    [Senate Hearing 118-766]
    [From the U.S. Government Publishing Office]

                                                           S. Hrg. 118-766

                           AMERICAN MADE: GROWING U.S.
                       MANUFACTURING THROUGH THE TAX CODE

    =======================================================================

                                    HEARING

                                   before the

                              COMMITTEE ON FINANCE
                              UNITED STATES SENATE

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 MARCH 12, 2024

                                   __________

                     [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                Printed for the use of the Committee on Finance

                                   ______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    62-599--PDF               WASHINGTON : 2026

                              COMMITTEE ON FINANCE

                          RON WYDEN, Oregon, Chairman

    DEBBIE STABENOW, Michigan            MIKE CRAPO, Idaho
    MARIA CANTWELL, Washington           CHUCK GRASSLEY, Iowa
    ROBERT MENENDEZ, New Jersey          JOHN CORNYN, Texas
    THOMAS R. CARPER, Delaware           JOHN THUNE, South Dakota
    BENJAMIN L. CARDIN, Maryland         TIM SCOTT, South Carolina
    SHERROD BROWN, Ohio                  BILL CASSIDY, Louisiana
    MICHAEL F. BENNET, Colorado          JAMES LANKFORD, Oklahoma
    ROBERT P. CASEY, Jr., Pennsylvania   STEVE DAINES, Montana
    MARK R. WARNER, Virginia             TODD YOUNG, Indiana
    SHELDON WHITEHOUSE, Rhode Island     JOHN BARRASSO, Wyoming
    MAGGIE HASSAN, New Hampshire         RON JOHNSON, Wisconsin
    CATHERINE CORTEZ MASTO, Nevada       THOM TILLIS, North Carolina
    ELIZABETH WARREN, Massachusetts      MARSHA BLACKBURN, Tennessee

                        Joshua Sheinkman, Staff Director

                    Gregg Richard, Republican Staff Director

                                      (II)

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee
      on Finance.....................................................     1
    Crapo, Hon. Mike, a U.S. Senator from Idaho......................     3

                                   WITNESSES

    Widmar, Mark R., chief executive officer, First Solar, Inc.,
      Tempe, AZ......................................................     5
    Fendley, Anna, director of regulatory and State policy, United
      Steelworkers (USW), Pittsburgh, PA.............................     7
    Janis, Shannon M., vice president of global tax, onsemi,
      Scottsdale, AZ.................................................     9
    Silver, Courtney, president and owner, Ketchie, Inc., Concord, NC    10
    Huntsman, Peter R., chairman, president, and chief executive
      officer, Huntsman Corporation, The Woodlands, TX...............    12

                   ALPHABETICAL LISTING AND APPENDIX MATERIAL

    Brown, Hon. Sherrod:
        Submission for the record....................................    45
    Cortez Masto, Hon. Catherine:
        Submissions for the record...................................    64
    Crapo, Hon. Mike:
        Opening statement............................................     3
        Prepared statement...........................................    71
    Fendley, Anna:
        Testimony....................................................     7
        Prepared statement...........................................    72
        Responses to questions from committee members................    76
    Huntsman, Peter R.:
        Testimony....................................................    12
        Prepared statement...........................................    77
        Responses to questions from committee members................    82
    Janis, Shannon M.:
        Testimony....................................................     9
        Prepared statement...........................................    83
        Responses to questions from committee members................    86
    Lankford, Hon. James:
        Submission for the record....................................    90
    Silver, Courtney:
        Testimony....................................................    10
        Prepared statement...........................................    91
        Responses to questions from committee members................    96
    Widmar, Mark R.:
        Testimony....................................................     5
        Prepared statement...........................................    99
        Responses to questions from committee members................   102
    Wyden, Hon. Ron:
        Opening statement............................................     1
        Prepared statement with attachment...........................   105

                                 Communications

    Acena Consulting, LLC............................................   113
    Acoustic Range Estimates, LLC....................................   115
    American Chemistry Council.......................................   116
    American Clean Power Association.................................   118
    American Rental Association......................................   119
    Bloom Energy.....................................................   120
    Lee, John........................................................   123
    Off Planet Research, LLC.........................................   124
    One Voice for Manufacturing......................................   125
    Smart Material Solutions, Inc....................................   126
    Thrive Business Group............................................   127
    U.S. Tire Manufacturers Association..............................   128
    Vital & FHR North America LLC....................................   136

                           AMERICAN MADE: GROWING U.S.
                       MANUFACTURING THROUGH THE TAX CODE

                                  ----------

                            TUESDAY, MARCH 12, 2024

                                           U.S. Senate,
                                          Committee on Finance,
                                                        Washington, DC.
        The hearing was convened, pursuant to notice, at 10:05
    a.m., in Room SD-215, Dirksen Senate Office Building, Hon. Ron
    Wyden (chairman of the committee) presiding.
        Present: Senators Stabenow, Cantwell, Carper, Brown,
    Bennet, Casey, Hassan, Cortez Masto, Warren, Crapo, Lankford,
    Daines, Young, Barrasso, Johnson, Tillis, and Blackburn.
        Also present: Democratic staff: Kimberly Arndt, Tax
    Counsel; Ursula Clausing, Tax Policy Analyst; Jonathan Goldman,
    Senior Tax Counsel International; Alice Lin, Senior Tax Policy
    Advisor; and Joshua Sheinkman, Staff Director. Republican
    staff: Courtney Connell, Chief Tax Counsel; Kate Lindsey, Tax
    Policy Advisor; Gregg Richard, Staff Director; and Don Snyder,
    Senior Tax Counsel.

       OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM
                 OREGON, CHAIRMAN, COMMITTEE ON FINANCE

        The Chairman. There's a lot for the committee to discuss on
    the topic of manufacturing, and I want to start off with a
    little bit of recent history of key manufacturing issues. On
    infrastructure--and we know that you cannot have big league
    manufacturing with little league infrastructure--it was a
    running joke during the Trump administration that every week
    was infrastructure week. The big infrastructure bill was just a
    few days away. It was kind of like the marquee at the old movie
    house, where it always said ``coming soon,'' but it just never
    actually got there. It was the Biden administration that
    finally got a major infrastructure bill passed.
        Now there are shovels in the ground all over the country
    working on rebuilding our roads and bridges, highways, ports,
    and airports. On energy, former President Trump talked, again,
    a big game on energy independence. Had he wanted, he could have
    pushed for big investments in batteries, wind and solar, and
    electric vehicles. He passed on that one too.
        Democrats got that done in the Inflation Reduction Act. The
    United States now produces more energy than ever before, and we
    have achieved a greater level of energy independence than we
    have had since the days when millions of Americans had big
    piles of coal shoveled into their basements. Consumers are
    saving money. Putin and OPEC have a whole lot less influence
    over our energy prices than they did when former President
    Trump was in the White House.
        On semiconductors--these are the chips that Americans
    interact with from the time they wake up in the morning and
    check their cellphones, to the time they go to bed at night
    setting an alarm. Once again, Donald Trump was on the
    sidelines. He could have pushed for more chips investment to
    bring a vital high-tech manufacturing industry back home,
    giving us a better and stronger competitive edge with China.
    Once again, it did not get done.
        The CHIPS and Science Act passed on a bipartisan basis
    under the Biden administration; they are getting it done.
    Nobody would blame Americans for having grown tired and
    frustrated after years of empty political promises about
    bringing manufacturing and employment back home. Every
    shuttered factory, every job shipped overseas was a painful
    wound to those who were left behind in communities that took
    pride and found identity in the things they made with their
    labor.
        Donald Trump talked an awful lot about bringing
    manufacturing jobs home. Once again, failure to deliver. In
    fact, the manufacturing sector went into a recession in 2019
    after his tax law went into effect and before the pandemic
    clobbered our economy.
        So let's look at what is happening now. The cycle of empty
    promises is ended. The U.S. is in a manufacturing boom, thanks
    in large part to this landmark legislation passed under the
    Biden administration, much of which came from this committee.
    Manufacturing investment in clean energy in 2023 was triple the
    level from before Congress passed the IRA. The running total of
    clean energy and chips investments announced in the last few
    years is now more than $350 billion. That is more than a
    quarter-million jobs created. That was an effort that Democrats
    pushed vigorously with a
    private-sector, market-oriented, no mandates, technology-
    neutral system that finally broke the gridlock on climate, and
    is producing big investments in the private sector for cleaner
    energy.
        The CHIPS Act and the IRA went further than any laws in
    recent memory. The Buy American Act countered dependence on
    China. That is a big reason why so many foreign governments
    come to town and talk about how upset they are after Democrats
    passed the IRA. My response to them is, ``Why don't you all go
    do what we did in your country? I think you will find it
    works.'' With one single piece of legislation, the U.S. lapped
    the pack in terms of investment in clean energy and clean
    transportation.
        So that is all solid news about the state of manufacturing
    in America. Here is the big concern. Former President Trump
    wants the IRA repealed. House Republicans voted to gut nearly
    the entire IRA energy package. It is not because they have a
    better idea for energy or manufacturing; it is because they
    wanted to score a political win no matter the cost. And in this
    case, the cost would be hundreds of thousands of jobs in
    America. It would be higher costs for consumers; greater
    dependence on foreign oil; and surrendering to China and other
    countries when it comes to clean energy, innovation, and jobs.
        We have to make sure that does not happen. For the first
    time in a long time, the future of manufacturing in America and
    manufacturing jobs looks bright. Congress has to do everything
    it can do to build on this progress.
        On that topic, the Senate is in the middle of a debate that
    pairs tax cuts for businesses, including research and
    development expenses, with an expansion of the Child Tax
    Credit. I proposed this bill with Chairman Jason Smith of the
    House Ways and Means Committee several months ago. The House
    passed it 6 weeks ago with 357 votes in favor. I think it would
    be fair to say you cannot get 357 members of the House of
    Representatives to agree that 1 plus 1 equals 2.
        That is an extraordinary vote: both sides of the aisle
    almost unanimous in saying that we want to be there for 16
    million kids of modest incomes, who right now are discriminated
    against if they come from a large family. And then they said we
    want to be there for our small businesses that desperately need
    that research and development money to make payroll.
        The Senate has to get this done. I have said it now for
    weeks and weeks. I will talk to anybody who wants to work in
    good faith to move this forward quickly, because right now,
    folks, let's make sure everybody understands what's going on.
        Right now, thousands of small businesses, millions of
    families, they are all waiting. They are waiting to see if the
    U.S. Congress is going to be there for them. Seems like the
    Congress can be there for lots of other causes. Now let us make
    sure they are there for those scores and scores of small
    businesses, and those millions of families that are waiting.
        I have heard from the small business owners that if the
    Senate sits on this issue until 2025, a lot of them are not
    going to be around to talk about that. They just will not be
    here. They will not make it. So the time to act is now, and I
    continue to be open to all sides who want to work in good faith
    to get this done.
        Some of my colleagues understand the urgency here, and
    let's understand that this set of policies is not going to be
    on the table in 2025 if this bill stalls out. So it is my hope,
    and I think we will hear today that the American people again--
    another important group of Americans--want the Senate to move
    soon.
        Senator Crapo?
        [The prepared statement of Chairman Wyden appears in the
    appendix.]

