NEMA Addresses Pros and Cons of 2015 budget proposal.

Press Release Summary:

Responding to 2015 budget proposal submitted to Congress by President Obama, NEMA offered positive and negative feedback. NEMA President and CEO Evan R. Gaddis said having federal budget in place "gives manufacturers targets to incorporate in their long-term financial and operational plans.” Alongside several positive budget aspects, Gaddis cited such negative points as potential repeal of last-in, first-out (LIFO) accounting rules and absence of any relief on medical device tax.

Original Press Release:

NEMA Supportive of Efficiency and R&D, Concerned about LIFO and Device Tax in 2015 Budget

ROSSLYN, Va.—In response to the 2015 budget proposal submitted to Congress by President Obama, the National Electrical Manufacturers Association (NEMA) offers both positive and negative feedback that reflects the interests of its members.  While the president’s priorities make clear the importance of energy efficiency in our domestic energy economy and the role of federal leadership in implementing energy efficiency policies, more can and should be done to maintain support for the manufacturing sector of the economy.

“I’m pleased to see Congress and the administration moving toward a budget deal,” said NEMA President & CEO Evan R.  Gaddis, adding that the stability of having a federal budget in place “is a benefit to our members because it gives manufacturers targets to incorporate in their long-term financial and operational plans.”

Positives in the budget include a proposal to make the commercial building tax deduction a permanent part of the U.S.  tax code.  This is the best option in lieu of comprehensive tax reform that would eliminate all credits and deductions and lower rates.  The provision allows a deduction to a taxpayer who owns, or is a lessee of, a commercial building and installs property as part of the commercial building’s interior lighting systems, heating, cooling, ventilation, and hot water systems, or building envelope.  This would give certainty to building owners that would make this very effective tax policy even more so.

Other plusses in the budget proposal include requests to boost funding for the Department of Energy.  Priorities include increased support for Smart Grid and energy storage research and development, as well as building technologies with a focus on building code compliance.

NEMA also appreciates proposals to develop a more resilient infrastructure and create an Energy Efficiency and Grid Modernization Race to the Top program, even if the amounts proposed for each would be difficult to achieve in the current budget environment.

The major negative in the proposal is a potential repeal of the last-in, first-out (LIFO) accounting rules.  Absent a larger package to repeal all deductions and lower rates, LIFO is the preferred accounting method for manufacturers because it more accurately reflects the fact that inventory depreciates over time.  Accounting alternatives such as first-in, first out (FIFO) and cost averaging are much more appropriate for perishable items and bulk commodities, the inventories for which are maintained in a completely different fashion than non-perishable manufactured goods like electrical equipment and medical imaging devices.  It is unclear whether or not the budget would institute the LIFO rule retroactively.

Another disappointment for NEMA members is the absence of any relief on the medical device tax.  The tax, which applies to qualified medical devices sold after December 31, 2012, is being absorbed by manufacturers and has had the impact of decreasing innovation and causing layoffs for the members of NEMA’s medical division, the Medical Imaging Technology Alliance (MITA,

NEMA is the association of electrical equipment and medical imaging manufacturers, founded in 1926 and headquartered in Rosslyn, Virginia. Its 400-plus member companies manufacture a diverse set of products including power transmission and distribution equipment, lighting systems, factory automation and control systems, and medical diagnostic imaging systems. Total U.S. shipments for electroindustry products exceed $100 billion annually.

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