NOL Carryback:
Transforming Tax Benefits into Cash Today

The expansion of the Net Operating Loss (NOL) carryback is an important piece of tax relief that is already in our industry’s legislative victory column and could shorten the road to recovery for many plastics processors. In November, when President Obama signed into law the Worker, Homeownership, Business Assistance Act (Public Law 111-92), it included the NOL carryback provision – a strong tool that could help many processors weather the current economic storm.

In simple terms, the NOL carryback rules allow companies to “carry back” current losses to earlier, profitable years and obtain expedited tax refunds. Almost one year ago, the American Recovery & Reinvestment Act (the “stimulus bill”) included a provision to temporarily extend the NOL carryback period to 5 years from 2 years, but only for small companies ($15 million or less in annual gross receipts). However, the law now extends the relief to companies of any size. This temporary tax measure enables companies to get immediate cash refunds from the IRS by using their 2008 or 2009 losses to offset taxes paid in the prior five years.

Faced with limited access to capital, the ability to transform a tax benefit into cash today is critical to many companies looking to fund operations, make needed investments, or just survive and preserve jobs. I am proud that SPI’s government relations team aggressively advocated for the expansion of the NOL measure to include medium and large companies. If they have not done so already, all plastics processors should consult with their accountants to determine if their company may benefit from enhanced NOL carryback.

R&D Tax Credit:
Keeping Innovation (and Jobs) in the U.S.

Innovation has always been the prime characteristic of our industry. From new polymers to new processes, bright ideas have propelled plastics through the decades to meet societal needs as they arise. Today is no different. Promising innovations such as bioplastics, highly conductive polymers, and nanotechnology have arrived and are already rejuvenating a mature industry. Sustainability and consumer demand for “greener” products have driven new applications for used and recycled plastics and products designed for “next life” rather than “end-of life.” Future growth markets for plastics include solar and wind energy, medical devices, and fuel-efficient transportation.

But the necessary research and development (R&D) to turn innovation into safe, useful products is full of both risk and reward. The federal R&D tax credit continues to be essential to U.S. plastics manufacturers because it helps boost industry investment in research done in the United States and is essential for sparking innovation of new products and competitiveness in world markets.

Originally enacted in 1981, the R&D tax credit has been extended 14 times. It is available only for certain qualified research and development expenditures incurred in the United States. The primary categories of qualified R&D expenditures are wages paid to employees performing research activities, a percentage of the amount paid to outside contractors for the performance of research, and the expenditures for supplies used in the conduct of research. Unfortunately, the R&D tax credit extension expired on December 31, 2009. Congressional action is needed to ensure that this tax credit continues to aid investment in the United States.

At SPI, we remain confident that Congress will once again extend the credit (in this case, retroactively). This is critical because, without the R&D tax credit, innovation is impeded as companies are wary of taking on the burden of research costs. High costs are already driving R&D investments overseas – without this tax credit, the situation becomes even more acute. Furthermore, the resulting reduction in R&D means fewer high-paying jobs. The trickle down effect on the nation’s economy, from our industry’s chain of processors, packagers, suppliers, and consumers, becomes quite evident. The R&D credit fuels innovation and pays the wages of skilled workers in 17,700 companies across all 50 states and is one of the best ways to stimulate future economic growth.

All of this is why SPI and other trade associations are part of a coalition lobbying Congress to pass a permanent extension of a strengthened R&D tax credit that includes increased incentive to locate more R&D jobs in the United States.

“Card Check” Bills –
Diminishing Worker Rights and American Competitiveness 

The third key legislative issue that plastics processors should monitor this year is the misnamed “Employee Free Choice Act (EFCA)” – union labor’s top legislative priority for 2010. Introduced on March 10, 2009, in both the House of Representatives and the Senate, the so-called “card check” bills would significantly alter the process by which employees form a union. The bill would reverse a time-tested process, established under the National Labor Relations Act of 1935, by replacing the secret ballot with a card check system – essentially stripping an employee of his or her right to decide on union representation in a federally supervised, secret ballot election. Instead, this new card check system would enable a union to organize so long as a majority of employees sign an authorization card. It is an unsupervised system that abolishes privacy protections of individual workers. Additionally, this legislation would impose an artificial timeline for the certification of a union contract, which could require a federal arbitrator to dictate the terms of the contract without the input of the employer or employee.

As the situation stands today, supporters of EFCA legislation are close to garnering the 60 votes required to pass it in the Senate. SPI has mobilized its grassroots advocacy network in opposition to both the House and Senate bills for a number of reasons. First, the private ballot would be replaced with a biased and inferior process (“card check”) which allows a union to organize if a majority of workers simply sign a card. Workers are better protected from interference and intimidation by casting their vote privately. Second, this legislation would force binding arbitration on both the employer and the collective bargaining unit. This makes business planning difficult and reduces the amount of control employers have over operations and property. Passage of EFCA also would have the potential to reduce employers’ incentives to grow their businesses in the U.S., as other companies based in other nations do not have similar binding arbitration statutes.

As the third largest manufacturing industry in the United States, a strong plastics industry is essential to the U.S. economy in a highly competitive global marketplace. Smart, sound public policy decisions made by our lawmakers on the issues outlined here will be critical in order to maintain our industry’s strength and move forward on the road to economic recovery. SPI’s advocacy efforts in 2010 will implement all of our organization’s resources – staff and member expertise, grass roots networks, and coalitions – to successfully lobby on these critical issues.

William R. (Bill) Carteaux is president and CEO of SPI, beginning his tenure at the association in March 2005. Founded in 1937, SPI is the plastics industry trade association representing the third largest manufacturing industry in the United States. SPI’s member companies represent the entire plastics industry supply chain, including processors, machinery and equipment manufacturers and raw materials suppliers. The U.S. plastics industry employs 1.1 million workers and provides nearly $374 billion in annual shipments.