                 OPENING STATEMENT OF HON. MIKE CRAPO,
                       A U.S. SENATOR FROM IDAHO

        Senator Crapo. Thank you, Mr. Chairman.
        During last Thursday's State of the Union address, using
    fair share rhetoric, President Biden laid out his plans for
    making American manufacturers more competitive: tax them more--
    a lot more. President Biden's proposed 28-percent corporate
    rate and about 32 percent when including State taxes, would
    leave the U.S. with one of the highest rates in the developed
    world.
        It gets worse. Biden would also hike the Democrats' book
    minimum tax, a fundamentally flawed proposal which harms
    American manufacturers, by 40 percent, to 21 percent. Contrast
    that vision with what the Republicans actually did in 2017.
    Prior to the Tax Cuts and Jobs Act, the U.S. had one of the
    highest corporate income tax rates among developed countries.
        In 2017, Republicans lowered the rate and broadened the
    base, putting a stop to corporate inversions. It led to one of
    the strongest economies in generations prior to the pandemic.
    Unemployment dropped to a 50-year low. Economic gains flowed to
    all demographic groups and all income levels, and American
    businesses reported record R&D investment.
        In the words of former President Obama's economic advisor
    Jason Furman, ``taxes do actually matter.'' In response to a
    recent study on the impact of the TCJA's policy changes on
    domestic investment, Furman stated, ``These are the most
    convincing estimates of the response of investment to corporate
    tax rates that I had ever seen.''
        I agree--tax rates actually do matter. A competitive tax
    system is instrumental in manufacturers' decisions of where to
    invest. Reducing business tax rates paired with good progrowth
    policies like immediate expensing of capital investments, drove
    historic growth in the manufacturing sector.
        According to the National Association of Manufacturers, in
    2018, the year immediately following the TCJA's enactment,
    manufacturing had the best year for job creation in 21 years.
    Manufacturing wages grew at the highest level in 15 years.
    Manufacturing capital investment grew by 4.5 percent, and
    manufacturing production grew 2.7 percent, with December 2018
    being the best month for manufacturing output since May 2008.
        Stability of tax policy is also key to maintaining strong
    manufacturing in the United States. We must protect the TCJA's
    progrowth tax policies, and seek to make them permanent before
    they expire in 2025. We should also look to improve and build
    on those policies to ensure that U.S. companies and workers can
    continue to compete globally.
        Another area of continued bipartisan interest is bolstering
    the domestic supply chain of semiconductors. American
    semiconductor manufacturers, represented here today by onsemi,
    are operating in an increasingly competitive market. While we
    must be circumspect when considering industry-specific tax
    incentives, bolstering domestic manufacturing of semiconductors
    is vital to safeguarding our national security.
        Chairman Wyden and I have worked closely over the years on
    proposals to strengthen the U.S. semiconductor supply chain.
    The Advanced Manufacturing Investment Credit, the AMIC, is the
    result of that bipartisan effort and has already led to
    increased investment across the United States.
        In my home State of Idaho, Micron announced that it will
    construct a new memory chip plant, the first new semiconductor
    memory manufacturing fab built in the U.S. in the last 20
    years. This expansion ensures the semiconductor industry will
    continue to innovate and develop new technologies that keep
    Idaho and the country on the leading edge for research and
    development.
        In contrast to this bipartisan effort, the costs of the
    Inflation Reduction Act and the energy incentives contained in
    it have quickly mushroomed from the original JCT score of $270
    billion over 10 years to a June 2023 estimate of $663 billion.
    One of our witnesses today will discuss his experience with how
    the administration is proposing to implement these incentives
    in a way that bolsters China and foreign manufacturing.
        Unfortunately, he is not alone. Hundreds of domestic
    stakeholders have provided formal comments to various proposed
    energy incentive rulemakings, which express significant
    concerns with the implementation of those energy incentives,
    including two other witnesses here today.
        Congress should closely scrutinize a law that both costs
    much more than promised, and also fails to achieve key goals
    like making the U.S. less reliant on our adversaries. I look
    forward to discussing how we can continue to encourage domestic
    manufacturing activity, including addressing the global
    semiconductor shortages and supply chain issues.
        Thank you, Mr. Chairman, and I yield back.
        [The prepared statement of Senator Crapo appears in the
    appendix.]
        The Chairman. All right. Let's introduce our witnesses now.
        Mark Widmar is the CEO of First Solar. I know my colleague,
    Senator Brown, very much wanted to be here to introduce you. He
    is chairing a hearing in the Banking Committee this morning and
    will be here later.
        Anna Fendley is the United States Steelworkers director of
    regulatory and State policy. We welcome her.
        Shannon Janis is vice president of global tax for onsemi.
        Courtney Silver is president and owner of Ketchie, Inc.
        Our final witness is Peter Huntsman, the chairman,
    president, and CEO of Huntsman Corporation.
        I want to at this time also publicly acknowledge all the
    work that Mr. Huntsman has been doing for years in mental
    health. We understand, in the Huntsman family and the Wyden
    family, that this takes an enormous toll on millions of
    Americans. It is not the topic of conversation today, but we
    just want you to know we are very appreciative of the efforts
    that you have made working with me specifically, and I look
    forward to continuing that work.
        All right. Let's go and begin with you, Mr. Widmar.

      STATEMENT OF MARK R. WIDMAR, CHIEF EXECUTIVE OFFICER, FIRST
                         SOLAR, INC., TEMPE, AZ

        Mr. Widmar. All right. Good morning, Chairman Wyden,
    Ranking Member Crapo, and distinguished members of the
    committee. My name is Mark Widmar, and I am the chief executive
    officer of First Solar, the Western Hemisphere's largest solar
    manufacturer. We have over 6 gigawatts of operational capacity
    in Ohio, with new factories under construction in Alabama and
    Louisiana that are expected to take us to 14 gigawatts of
    capacity in the U.S. and 25 gigawatts cumulative global
    capacity by 2026.
        Our proprietary, uniquely American thin film solar
    technology was developed here in the U.S., and is manufactured
    in fully vertically integrated factories that produce thin film
    solar wafers, cells, and modules in a single process entirely
    under our factory's roof.
        First Solar is enabled by thousands of hardworking people
    across the country: soda ash miners in Wyoming; silicon miners
    in Michigan; copper miners in Utah; steelworkers in Alabama,
    Louisiana, and Ohio; glassworkers in Illinois, Ohio, and
    Pennsylvania; woodworkers in Indiana; and a nationwide network
    of truckers, rail workers, and many more.
        Given this context, it is an honor to represent First Solar
    today, and I thank the committee for convening this hearing on
    how tax policies impact domestic manufacturing in the U.S. We
    applaud the IRA and believe it represents America's first
    durable solar industrial strategy. Implementation of the IRA--
    consistent with its legislative intent and the establishment of
    restrictions to prevent companies controlled or owned by the
    Chinese Government from receiving American taxpayer dollars,
    together with effective enforcement of trade law--gives the
    potential to dismantle China's near-
    complete control of the solar supply chain and enable the
    United States to secure its clean energy manufacturing base
    while capturing economic value and creating good-paying,
    enduring jobs.
        Not only did the IRA provide CapEx-based grants to enable
    the setup of onshore manufacturing, but through supply driven
    advanced manufacturing tax credits, the IRA took on the complex
    challenge of incentivizing the operational side of
    manufacturing in strategic clean energy sectors. This provides
    solar, wind, battery storage, and other manufacturers the
    momentum needed to scale domestically, drive down cost, and
    spur cycles of innovation to maintain American technology
    leadership. The IRA also created a crucial parallel demand-side
    driver to incentivize purchasing the output of these American
    factories, by introducing a bonus to the investment or
    production tax credit, accessed by solar generation asset
    owners if projects procure domestically made content, including
    solar panels.
        While regulations to implement this aspect of the IRA
    remain pending, the domestic content bonus is expected to
    create a durable market pull for solar produced via high-value
    domestic manufacturing. It is difficult to overstate the IRA's
    economic potential, and First Solar provides a case in point.
    Analysis shows that First Solar's U.S.-based footprint alone
    will support an estimated 30,000 direct, indirect, and induced
    jobs in 2026, representing approximately $2.8 billion in annual
    labor income, while generating over $10 billion in economic
    output in 2026 alone.
        While we are not the only American solar manufacturer to
    come into existence at the end of the last century, the grim
    reality is that we are the only one of scale to remain today.
    It is therefore imperative that America's response to China's
    dominance of the solar industry is not a one-horse race.
        Consider this: solar is already the lowest-cost form of new
    electricity generation, and the IRA offers a catalyst for
    unprecedented growth in high-value domestic solar
    manufacturing. And yet the solar manufacturing industry remains
    in a precarious position today. Less than a third of the 35
    gigawatts of new solar installed in 2023 in the U.S. were
    produced here. None, not one of the crystalline silicon panels
    installed, was assembled with American-made solar cells.
        The relentless Chinese anticompetitive behavior has caused
    a significant collapse in cell and module pricing. This dynamic
    goes well beyond just a risk to our company. It threatens the
    viability of all aspiring U.S.-based manufacturers, who may
    never be able to finance the startup or growth of their
    operations.
        The U.S. tax code, through legislation such as the IRA, has
    the power to incentivize domestic investment, but for those
    investments to endure, they must be supported by corresponding
    strong and consistent enforcement of trade. And there should be
    no doubt: we invite competition and free trade. All we ask is
    that this competition and trade are practiced on a level
    playing field.
        On behalf of First Solar, I am pleased to participate in
    this important discussion. I thank you, and I will be happy to
    answer any questions you may have.
        [The prepared statement of Mr. Widmar appears in the
    appendix.]
        The Chairman. Thank you very much, Mr. Widmar.
        Ms. Fendley?

