Finally, critics say the U.S. economy would probably benefit more in the short run from
government efforts to dismantle foreign barriers to U.S. exports of services than from new
programs to bolster the competitiveness of U.S. manufacturers. They say the United States has a
greater comparative advantage in highly skilled services such as engineering, law, finance, and
architecture than in products made with the use of low-skilled workers (e.g., apparel, wood
products, processed food). In addition, service industries, broadly defined, employ about 70% of
American non-farm workers, and the United States is the leading exporter of services in the
world. Nonetheless, according to critics, there is considerable untapped potential for expanding
the U.S. share. Current service exports come from a small percentage of U.S. companies, and
there is a boom in infrastructure development in faster-growing economies like China, India, and
Brazil. According to an estimate by J. Bradford Jensen, an economist with the Petersen Institute
for International Economics, the United States has the potential to more than double its current
service exports if existing barriers overseas were removed, creating an additional $800 billion in
tradable business services like law and engineering.26 Such an increase would support or create
nearly three million U.S. jobs, according to Jensen, and those jobs would be likely to pay higher
wages than manufacturing jobs, on average. Given these possible gains, critics argue that the
federal government should boost its efforts to press other governments to open up their service
markets to U.S. companies. It should also, in their view, loosen U.S. immigration controls and
work with other countries to relax theirs; such controls can restrain the growth of service exports
by hindering the free movement of service workers across national borders.
Implications of the Arguments for Federal Policy
The pro and con arguments related to the federal role in the manufacturing sector have
implications for how federal policy should respond to the current challenges facing the sector.
The main ones are considered below.
First of all, the arguments and the evidence cited in support of them suggest there is no clear and
indisputable economic rationale for providing special federal support for the manufacturing
sector. Goods production as an economic activity seems generally free of market failures. Some
try to make a convincing case to the contrary based on manufacturing’s central role in
technological innovation in the private sector, the positive external benefits associated with
private-sector R&D investment, and the “direct linkages” between manufacturing and well-
paying service jobs throughout the economy. But such an argument may lose some of its appeal
and plausibility when one considers the steps the federal government has taken since the 1950s to
lift business R&D investment to levels thought to be more in line with the economic returns to
innovation. These steps include a tax credit and an expensing allowance for expenditures on
qualified research. Since eligibility for these tax benefits depends critically on the nature of the
research a firm conducts or finances, they have the significant advantage, relative to an R&D tax
subsidy aimed at manufacturers only, of stimulating increased investment in innovative activity
across all sectors, not just in manufacturing. The market failure inherent in such investment in

26 Catherine Rampell, “Some Urge U.S. to Focus on Selling Its skills Overseas,” New York Times, April 10, 2012.
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theory affects firms in all lines of business, not just manufacturing; so policy measures to remedy
the failure arguably should be targeted at all sectors.
In addition, it is unlikely that special aid for manufacturing would spark a significant rise in job
creation in the current economy. The sector’s contribution to overall employment has been
declining for more than three decades and now stands at 9% of U.S. non-farm employment. And
the U.S. Department of Labor reports that private-sector payroll employment rose by 4.267
million from its most recent low in February 2010 to May 2012; manufacturing contributed
495,000 jobs to that gain, or 11.6%. In an economy marked by lingering high unemployment
sustained by insufficient aggregate demand, increased support for manufacturing may have less
bang for the buck in its impact on job creation than policy options intended to deliver a quick,
sizable stimulus to aggregate demand. Examples include increases in federal spending on
infrastructure, transfers of federal funds to state and local governments, or tax cuts for
households. In the long run, it is economic growth that underpins and drives job creation.
The arguments also indicate that some of the proposals to harness federal policy to the goal of
bolstering the competitiveness of U.S. manufacturers would have similar benefits for other
sectors, augmenting the overall return on federal spending for that purpose. Some proponents of a
federal manufacturing policy say it should address four major issues: increased R&D support,
greater investment in worker training, improved access to investment capital, and new
mechanisms for creating and sharing productivity improvements and other innovations among
competing firms. There is no reason why firms in other industries could or would not benefit
from similar policies. So rather than focusing on manufacturing, Congress may wish to consider
cost-effective policy options for providing more R&D support, improving worker training to
reduce mismatches between employer skill needs and the skill sets of workers, expanding access
to credit for small- and medium-sized companies, and encouraging the growth of industry-
specific networks that could offer a range of collaborative services for the mutual benefit of
individual firms that would apply to all sectors.
Finally, though this issue is not explicitly addressed in any of the pro and con arguments
considered earlier, Congress may want to look at the advantages and disadvantages of using tax
incentives as a tool for achieving any policy objectives it may set for manufacturing industries.
Tax incentives require no annual appropriations to enable them to have their intended effect. But
they can operate like hidden entitlements that can impose significant compliance burdens on
companies and enforcement costs on the IRS, which has been facing growing pressure from
Congress in the past few years to do more with less. By contrast, spending programs tend to be
more transparent and open to congressional oversight. The comparative advantages of spending
programs (including credit guarantees) and tax incentives may come under greater scrutiny as
Congress debates options for achieving long-term reductions in budget deficits and federal debt,
including fundamental tax reform, in coming months. This issue has already surfaced in some
proposals for Congress to expand federal support for manufacturing by enacting measure that
involve no tax benefits. One such proposal calls for the following initiatives:
• establishing a National Laboratory for Advanced Manufacturing to undertake
engineering research on early-stage applications that might be useful in a variety
of manufacturing processes;
• offering competitive grants to organized groups of manufacturers and related
institutions to help them to collectively solve common problems, such as worker
training;
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Federal Tax Benefits for Manufacturing

• expanding and modernizing the MEP to provide more assistance to small and
medium-sized firms in designing new products, finding new markets, and
distributing and marketing products; and
• providing competitive grants to companies that engage in high-wage production
in the United States. 27


Author Contact Information

Gary Guenther

Analyst in Public Finance
gguenther@crs.loc.gov, 7-7742


27 Susan Helper and Howard Wial, Strengthening American Manufacturing : A New Federal Approach, Brookings
Institution, Metropolitan Policy Program (Washington: September 27, 2010). Available at http://www.brookings.edu/~/
media/research/files/papers/2010/9/27%20great%20lakes/0927_great_lakes_manufacturing.pdf.
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