Q&A talks about recent legislative changes to the state’s Manufacturing Reinvestment Account with co-creator Jamison Scott, who is the executive vice president and corporate officer of Woodbridge-based Air Handling Systems.
Q: You helped push for the Manufacturing Reinvestment Account changes at the state and federal level. For the uninitiated, what is the Manufacturing Reinvestment Act (MRA) and how does it work?
A: The MRA is like an IRA for manufacturers. The state legislation allows manufacturers to save money (up to $100,000 annually) for up to a 5-year period and then reinvest that money in the business tax free. Currently manufacturers are paying full state income tax on retained earnings. So every dollar we reinvest in our business is taxed at 100 percent.
Money invested in a MRA that is invested in new equipment, plant expansion or job training and workforce development will not be taxed. The federal plan, introduced as proposed legislation, lowers tax obligations for subchapter S manufacturers investing in an MRA to 15 percent and allows companies to invest upwards of $500,000 per year for up to 7 years.Â
Q: The MRAs were first enacted in 2010 but weren’t attractive to manufacturers because of the investment required for so little return. Will the changes to the state law attract more participation?
A: Originally the law only allowed for a 50 percent reduction in state income tax. Recently passed legislation allows for a full elimination of the state income tax on money invested in an MRA.
This change will certainly lead more companies to participate.
Q: How did you overcome concerns about MRAs having a negative impact on state coffers? If 50 manufacturers take advantage of the accounts, what is the potential in lost revenue?
A. The fiscal impact from the original law has not changed because the number of companies that can participate has been reduced to 50 from 100.
While we certainly have our challenges in a high cost state, manufacturing is rebounding in Connecticut and the state will actually benefit with greater investment in manufacturing. Investing in new machinery, technology, plant expansion, and job training comes from companies growing and this growth creates more manufacturing jobs.
There is also the added benefit of the multiplier effect and for every one manufacturing job created, it supports an additional three to five more jobs.
Q: The new law also expands MRA eligibility to firms with 150 employees vs. the original 50 employees limit. Are larger manufacturers better positioned to invest in the MRAs?
A: I have spoken to manufacturers of all sizes that are interested in participating. Originally limiting MRAs to companies with 50 employees did narrow the possibilities, so increasing from 50 to 150 will allow for a potential larger pool of participants.
Q: When Connecticut first created its MRAs, the law was hailed as a national model for supporting manufacturers. Have other states enacted MRAs?
A: Other states such as Pennsylvania have expressed interest in introducing similar legislation, in their case calling it a MIA, Manufacturers Investment Account.
Q: How do things stand at the federal level with the Manufacturing Reinvestment Accounts?
A: I originally brought this idea to Congresswoman Rosa DeLauro, who introduced it in the House (H.R. 1737). Consequently, I have worked with Sen. Blumenthal, who has introduced a bill in the Senate. That legislation is co-sponsored by Sen. Chris Murphy, and is also part of his Manufacturing Compact. The next step would be to get movement in House Ways and Means Committee, with help from Rep. John Larson.