      STATEMENT OF ANNA FENDLEY, DIRECTOR OF REGULATORY AND STATE
           POLICY, UNITED STEELWORKERS (USW), PITTSBURGH, PA

        Ms. Fendley. Good morning. On behalf of the members of the
    United Steelworkers Union, I would like to thank Chairman
    Wyden, Ranking Member Crapo, and the members of the committee
    for holding this hearing and for the invitation to testify. Our
    members manufacture a wide array of products in some of the
    most advanced facilities in the world. Their jobs are the sort
    that built the middle class. We appreciate that this committee
    has spent many years considering, developing, and overseeing
    initiatives to grow U.S. manufacturing.
        Through the infrastructure law, the CHIPS Act, and the
    Inflation Reduction Act, Congress has enacted a once-in-a-
    generation investment in industry, and these efforts have
    already led to a boom in spending on manufacturing
    construction.
        While I will only discuss a few tax credits in my
    testimony, they are part of an interlocking series of policies
    necessary for manufacturing workers. The first provision I
    would like to highlight is the section 45X Advanced
    Manufacturing Production Credit. Our union was particularly
    supportive of efforts to create this tax credit to reshore
    solar manufacturing capacity after the majority of it was lost
    to China, to ensure that a new domestic offshore wind industry
    is supplied by U.S.-made components, and to boost the
    production of critical minerals for batteries in this country.
        We are grateful for careful work being done by the Internal
    Revenue Service to implement this provision so far, including
    efforts to solicit public input on certain key questions. The
    implementation of this credit is an iterative, as yet
    incomplete process, and our union has offered supportive
    comments on some provisions and suggestions to the agency on
    others in the recent comment period. However, we are very
    excited about the prospect of this credit to help build U.S.
    supply chains for clean technologies.
        The second credit to discuss is the section 48C Qualifying
    Advanced Energy Project Credit. Our union supported 48C when it
    was originally enacted in 2009. The revival and expansion of
    48C will advance decarbonization efforts through the domestic
    manufacture of energy technologies and in direct efforts to
    decarbonize industrial processes. We applaud the expanded list
    of technologies that Congress included in the credit this time.
    We also applaud Congress's direction to allot 40 percent of the
    funding to designated energy communities, which will ensure
    that the benefits accrue to those communities and workers that
    may suffer the most harm from the loss of fossil fuel jobs.
        As expected, the appetite for this credit has been huge,
    with the first round of applications for $4 billion in credit
    availability attracting concept papers seeking $42 billion in
    funding. This is not a surprise, given how over-subscribed 48C
    was in 2010. Because awarding of the 48C credit functions more
    like a grant process than a typical tax credit, I would be
    remiss not to mention the important role that the Department of
    Energy is playing. Our union strongly supports the work that
    DOE has done to include Community Benefits Plans into these
    funding criteria. This process requiring labor engagement has
    helped drive very productive conversations between our members
    and their employers, and I am sure I join most in this room in
    looking forward to learning which projects are selected in this
    first tranche of funding.
        These two credits are both supply-side drivers. They will
    help producers make things. But in order to be fully effective,
    producers need certainty. Even with a tax credit, these
    projects are not free, and undertaking them entails risk. That
    risk can be mitigated by demand-side drivers that give
    producers confidence that there will be a stable market for
    their products. These are somewhat new to the tax code. The
    Inflation Reduction Act included a bonus credit for clean
    energy projects that use American iron, steel, and manufactured
    goods, and the section 30D tax credit now includes requirements
    for vehicle assembly, and provisions around critical mineral
    and battery production. We strongly support these provisions.
        Additionally, we must have strong trade enforcement, a
    topic also under this committee's jurisdiction. This is an
    exciting time for American manufacturing. The transition to a
    clean energy economy will result in lots of jobs somewhere in
    the world, and we want them to be jobs for American workers.
        Still, there is a lot of work before us. Implementation of
    the credits is not yet complete, and arguably more could be
    done to engage small and mid-size manufacturers to ensure that
    this opportunity is broadly shared. We look forward to
    continued work with you, the administration, our employer
    partners, and others on these matters.
        Thank you for your interest in our union's perspective, and
    for the opportunity to testify today.
        [The prepared statement of Ms. Fendley appears in the
    appendix.]
        The Chairman. Thank you, Ms. Fendley. And not a week goes
    by when Senator Casey and Senator Brown make some of the very
    same points that you have made today, and we are going to stay
    at it until those hopes for steelworkers and manufacturing
    communities are realized. Thank you.
        Okay. We are now going to hear from Ms. Janis.

     STATEMENT OF SHANNON M. JANIS, VICE PRESIDENT OF GLOBAL TAX,
                         ONSEMI, SCOTTSDALE, AZ

        Ms. Janis. Chairman Wyden, Ranking Member Crapo, and
    members of the committee, thank you for the invitation to
    testify today. My name is Shannon Janis, vice president of
    global tax at onsemi. I am here today to share what we do at
    onsemi and discuss how U.S. tax policy shapes our decisions
    regarding domestic manufacturing.
        onsemi is a Fortune 500 semiconductor company with over
    4,000 employees in the U.S. We specialize in delivering
    industry-leading intelligent power and sensing solutions that
    greatly improve the safety, sustainability, and power
    efficiency of end products in the automotive and industrial
    markets. We operate 19 manufacturing sites across eight
    countries worldwide. These sites consist of front-end materials
    and wafer fabrication facilities known as fabs, as well as
    back-end assembly and test site facilities. In the U.S., our
    materials and fab operations are located in five States:
    Oregon, Idaho, Pennsylvania, New York, and New Hampshire.
        Each of these sites is an integral part of onsemi's global
    manufacturing network. Our wafer fab in Gresham, OR is onsemi's
    third largest fab globally. The Gresham fab employs over 600
    people. Over 50 percent of Gresham's volume supports the
    automotive market, with over 35 different technologies
    manufactured at the site. Our wafer fab in Nampa, ID employs
    over 260 people, and supports the image sensor business. Image
    sensors are a key component in machine vision cameras,
    including digital and security cameras. Our Mountain Top, PA
    fab employs over 240 people making power semiconductors, and is
    the only union fab in the U.S. Our East Fishkill, NY fab is
    onsemi's largest manufacturing facility in the U.S., employing
    over 1,000 people, and it is the only 12-inch power discrete
    and image sensor fab in the U.S. And our Hudson, NH facility is
    the cornerstone of onsemi's silicon carbide products.
        Today, onsemi is the only U.S.-based company that has fully
    integrated end-to-end silicon carbide manufacturing. Why is
    this important? Silicon carbide semiconductors play a pivotal
    role in enabling the transition to electric vehicles and
    renewable energy systems. Manufacturing silicon carbide
    semiconductors is more complex than traditional semiconductors,
    due to higher temperatures, specialized equipment, and unique
    expertise. We are proud that our New Hampshire site enables our
    network of factories to deliver the end-to-end silicon carbide
    power solutions necessary for EVs, hybrid vehicles, and
    renewable energy.
        As this committee is aware, the steady decline in the
    United States' share of worldwide semiconductor manufacturing
    capacity poses a risk to America's supply chains and our
    national security. This decline has been decades in the making,
    and it will require persistent attention to achieve a
    sustainable reversal. A key contributing factor to this decline
    has largely been due to the substantial manufacturing
    incentives offered by the governments of our global
    competitors, placing the U.S. at a competitive disadvantage.
    Additionally, Federal investments in semiconductor research
    have historically been flat as a share of GDP.
        While other countries have prioritized investments in R&D
    initiatives to strengthen their own semiconductor capabilities,
    our U.S. R&D tax incentives have lagged behind those of other
    countries. Although the U.S. has taken the initial steps to
    curb this decline, other countries, both within the European
    Union as well as countries such as South Korea, Japan, and
    China, are significantly increasing their investments in the
    semiconductor industry and its workforce. Many of these
    countries have legislation similar to the CHIPS Act to support
    their domestic companies, as well as incentivizing other
    companies to invest in their regions. The CHIPS Act, and in
    particular the section 48D Advanced Manufacturing Tax Credit,
    have played a critical role in enhancing the global
    competitiveness of the U.S. The enactment of the CHIPS and
    Science Act was a landmark step toward reinvigorating domestic
    semiconductor manufacturing and innovation.
        The mission is clear. Establishing a leadership role is
    vital for the U.S. to win the global technology race in the
    semiconductor industry. Ongoing support from the CHIPS Act,
    with its section 48D Advanced Manufacturing Tax Credit, will
    enable companies like onsemi to continue to invest in the U.S.,
    compete with companies that are located offshore, and
    strengthen the resiliency of critical supply chains.
        Mr. Chairman, I appreciate your calling for this hearing
    and this committee's support of the U.S. semiconductor
    industry. Thank you for the opportunity to testify at today's
    hearing.
        [The prepared statement of Ms. Janis appears in the
    appendix.]
        The Chairman. Ms. Janis, thank you very much, and good to
    hear about chips manufacturing going on in Gresham, OR. That is
    the right place to have it. Thank you.
        Okay; Ms. Silver?

      STATEMENT OF COURTNEY SILVER, PRESIDENT AND OWNER, KETCHIE,
                           INC., CONCORD, NC

        Ms. Silver. Good morning, Chairman Wyden, Ranking Member
    Crapo, and distinguished members of the committee. Thank you
    for holding today's important hearing on how the U.S. tax code
    impacts manufacturing in America. My name is Courtney Silver,
    and I am the president and owner of Ketchie. Following my
    husband's passing, I was honored to take over Ketchie, a third-
    generation, full-service, precision machine shop located in
    Concord, NC.
        Ketchie was established in 1947 to fill the gap of the
    local textile industry after World War II. We have been a
    pillar in Concord for nearly 80 years, providing strong
    manufacturing jobs and giving back to our community. Our
    mission is to support the U.S. manufacturing supply chain by
    delivering reliable, high-quality machine parts to our
    customers. We invest in equipment, technology, and most
    importantly people, to make it easy for our customers to focus
    on what they do best and have confidence in their manufacturing
    supply chain. My testimony will focus around one main theme
    today, and I hope if members take away anything from me, it is
    this.
        Manufacturing is a team sport. A team can only reach
    greatness if every player is operating at their full potential.
    If not, the team falls apart. At the core of any sport are
    clear, sensible rules that do not unfairly handicap any
    players. The rules must be consistent, rather than constantly
    changing, so that the game does not devolve into chaos.
        In this context, the rules of the game are the U.S. tax
    code. The 2017 Tax Cuts and Jobs Act was revolutionary for the
    manufacturing sector. After it was signed into law, Ketchie
    experienced its best year in our 7-decade history. I know
    others further up in my supply chain were booming as well. I
    clearly remember our typically organized shop floor covered in
    pallets of material in every available space to keep up with
    our customers' demands. We were able to invest more than $1
    million in capital and equipment and create several new jobs
    within Ketchie in 2018.
        While Ketchie experienced a significant increase in sales,
    every day is a battle. When we want to win, the only choice is
    to pour profits back into your team. We made major investments
    in capital equipment. We were able to purchase advanced
    robotics. We invested in new HVAC systems for our facilities,
    and in new security systems for our team members. What I am
    most proud of is that we were able to provide 100 percent of
    our Ketchie team with pay raises and quarterly bonuses in the
    years following TCJA. Our team members were buying their
    families' first homes and first cars. We were making a true
    difference in the lives of those who had dedicated themselves
    to our mission.
        Of course, our growth trajectory was disrupted during the
    COVID-19 pandemic, like the rest of the world. However, thanks
    to TCJA's impact in 2018 and 2019, we were able to withstand
    the shutdowns and supply disruptions in 2020. Even as some of
    our customers went out of business and others were unable to
    pay open invoices, we were able to survive.
        Ketchie might not be here today if we did not have the
    economic boom provided by tax reform in the years prior to the
    pandemic. Unfortunately, beginning in 2022, the rules of the
    game began to change, making it more difficult for
    manufacturers to thrive in America. Crucial policies began to
    expire, such as immediate R&D expensing, enhanced interest
    deductibility, and full expensing. These tax policies were a
    game-changer for the manufacturing industry. They certainly
    were for Ketchie. Manufacturers need members of this committee
    to restore these policies and ensure small manufacturers can
    compete here and in the global economy.
        More tax increases are on the way. Other critical
    provisions expire at the end of 2025, which will have a direct
    impact on the manufacturing sector. Ketchie will be directly
    harmed by the loss of the pass-through deduction, the increase
    in our tax rates, and the reduced protection from the estate
    tax. If Congress does not act both now and in 2025,
    manufacturers will be competing with one hand tied behind our
    back for the foreseeable future.
        Manufacturers across the country made a promise to take tax
    reform's progrowth provisions and ensure they had a direct,
    positive impact on American lives. We have kept our promise,
    and I hope Congress will allow us to continue to do so even
    more. Manufacturing truly is a team sport, and you all are on
    our team. Small companies like mine are depending upon you to
    play with us rather than against us, and to ensure our U.S. tax
    code does the same.
        Thank you.
        [The prepared statement of Ms. Silver appears in the
    appendix.]
        The Chairman. Well said. We are going to be playing with
    you very hard over the next few weeks to get done what we can
    get done now, and then we will have a big debate in 2025. Thank
    you.
        Mr. Huntsman, again welcome, and we will talk mental health
    another time.

    STATEMENT OF PETER R. HUNTSMAN, CHAIRMAN, PRESIDENT, AND CHIEF
       EXECUTIVE OFFICER, HUNTSMAN CORPORATION, THE WOODLANDS, TX

        Mr. Huntsman. Thank you very much, Chairman Wyden. And I
    know my father greatly appreciated his work with you,
    particularly his friendship with you.
        Ranking Member Crapo, members of the committee, my name is
    Peter Huntsman, and I'm chairman, president, and chief
    executive officer of Huntsman Corporation. Over 40 years ago, I
    worked as a Senate intern for Orrin Hatch. The idea that I am
    testifying before his former committee is nearly inconceivable
    to me. If there is one conclusion I would like members of this
    committee to come away with from my testimony, it is this:
    American manufacturing dominance, prosperity, security, and
    power are based predominantly on access to cheap, abundant, and
    reliable energy, primarily in the form of hydrocarbons. Without
    it, our way of life is simply not possible.
        My father started his life in an Idaho home with no indoor
    plumbing. He founded Huntsman and built a global chemical
    company with billions in revenue, operations in dozens of
    countries, and thousands of associates. He is a quintessential
    American story. I started my career as a truck driver. Over my
    life, I have witnessed boom and bust business cycles, multiple
    iterations of peak oil and the collapse of the Soviet Union,
    the reunification of Europe, the rise of China, the growth of
    the Internet, and the transformational impact of hydraulic
    fracturing, among other things. I have also observed the tax
    policy and regulatory environment around the chemical sector as
    it has ebbed and flowed across Democratic and Republican
    administrations and Congresses. Our company and the chemical
    industry have played a role in it all.
        In the chemical industry, we take atoms and molecules, we
    break them apart and put them back together to make the
    building blocks of virtually everything you see and touch in
    modern life: automobiles and trucks, airplanes, mineral
    refining, batteries, building and insulation materials,
    pharmaceuticals, semiconductors and computers, solar panels,
    wind turbines, clean drinking water, to just name a few. The
    most utilized starting atoms, or ``feedstocks,'' for chemical
    manufacturing are hydrocarbons derived from natural gas and
    petroleum. Without abundant access to these fossil fuel
    feedstocks, we cannot make chemicals. We know the biggest
    threat to American manufacturing is the belief that we can
    choose not to extract our natural resources.
        Even if we could transition tomorrow to a fossil fuel-free
    energy grid, we cannot transition away from fossil fuels as a
    feedstock for chemical and manufacturing production. It is the
    chemical sector that develops the molecules that allow us to
    lower our emissions. If the goal of government and business is
    to reduce greenhouse gas emissions, tax policy should be
    calibrated to increase production of the very chemicals and
    materials needed to reduce energy consumption.
        MDI made by Huntsman is a great example of this. MDI is
    used to make spray foam insulation. This building material
    reduces energy consumption by as much as 50 percent. Huntsman
    was pleased to work with Senators Hassan and Collins on
    legislation that updated the Energy Efficient Home Improvement
    Tax Credit to be sure we capture the energy conservation
    benefits of spray foam.
        Increased adoption of EVs in the United States will
    increase our Nation's dependence on China, unless the U.S.
    Government enables a massive domestic expansion of mining and
    chemical refining. For most parts of the EV battery supply
    chain, China is the dominant global producer. American
    companies have little hope of competing against lower-cost
    Chinese labor, Chinese coal-based manufacturing, and Chinese
    pricing. Huntsman has experienced this phenomenon firsthand.
    Huntsman is the only North American producer of ethylene
    carbonate, a chemical that is so critical to the production of
    electrolytes that you cannot make an EV battery without it.
        In 2021, Huntsman made the decision to invest $50 million
    to increase our U.S. production capacity by 530 percent to meet
    the projected needs of the U.S. EV battery business. However,
    following passage of the IRA, Chinese producers slashed their
    price for EC, ethylene carbonate, by 75 percent, a level far
    below Huntsman's cost of production. Huntsman simply cannot
    compete with the Chinese under these circumstances, and I
    recently made the painful decision to suspend work on this
    expansion.
        Reductions in energy consumption, a robust manufacturing
    industry, and secure supply chains in the U.S. can be achieved
    only if America has a thriving chemical industry. America needs
    policies that recognize and promote our industry.
        I look forward to your questions. Thank you.
        [The prepared statement of Mr. Huntsman appears in the
    appendix.]
        The Chairman. Thanks very much, Mr. Huntsman. All of you
    have been very helpful, and I am going to start with taxes.
        Now the tax bill that is being considered is a bill that
    was written by the House Republican Chair of the Ways and Means
    Committee, Jason Smith, and myself. So, this Smith-Wyden bill
    had a number of key provisions, helping 16 million kids trying
    to figure out how they were going to get shoes and school
    clothes and all that kind of thing, and then it was going to be
    paired with the important business incentives. Right at the
    center of that was the research and development tax break.
        It was the feeling of members that to compete with China,
    which gives such generous incentives for research and
    development, we could not walk away from research ourselves.
    But that was what was done in the Republican tax bill in 2017:
    that research and development incentive was stripped. Ever
    since then, I can tell our panel, I have heard virtually every
    Senator and most members of Congress, whether they are
    Democrats or Republicans, say, ``I am going to get that fixed
    at the first possible opportunity.'' That first possible
    opportunity has now arrived. Three hundred fifty-seven members
    of the House of Representatives have voted for that, 16 million
    kids getting help, important assistance for housing, and we are
    pulling out all the stops to get that done here.
        So my question to our witnesses today--you really sort of
    started it, Ms. Silver--is what the effect of postponing this
    tax bill would mean for all of you. Mr. Widmar, what kind of
    damage would be done to domestic manufacturers if the Senate
    punts on the passage of the provisions in the Smith-Wyden tax
    bill?
        Mr. Widmar. Yes. First and foremost, we are somewhat on an
    island of our own. We are a U.S. company that has to go up
    against China, Inc. All of our competition is outside of the
    U.S. and headquartered in China. We need to out-innovate. So,
    the only way we are going to be successful is by being a
    technology leader.
        We are in the process right now of making a $400-million
    investment in a research and development center in Ohio. We
    will be spending about $200 to $250 million a year on R&D. If
    we are not able to out-innovate, we will not be able to survive
    the onslaught that we are facing today.
        This bill is critical from that standpoint, as it relates
    to R&D and the opportunity for expensing the R&D versus
    deferring R&D. But it is also very critical to the bonus
    depreciation that is enabling a lot of the factory expansions
    that we are making right now.
        So, outside of the R&D centers, we are putting another 2-
    plus million dollars into new factories here in the U.S. So
    this bill is critical, that this gets addressed.
        The Chairman. And putting everything off just generates
    more uncertainty and delay?
        Mr. Widmar. Delay and loss of thousands of jobs.
        The Chairman. Thousands of jobs--thousands of jobs being on
    the line with getting this done now. Thank you.
        Ms. Fendley?
        Ms. Fendley. First, I would like to acknowledge the work
    that you have done to negotiate that. The ability of
    manufacturers to innovate, as Mr. Widmar said, is so important
    to global competitiveness, and our fear is that, without
    appropriate tax incentives to do that, companies will stand
    still for too long, and that harms their global
    competitiveness.
        I also just want to mention the importance of the Child Tax
    Credit for working families. This is a really critical piece of
    this legislation. Our union would support a bolstering to what
    was included in the American Rescue Plan, but we do strongly
    encourage the Senate to begin debate on this.
        The Chairman. You are absolutely right. And Chairman Smith,
    to his credit, as we worked in a bipartisan way--a Republican
    and a Democrat--also made the point that having those
    opportunities for the kids puts them in a better position to be
    healthy and become the workers that you are all talking about
    here today. So there really is a link between healthy kids and
    a healthy job base.
        Ms. Janis?
        Ms. Janis. Right now, the OECD says that the U.S. now ranks
    30 out of 37 for research and development incentives among the
    advanced world economies. If the R&D tax deduction is not
    restored quickly, R&D will shift to elsewhere in Europe, Asia,
    and even the other USMCA nations. I recognize that budgets are
    tight; however, restoration of this immediate expensing is
    imperative to innovation. I would encourage the committee to
    advance this legislation, the 174 immediate expensing, and if I
    may also request, to go for its permanency, in order to provide
    assurance to businesses and stabilization.
        The Chairman. That may be too logical for everybody in
    Congress right now, but I am glad to hear that is the voice of
    Oregon. Thank you, and well said.
        Ms. Silver?
        Ms. Silver. Not taking action now has a huge impact on
    Ketchie and the entire manufacturing sector. In fact, I am
    delaying an investment in capital equipment and technology
    because of it, and it means less job creation.
        The Chairman. Tell me a little bit about the project you
    are delaying on right now with the uncertainty.
        Ms. Silver. Sure. Well, due to the change in bonus
    depreciation dropping to 60 percent, it is actually something I
    think about every day when I walk on my shop floor. I have a
    very large area on my shop floor that is empty, and I have a
    crane there, I have air, I have electrical. I know the piece of
    machining technology that I would like to invest in. This piece
    of machining equipment and technology would decrease our lead
    times. It would increase our productivity. It would get us into
    new markets that we are not currently in, and it would create
    jobs--highly skilled, highly paid jobs in machining.
        So, due to the bonus depreciation dropping to 60 percent,
    that changes my return-on-investment calculation, and it feels
    like an irresponsible business decision, and it feels too
    risky. It is honestly an awful feeling. It is a roadblock to
    achieving our mission.
        My customers are large manufacturers all across our
    country, and they need to have confidence in their domestic
    supply chain so they can focus on what they do best. In order
    for them to have that, I have to be able to invest in machines.
    I have to be able to invest in our people and invest in
    processes.
        The Chairman. Mr. Huntsman--and I am over my time.
        Mr. Huntsman. Chairman Wyden, I will not repeat what has
    already been said here. I would just note the company spends
    roughly $150 million a year. We do not invest 1 year at a time.
    We invest over a horizon of 20-30 years at a time when we build
    facilities.
        So, what Ms. Janis said earlier about making this permanent
    would be incredibly helpful. It would also be very helpful if
    the government and the regulatory body, particularly around the
    EPA--and the Senate worked very hard to pass TSCA, which gives
    the EPA 90 days to approve all the work that comes out of our
    R&D facilities. We are now waiting in some cases up to 3 to 4
    years to have our technical innovation, and the progress that
    we make in chemistry, approved so that we can manufacture. So
    it would be great if we could make it permanent; it would be
    great if the regulatory bodies could also be supporting us as
    well.
        The Chairman. All right.
        Senator Crapo?
        Senator Crapo. Well, thank you very much, and let me at the
    outset say I agree completely with--in fact, I do not know that
    there is a stronger advocate in Congress for extending and
    making permanent the three expired or expiring TCJA provisions
    that have been referred to here: the R&D tax credit, the bonus
    depreciation, and the interest deduction. My hope is that we
    can get there sooner rather than later. There are, as everybody
    knows, some concerns on the Republican Senate side with regard
    to other provisions in the bill. And my hope is that the
    Republican Senate can have its voice, we will be able to deal
    with it, and get something resolved quickly.
        It is a difficult time, and as with almost every single
    issue in this Congress today, there are difficult battles to
    deal with. That being said, I do not disagree with the
    testimony of any one of you. In fact, you are all giving great
    examples of why those three provisions of the TCJA are so
    critical.
        I would like to go to you first with my question, Mr.
    Huntsman. I understand, as the example you gave, your need in
    your company to delay the opening of a new chemical facility
    because of how the IRA is being implemented. Tell me if I have
    this right. I understand that you were basically undercut by
    Chinese price fixing, if you will, by the Chinese market, in
    your effort to develop this new chemical--its name I cannot
    repeat right now--and that the ability of the Chinese to simply
    underbid you in the market caused you to have to stop the
    production.
        Is that a very first grade level of explaining what
    happened?
        Mr. Huntsman. Yes. Well, this product, ethylene carbonate,
    is one of the raw materials on a chain. Look, there were
    positive things in the IRA, obviously, that came out. One of
    the areas of concern with us is that the Treasury Department
    recently came out and said that a number of products that China
    produces will be exempt when we talk about things that are made
    in America.
        I think if you would write down this rule right here, we
    would all agree that when it says ``made in America'' that
    ought to be the entire supply chain too. It ought not just be a
    bunch of products that come in from around the world and the
    final assembly is made in America, but that entire supply chain
    is made in America. With a product like ethylene carbonate,
    that was a product that we were hoping the Treasury Department
    would define that way and look at as a product that should be
    made in America. When there are other products like graphite
    and so forth--we do not make any of that in the United States,
    but we need to build those industries; we need to be given
    incentives. So this is a product that we hope the Treasury
    Department, hopefully in due course, will see fit that we ought
    to have as a domestic component. And when the Chinese undercut
    prices like this--this is usually just on a temporary basis--
    this discouraged hundreds of millions of dollars of future
    investment not just by Huntsman, but other producers as well,
    for other companies to come in and eventually produce these
    products.
        Senator Crapo. So, thank you. You have explained it very
    well, and I want to be sure that we make this point. The
    solution to stopping your particular crisis with the Chinese
    undercutting your prices could be fixed regulatorily by the
    United States Treasury Department in its regulatory actions. Am
    I correct?
        Mr. Huntsman. Yes, sir.
        Senator Crapo. So this is a situation in which our
    interpretation of, or our implementation of, the IRA has not
    been effective enough to get us to the point where our American
    producers can have a balanced playing field against the
    Chinese?
        Mr. Huntsman. As it pertains to this product, yes, sir.
        Senator Crapo. Yes; and I assume that there are a lot of
    other products that are on that same list, that would like to
    be getting into the designation of being an American-made
    product?
        Mr. Huntsman. Assuming that we are allowed to produce those
    products on a competitive playing field, yes, sir.
        Senator Crapo. All right. Thank you very much.
        The Chairman. Senator Lankford, you are next.
        Senator Lankford. Mr. Chairman, thank you. Thanks for the
    hearing and pulling this topic together. You all, thanks for
    the testimony as well, and to be able to bring these things
    together.
        We do need to get permanency in the tax code. What we are
    discussing currently right now is a temporary fix, but we need
    to get some permanency to our tax code, so it is predictable. I
    heard a number of you say basically, get the tax code set and
    leave it alone. Make it business-friendly so we can actually
    hire people, buy equipment, do those things and be able to set
    it.
        I have the ALIGN Act that deals with the bonus
    depreciation, to try to make this permanent so it is
    predictable. This has been bipartisan in the past. Every year
    since 2000, we have had some kind of bonus depreciation except
    for 2007. This has not been a partisan issue for us. It is a
    basic progrowth policy in our tax policy, and I would like to
    be able to get it set and to be able to leave it there.
        Ms. Silver, you mentioned a lot about this bonus
    depreciation piece and some of the investment--obviously, a big
    gap in your shop floor right now waiting on a piece of
    equipment to be able to come. Talk about the difference between
    if we--60 percent now, as you mentioned before, but just
    scratch that. If we just set it and just leave it alone--
    obviously north of 60 percent, because that is not the tax
    piece that you need at this point--what is it on the permanency
    that makes a difference? Because there is some conversation to
    say the bonus depreciation should just come in in times of
    economic downturn, and not be normal, standard policy.
        Should this just be made permanent, or is it better when it
    is just in an economic downturn, to turn it on and off ?
        Ms. Silver. Definitely permanent. Planning, taking risks,
    innovating, wanting to be here for the next 80 years, requires
    a permanent, stable, consistent, common-sense tax code.
        Senator Lankford. Great. It's what we all expected to be
    able to hear, and it is what I think we need to have. And
    obviously next year, as we sit down and talk through a lot of
    the tax issues as well, we've got to find a way to be able to
    move this from, over the next 2 years it has this, to as far as
    the eye can see, to be able to get this set so that we know
    what policy we are actually going toward and where we are
    headed on this.
        Some of the challenges that we have had have been on
    hydrocarbons, Mr. Huntsman, as you have brought up as well. It
    is remarkable to me to be able to sit in this room at times and
    to be able to hear a conversation about ending drilling or
    ending hydrocarbons, and I sit in this room and think ``the
    carpet is made of hydrocarbons.'' That little sign right there
    is made of hydrocarbons. This chair is made of hydrocarbons.
    This bottle is made of hydrocarbons, and the belief that at
    some point we are going to just turn all that off and that is
    going to work out well for our economy is just factually not
    true, based on what is happening both in chemical production
    and in energy production, trying to keep the costs down.
        What we have seen is a rise in cost in hydrocarbons right
    now that is unnecessary in some ways. And the IRA, when it came
    out, specifically targeted oil and gas production, to be able
    to target them, to raise their taxes significantly. Every one
    of you can deduct your everyday expenses. Every one of you can
    deduct your everyday expenses, unless you are an oil and gas
    producer. And now you cannot do that anymore. So that
    particular type of manufacturing was pulled out and punished in
    the tax code, in the IRA, and the result that we have seen is
    higher prices now for oil and gas. It means higher prices for
    manufacturing, higher prices for the consumers.
        So the challenge that we have is how to be able to actually
    protect those mid-size businesses, so that they do not have to
    deal with higher tax burdens as well. The Protecting Domestic
    Energy Act is an act that I have on this.
        I have a letter, Mr. Chairman, I would like to be able to
    enter into the record. This comes in from the American
    Exploration and Production Council and Domestic Energy
    Production Alliance, what we know affectionately as AXPC and
    DEPA. Those organizations are saying, hey, we need to find some
    way to be able to not just deal with the tax code for this
    manufacturer, but for all manufacturers, and actually have
    fairness in the tax code as well, so that they are not
    specifically targeted.
        The Chairman. Without objection.
        [The letter appears in the appendix beginning on p. 90.]
        Senator Lankford. So my question on this is, when we start
    dealing with the issue of hydrocarbons and start to deal with
    all of the challenges that you have dealing with China, and
    what Senator Crapo was saying as well, all the issues about
    antidumping--and I want to drill down a little bit on that with
    you, Mr. Huntsman.
        How difficult is it to make a charge on dumping on a trade
    charge, as far as the legal fees, the challenges of it--to say
    not only is our own Treasury allowing an exception for a
    Chinese company which drives American manufacturing out, but if
    you wanted to make an antidumping charge on China, how
    technically difficult is that, and is that something this
    committee, which also has a responsibility for trade, needs to
    take on?
        Mr. Huntsman. In the 30 years that I have been president of
    this company, I do not think we have ever initiated an
    antidumping charge, not because it does not occur. It is just
    too long, too complicated, and you rarely ever see it through
    to fruition. It would be great if we could somehow just
    streamline that process and come to a conclusion quicker. We
    are not asking that justice be more on our side or anybody
    else's side; just make it where you can come to a conclusion
    quicker.
        Senator Lankford. Yes. I have heard that over and over
    again; steel, for instance, and all kinds of manufacturing to
    say, we know the dumping is happening, but it is too
    complicated, too expensive, takes too long to be able to do it,
    so we just shut down manufacturing rather than actually charge
    antidumping. And the American consumer and American businesses
    and jobs continue to get hurt.
        Mr. Chairman, I know this is a tax conversation, but this
    issue on trade is exceptionally important for this committee to
    take on as well.
        The Chairman. You got me at ``hello'' on the whole issue of
    streamlining the dumping rules, because we hear this in sector
    after sector. So, message sent.
        All right. Let's see. Senator Casey, you are here by your
    lonesome. We are glad you are here, Mr. Manufacturing.
        Senator Casey. Mr. Chairman, thanks very much, and thanks
    for calling this hearing. I want to thank you and the ranking
    member. I want to thank our witnesses for being here. I will
    direct my questions probably to only two of our witnesses.
        But I wanted to start with the recent record. It is really
    a remarkable record of job creation, especially manufacturing
    job creation. The years 2021, 2022, 2023 each had more job
    growth than any year since the 1990s. According to the Federal
    Reserve, private companies are currently investing a record
    $225 billion to build and refit new manufacturing plants.
        That is three times the manufacturing investment we saw
    before the pandemic. So that is why we are glad to be with the
    manufacturers in front of us here, as well as the Steelworkers,
    to talk about what you are investing in America and also
    expanding America's productive capacity.
        Mr. Widmar, I will start with you. You testified about
    First Solar's ``uniquely domestic supply chain.'' Can you tell
    us what are the advantages of having an American supply chain?
        Mr. Widmar. Yes. For me, it all comes back down to
    certainty and integrity of your counterparties, to deliver
    against obligations and commitments. We are making investments
    that are multiyear investments that go out really toward the
    end of this decade. And I need to have counterparties and
    partners who can grow and can scale with me, that I know are
    going to be there at the time that I start to ramp up a new
    factory.
        My supply chain is just instrumental to the success of our
    company long-term. Trying to have a supply chain for our
    manufacturing operations in the U.S. that is offshore or in
    Southeast Asia or even China just opens you up to too much risk
    and exposure.
        We saw that through the pandemic and the disruption in
    ocean freight, the cost associated with it, and we have seen it
    more recently with what is going on in the Red Sea. I make a
    product that comes off a production line about every 1 second
    somewhere in the world, most of that being here in the U.S.
        I produce 24-7, 365. I need a supply chain that can be
    there with us to grow. If my glass supplier does not meet their
    delivery commitment, I cannot run my factory. If my junction
    box supplier does not meet their commitment, I cannot run my
    factory.
        So, having a supply chain that is close, that we can rely
    on, have certainty around, has been instrumental to our long-
    term success, and it translates into success in our
    relationship with our customers. We have a very unique approach
    compared to our competition, which we refer to as ``responsible
    solder.''
        We have a circular economy approach to what we do. We
    recycle everything that we make. Over 90-plus percent of the
    content is recycled and reused, and having supply chain
    partners that can work with you to evolve your value
    proposition into the marketplace has been very important for
    us, and we have been very successful with selling out multiple
    years of demand right now.
        Senator Casey. Well, that is good news, and I think a lot
    of what you said is what we were contemplating when we were
    putting together the Inflation Reduction Act. In that
    legislation, I sponsored a domestic content bonus tax credit,
    which rewards companies that have American supply chains. That
    means that they manufacture their product in America, with
    American materials and American workers, from start to finish.
    In fact, First Solar will be buying, I am told, $2.6 billion
    worth of high-tech glass from a Pennsylvania manufacturer, a
    manufacturer that has locations in both Meadville and Carlisle.
        And I wanted to ask you--or if you can tell me about the
    effect that my domestic content bonus credit has had on your
    business and your suppliers in Pennsylvania.
        Mr. Widmar. So right now, with the current guidelines that
    are out on domestic content, we started a journey in about
    2018-2019 to localize our supply chain. Timing was obviously
    very good, given how things have moved forward. But it was a
    strategic thread along the lines that I referenced before, and
    why we wanted a domestic supply chain.
        In today's market right now, we are the only company under
    the current guidelines that qualifies to have a domestic
    product here in the U.S. All of the components that are
    required in order to meet the requirements for domestic content
    are sourced in the U.S. and are manufactured here in the U.S.
        So, it translates directly into our ability to sell through
    to our end customers, to give them the world's leading, best
    technology, and for us then to contract to have multiyear
    investments in contracts that go out now through 2028 and 2029.
        Senator Casey. That's great.
        Mr. Chairman, thanks. I will have questions for the record
    for Ms. Fendley; but thank you.
        The Chairman. Thank you, and thank you in particular,
    Senator Casey, for all your contributions on the IRA, because I
    know that was a difficult and challenging issue for many of
    your communities, and I think we are getting it right. Those
    are communities I have in timber and natural resources. So I am
    glad to be in line with you on that, and thank you for your
    work.
        Okay. Senator Blackburn, you are next.
        Senator Blackburn. Thank you, Mr. Chairman, and thank you
    for the hearing on this. I want to talk a bit about
    competitiveness, and as we have gone through the hearing this
    morning, you have heard a little bit about that.
        When I talk to Tennessee companies, this is what they talk
    with me about, whether they are competitive domestically,
    competitive in a global market. They talk about the inputs and
    the cost of those inputs, the importance of taxes and tariffs
    and how that plays into their pricing and therefore their
    competitiveness. And let us go to Ms. Silver and Mr. Huntsman--
    Ms. Silver first and then Mr. Huntsman--because I do want to
    talk about the Tax Cuts and Jobs Act.
        When I talk to Tennesseans, they talk about how they
    benefited from that, and cutting that tax rate from 35 to 21
    percent, and basically saying to businesses this is a good
    place to invest and to grow your business. And then we hear the
    President yesterday talk about hiking that corporate tax rate
    to 28 percent, and then increasing the book minimum tax from 15
    to 21 percent, which--as you can imagine, I heard immediately
    from some of our manufacturers.
        So, Ms. Silver first, and then Mr. Huntsman. Talk to me
    about how the TCJA helped you to grow your business, how it
    influenced the decisions that you make, and what would be the
    consequences for raising that tax rate? Ms. Silver first.
        Ms. Silver. Thank you for the question, Senator. So TCJA
    provisions were--they were rocket fuel for us. We were able to
    invest over a million dollars in capital equipment to create
    jobs, give our team members quarterly bonuses, raises. It gave
    us confidence, and not only confidence, but it gave us cash
    flow. It gave us liquidity, which has especially proved to be
    critical going into the unexpected years of the pandemic.
        And a quick example of even just some of these tax
    provisions that you mentioned: because of those TCJA tax
    provisions, we were able to, a couple of years ago, invest in
    our first collaborative robot. So this robot allows us to run a
    machine during the day and after shift, with no one there.
        And so, it decreases our lead time. It increases our
    productivity, so much so I was able to pass along a cost
    savings. I was able to reduce my customers' price on these
    particular precision machine parts. This customer is a large
    customer in the fluid motion control industry. So, we were able
    to invest in our company due to good progrowth tax policies,
    passing along these savings to our customers. They are able to
    reduce their cost of goods sold, and then I still am making a
    very healthy profit. So this is--it is a win-win for the entire
    manufacturing supply chain.
        Senator Blackburn. Good.
        Mr. Huntsman?
        Mr. Huntsman. Thank you very much. We were able to bring
    over a billion dollars from offshore businesses back into the
    United States. At least half of that went into projects over
    the course of the last 5 years, capital projects to expand
    production, to bring manufacturing into the domestic market
    share. And for us, that has bolstered our R&D, where we have
    been able to develop new technologies in the field of chemistry
    to reduce waste, better recyclability, and so forth. So, as we
    look at that entire supply chain for us, it has made the United
    States now one of the most competitive areas in which we can
    invest.
        Senator Blackburn. Excellent.
        Thank you, Mr. Chairman.
        The Chairman. I thank my colleague.
        Senator Warren is next; no, let me see. Senator Warren,
    Senator Barrasso was here first, so Senator Barrasso is next,
    then Senator Warren. And colleagues ought to know that we are
    getting ready to wrap up.
        Senator Barrasso?
        Senator Barrasso. Thanks so much, Mr. Chairman. Mr.
    Huntsman, good to see you again, and good to be with you. Thank
    you, Mr. Chairman, for pulling all these folks together.
        You know, conventional energy is at the heart of U.S.
    manufacturing. Petrochemicals derived from oil and natural gas
    help our Nation manufacture thousands of the everyday products
    and the high-tech devices that people use every day. These
    include plastics, clothing, digital devices, medical equipment,
    pharmaceuticals, detergents, towels, and fertilizers to grow
    our food.
        So ironically, solar panels and wind turbines rely heavily
    on oil and gas production. President Biden and many Democrat
    colleagues in the Senate want to move us away from these
    resources. They use the tax code as both a carrot and a stick
    to make that happen. They throw up regulatory roadblocks to
    stifle traditional energy production and refining, and you
    mentioned this in your testimony. But I just don't think we can
    hear it enough right now. What would it mean for U.S.
    manufacturing if we continue to move away from oil, gas, coal
    production, and is manufacturing even possible without the
    production of those fossil fuels?
        Mr. Huntsman. Thank you very much, Senator Barrasso. It is
    very nice to see you as well.
        Look, I have no problem moving away from fossil fuel, so
    long as you can move me to something else, and the problem is,
    there simply is no replacement, as I said in my prepared
    remarks. Even if you were to go to a complete fossil-free
    energy grid system, if we were to go to 100-percent nuclear,
    you would still need these basic building blocks to produce all
    the products that you have just said.
        And then we talked about one of the greatest inflationary
    pressures on society, particularly for those of low income. It
    is the inflation that we see in these basic raw materials. We
    simply pass these through. I should not say ``simply,'' because
    we are still having to compete against foreign entities and so
    forth.
        But these higher costs--whether it is in taxation or
    whether it is in raw materials--are just pass-throughs that go
    on down, and they put the inflationary pressures, as we saw in
    this morning's numbers. These are stubborn things to turn
    around.
        Senator Barrasso. Energy prices are certainly up, but also
    food, groceries. I mean, the thing I hear about in Wyoming is
    the cost of going to a grocery store, and it is much, much
    higher than it was 3 years ago when this administration took
    over.
        Mr. Huntsman. Well, your cost of manufacturing food,
    protecting food, cold storage of food, packaging of food,
    transportation of food, that is all part of our supply chain,
    where we produce the supply.
        Senator Barrasso. I wanted to get to China if I could. As
    we find opportunities to grow U.S. manufacturing, I think we
    have to look at ways to limit China's influence in the United
    States in terms of manufacturing, the impact on supply chains.
        You know, the so-called Inflation Reduction Act, with the
    help of the administration, I think favorably opened the door
    for U.S. tax dollars to go to entities controlled by China. Our
    energy and green manufacturing sectors are flooded with
    expensive tax credits, and this tax and spending bill is
    pushing us away from the fuels and the technologies that
    America dominates.
        Instead of pushing us toward the minerals and technologies
    controlled by China, I think we ought to be focusing more on
    what we do here in the United States. So, ``American Made'' is
    the title of this hearing, but the products and technologies
    that the Democrats are subsidizing are going to be put in with
    components and materials that say on them ``Made in China.''
        So my question to you is, what are some of the ways that
    China benefits from this so-called Inflation Reduction Act, and
    isn't that hurting us?
        Mr. Huntsman. Well, many of the products that go into the
    supply chain, the battery components and so forth, are exempt
    or we do not have to say that they are made in China. We can
    just say we do not produce them here, and they are going to be
    part of that.
        So, you look at Ford's recent earnings, and I do not have
    the exact numbers--I think maybe somewhere between $50,000 and
    $60,000 per car, per EV they produce. I can assure you that
    China does not lose money on the battery components that they
    are selling into that EV, everything from the cadmium to the
    lithium to the cobalt and so forth, the manganese products that
    we can be producing here domestically, ethylene carbonates and
    so forth.
        Those products are of great profit, and they continue to be
    subsidized by Chinese coal and government subsidies. So, there
    is that balancing where we either need to commit to that
    production and those supply chains ourselves, incentivize and
    admit that we need to get in there, or we need to let the
    Chinese do it if we are going to have an EV fleet.
        Senator Barrasso. And from what I have read from the
    economists, for most traditional vehicles--you ask the average
    person what percentage of the entire cost of the vehicle is the
    battery. For electric vehicles, about half of the cost is the
    batteries. Is that consistent with your findings?
        Mr. Huntsman. Well, it certainly is the most technically
    oriented and the part with the fewest raw material suppliers.
    You do not go out and find 20 different suppliers of cobalt.
    Usually you have one or two Chinese producers in these areas.
    This is not something you go scour and you get in 15 different
    suppliers around the world.
        Senator Barrasso. Thank you.
        Thank you, Mr. Chairman. My time has expired.
        The Chairman. I thank my colleague. Senator Stabenow is
    next, and I appreciate all my colleagues being patient. We have
    people coming and going, and it is a little hectic, but I think
    we can get to everybody.
        Senator Stabenow's next.
        Senator Stabenow. Well, thank you so much, Mr. Chairman. I
    am glad I got in at the end of this conversation a little bit.
    It is interesting to me as we transition, as a person who has
    authored the Made in America Office that we now have and the
    robust incentives for Buy America. We know that we do not yet
    produce everything here; that's why we are scrambling so hard
    to be able to get that done. When we passed the CHIPS Act, we
    did not say you cannot--manufacturers or technology companies
    and so on--buy any more chips overseas, you've got to wait 5
    years until we get these fabrication plants up and going in the
    United States.
        We did not say that. We did not say that. It would have
    been pretty dumb to say that, and instead what we are doing is
    building the capacity here so we can bring those jobs home as
    we continue. Now, the reason this is such a big fight is
    because it is oil and gas on one side, who are frantically
    trying to slow down EVs.
        And so, that is the undercurrent that I see happening all
    the time on this, as we transition to the technology and
    batteries and other kinds of technology that are needed for
    electrification of vehicles. And we will get there. In fact, in
    the past 3 years under President Biden we have made incredible
    progress in a whole range of clean energy areas, $649 billion--
    with a ``b''--in new private-sector investment announcements
    across an array of industries.
        There is more to come, and we know we have nearly 15
    million new jobs, including 800,000 new manufacturing jobs and
    counting. We have about 350,000 new jobs in Michigan that we
    are very excited about. When you make things, you say
    ``Michigan,'' and so we are very excited about that as well.
        But this could not have come at a more important time,
    because we are on the knife's edge of ceding an insurmountable
    lead to China on advanced manufacturing. We know that, which is
    why the strategy has been put in place with the infrastructure
    law and CHIPS and Science, and most notably the Inflation
    Reduction Act. That is what is going to allow us to make that
    transition to own this technology. There is no reason we cannot
    do that. We have smart businesses, smart workers creating the
    technology, and we are in a position to retake our position as
    global leaders.
        And so, when we look at this--I mean, we are hearing people
    talk about a domestic manufacturing renaissance, and I think we
    are starting it. But it is a transition, just like any other
    transitions to new technology.
        Unfortunately, there are huge, very, very big wealthy
    forces on the other side that do not want this to happen and
    will continue to put out, what I view as disingenuous and many
    times just plain false information, to try to slow this down as
    much as possible.
        Questions: one provision that is going to play a
    particularly important role in putting America in the driver's
    seat will be the clean energy manufacturing tax credit, 48C. I
    first authored this in the 2009 Recovery Act. We have now
    brought it back in our focus on this, and I think this is going
    to be an important part of this.
        Miss Fendley, I wanted, first of all, to thank you for the
    United Steelworkers' support for this provision. You have been
    very steadfast in supporting this and making things in America
    and bringing jobs home. So I appreciate that. As we allocate
    the decisions for the first round for 48C, Ms. Fendley, what
    sort of impacts do you foresee this credit having in
    communities across the country?
        Ms. Fendley. Thank you for the question, and we are also
    very glad that you have brought this credit back. Congress
    allocated a tremendous amount of money to catalyze investment
    in manufacturing jobs in communities across the country.
        I think one of the most important things that Congress did
    is allocate a portion of the funding directly to coal or energy
    communities, where there is potential or already job loss that
    has happened, so that we are reinvesting in these communities
    through 48C and hopefully through follow-on private investment,
    to really rebuild some of those local economies.
        Senator Stabenow. Great. Thank you very much, and let me
    ask a question on the domestic content bonus. Solar is one area
    where we have a lot of catching up to do in the United States
    as a global leader. As it stands right now, Chinese-
    headquartered companies now make up 99 percent of the world's
    solar wafer and 80 percent of the world's polysilicon
    production to core components that make up half the cost of
    solar panels. But we also are in a position to be able to take
    that back. So I sent a letter along with many colleagues,
    asking Treasury to ensure that solar polysilicon and wafer
    manufacturing are both counted in the IRA's domestic content
    bonus rules.
        Mr. Widmar, if you could--I know I am out of time here, but
    how important is it that the administration get the
    implementation of this right as we go forward?
        Mr. Widmar. I think it is absolutely critical, and I
    obviously applaud you and some of the other Senators for
    proposing the legislation that would actually require the wafer
    to be included in as part of the definition of domestic
    content. The intent of the IRA, as well as for the domestic
    content, was to enable a domestic industry, a domestic value
    chain.
        You have to then associate value to those various
    components, and where there is technology differentiation or
    there is high value-added manufacturing, to simply allocate
    domestic content criteria benefits to module assembly does
    nothing for us. I think Mr. Huntsman made a very similar
    comment about that earlier on as well.
        We need to enable cycles of innovation and technology here
    in the U.S. It is no secret--and it should not surprise anyone
    here--China does not want the U.S. to have its own domestic
    capabilities. We not only manufacture here in the U.S., we
    actually manufacture in other markets internationally, such as
    India. India has put in similar policies, and China is trying
    to disrupt that.
        That is why there is such a global oversupply right now.
    They are trying to usurp the opportunities that countries like
    the U.S. are trying to create with domestic capabilities. We
    have to avoid that at all costs, and we have to make sure there
    is value created to the technology, and the domestic content
    has to be associated with that.
        Senator Stabenow. Thank you.
        And as I close, Mr. Chairman, I just want to put in a
    plug--you already talked about the Wyden-Smith tax bill. The
    research in there is so important, the R&D tax credit is so, so
    important to this discussion. Thank you.
        The Chairman. Thank you.
        Senator Carper is next.
        Senator Carper. Thanks. Thanks, Mr. Chairman. Thanks for
    putting this together. To each of our witnesses, good morning.
    Thanks for joining us today and for sharing your thoughts and
    responding to our questions.
        Manufacturing is one of the largest sectors in Delaware's
    economy. We are big in tourism, big in agriculture, big in
    biopharmaceuticals. We are also a growing presence in
    manufacturing jobs, which is a good thing. We are a small
    State, but just, I think, the last couple of years we added
    about 2,000 new manufacturing jobs, all of them welcome, and we
    are excited about that.
        In Delaware and across our country, clean energy has been
    at the forefront of the manufacturing boom, as you know. As we
    know, without the right incentives to help American companies
    scale their production, demand for these clean energy
    technologies will go to the lowest-cost producers in China.
        I have a question for Mr. Widmar. We do not mean to pick on
    you, but you showed up, so we are going to take this
    opportunity. But can you just explain for us how the Inflation
    Reduction Act has provided certainty for your business and
    strengthened domestic supply chains in the solar industry?
        Mr. Widmar. Yes. I think this is what is so important about
    the Inflation Reduction Act, that it is the first time it
    actually gave a view of a runway, a certainty around a policy
    environment that would go out 10 years effectively, right, to
    the early 2030s. It also created an opportunity to enable and
    create a value to all participants in the industry. So, whether
    you are the developer of a project, whether you are the
    manufacturer of the technology, whether you are the owner of
    the generated asset, there is value for everyone that we all
    could align to.
        It was the first time there has ever been that type of
    industry approach and overall alignment so that we can now work
    collectively and collaboratively together for success. So it
    created a long-term vision, it created the alignment, and then
    it enabled the investments that needed to be made. So, if you
    think about it, one of the key opportunities on policy has to
    be around industrial policy, which the IRA did. It gave us a
    very strong industrial policy and gave us a very strong demand
    profile. So the manufacturing tax credit was very enabling of
    an industrial policy, and a production tax credit with bonus
    adders for domestic content and the like addresses the demand
    side of the equation, which were two fundamental enablers of a
    policy environment that people could move forward to.
        And then we have added--a lot of new capacity has come into
    the U.S. We personally have doubled our manufacturing here in
    the U.S. because of the IRA. We have a local supply chain, so
    100 percent of our materials are sourced locally. So we
    actually then enabled our suppliers in turn to grow.
        And as we indicated in our prepared remarks, if you go
    through and you look at the economic impact of what we as one
    company are doing as the result of IRA, it is creating 30,000
    direct, indirect, and induced jobs here in the U.S. That will
    be about $2.8 billion of annual payroll. I do not know of any
    other policy that can have that direct of an impact around U.S.
    manufacturing, innovation, and jobs.
        Senator Carper. Thanks for your comments. As we know, there
    are a lot of factors that determine whether or not businesses
    are going to be successful or not. One of the things that is
    most important is certainly predictability, and I am reminded
    of that almost every day in the work that we do here.
        Over, I think the last 15 or so years, Delaware has
    positioned itself as a leader in our country's hydrogen and
    fuel cell manufacturing economy. We are not alone in that
    regard. In order to sustain this growing industry, we need to
    extend the traditional fuel cell investment tax credit until
    green hydrogen is available at scale. I have introduced
    bipartisan, bicameral legislation to do just that, and I wanted
    to thank and express my appreciation to our fellow committee
    members, Senator Brown and Senator Tillis, for joining me, and
    my lead sponsor, Senator Lindsey Graham.
        We look forward to continue working with Chairman Wyden. We
    look forward to working with Ranking Member Crapo and the rest
    of our colleagues to find a path forward to extend this
    critical tax credit.
        With that, I thank you, and bid you ``adieu.''
        The Chairman. I thank my colleague.
        Senator Tillis is next.
        Senator Tillis. Sorry, Mr. Chair. I thought it was Senator
    Johnson.
        Senator Johnson. That's what I thought too.
        The Chairman. You know something? You are right. Senator
    Johnson is next. My apologies.
        Senator Johnson. Thank you, Mr. Chairman. You know, I just
    came from a Budget hearing where the President is presenting a
    $7.3-trillion-a-year budget. This is $3 trillion more than the
    $4.4 trillion we spent in 2019. Astounding. There is not 1
    year, projecting out 10 years, where the deficit is less than
    $1.5 trillion.
        So, we are talking about the tax code, and a quick question
    for all the witnesses, just a quick ``yes'' or ``no.'' Do you
    think our current tax code is simple and rational? Mr. Widmar?
        Mr. Widmar. That is a dangerous question, but I will say
    ``no.''
        Senator Johnson. Ms. Fendley?
        Ms. Fendley. I would agree. It is challenging.
        Senator Johnson. Ms. Janis?
        Ms. Janis. I would have to agree. It is extremely complex.
        Senator Johnson. Ms. Silver?
        Ms. Silver. No.
        Senator Johnson. Mr. Huntsman?
        Mr. Huntsman. No.
        Senator Johnson. So I ran a manufacturing plant for 30
    years. I have made investment decisions and invested millions
    of dollars in plant and equipment, and from my standpoint the
    thing that was most annoying, other than the regulation--
    overregulation--was the complexity of the tax code. I never
    made an investment decision based on tax treatment, quite
    honestly. I mean, when you get right down to the nub, I suppose
    you can take a look at the ROI and determine, well, if I get
    this deduction now, it is going to put me over that limit. But
    generally, I was responding to supply and demand, and looking
    ahead.
        As a student, I took accounting and got an accounting
    degree. And I remember a tax course where one of the tax
    principles was wherewithal to pay. So I guess the point I am
    trying to make in this questioning is, rather than arguing over
    these different treatments economically engineered through the
    tax code--I think we do a terrible job of it, because it comes
    and goes, it creates a high level of uncertainty.
        What I am proposing is, why don't we, rather than reform
    our tax code--all change is not progress, all movement is not
    forward--why aren't we talking about simplifying and
    rationalizing it? Wouldn't that be a better way to approach
    this thing, to take a look at this goal: what is a simple way
    of taxing American business?
        I would suggest a really simple way would be to consider
    cash income taxable income. Then you would not have all these
    issues of R&D tax credits and accelerated depreciation. And by
    the way, it would just be a timing difference, correct? Mr.
    Huntsman, you obviously operate on a global scale. Don't you
    think that would be a rational approach here: simplify the tax
    code, let us tax cash income, and get rid of all this crap? I
    would just like your comment on it.
        Mr. Huntsman. You are getting me kind of just a little bit
    off kilter here. It sounds--it sounds reasonable. Yes, it does.
        Senator Johnson. Oh, it is very reasonable.
        Mr. Huntsman. Okay. I, without having studied----
        Senator Johnson. It is also very doable.
        Mr. Huntsman. Without having studied it, yes. Yes, sir.
        Senator Johnson. But we don't do it because all of a sudden
    you don't have lobbyists coming here every year and having to
    lobby for this tax treatment or the other tax treatment. You
    know, I think it is remarkable--and again, I was not a really
    big fan of the tax act in 2017, 2018. I had to dig my heels in,
    because all we were going to do was cut income taxes for the
    top 5 percent of C corps. You know, great for the C corps.
    Really bad for pass-throughs who have to compete with that. So
    I dug my heels in. In the end, I voted for it.
        But what is not widely known is--because we did not know it
    at the time--what the effective tax rate of C corps was in 2017
    and 2018. It was 21 percent, for both large and small C corps.
    Now, after the tax act, for large corporations the effective
    rate is 10 percent. For small corporations, C corps, it is 14
    percent. So in that act, we actually created disparity between
    large corporations and small corporations. I do not like that
    fact. Plus, with the pass-through provisions expiring in 2026,
    now we are going to have an enormous disparity between the top
    5 percent of C corps versus the other 95 percent of businesses.
        So I guess my appeal to this committee is, let's take a
    look at what we need to do in 2026. Let's simplify and
    rationalize our tax code. You know, income is income. You need
    wherewithal to pay. So let's just tax cash income, and then we
    do not have to worry about all these provisions. We will not
    have all these lobbyists coming in here begging for a
    continuation and totally screwing up their business models.
        Yes, I completely agree with the fact that with all these
    things being temporary, it is very hard to make business
    decisions if you do not know what your tax treatment is going
    to be. So that is basically my pitch. I would like all of you
    to consider it, and I would certainly like the chairman and the
    ranking member to consider what I have been proposing.
        Thank you.
        The Chairman. Thank you.
        Senator Bennet, you are next.
        Senator Bennet. Thank you. Thank you, Mr. Chairman. I would
    like to thank the panel for being here, and thank you for
    holding this hearing.
        My first question is for Anna Fendley and for Mark Widmar.
    Thank you for being here. With the IRA, we passed the most
    significant climate legislation that any country on the planet
    has passed, and because of that bill, the United States is
    better positioned than any country in the world, I think, to
    lead the global transition in energy. The IRA incentives will
    help us deploy a lot more solar, a lot more wind and battery
    projects, and help us add three times the amount of clean
    energy to the grid by 2030. That is all good news from
    Colorado's perspective. Those incentives were also designed to
    help us ensure clean energy supply chains so we can begin to
    wean ourselves off products from China and other countries
    around the world, something the American people want us to do.
        Last summer, I visited Pueblo, CO, which was once the steel
    capital of the West, and it powered our State; it powered our
    country for decades. That community has long felt ignored by
    Washington for good reason. It felt stymied by our inability to
    actually invest at home in our own industries until now. In
    Pueblo, I visited CS Wind, which is now the world's largest
    wind tower production facility. The facility is expanding to
    double its input, and the chairman of CS Wind told us that this
    expansion, Mr. Chairman, would not have happened without the
    tax credits that we passed in the IRA. As a result, the company
    will create 850 new jobs in Pueblo, jobs that pay a good wage--
    a really good wage--and equip workers with the skills for the
    21st-century economy.
        Because of the legislation we passed, for the first time in
    a long time, we are actually outcompeting the rest of the
    world. We are showing the world what it looks like when America
    actually invests in America again.
        So, Ms. Fendley and Mr. Widmar, could you speak a little
    bit about how these clean energy manufacturing tax credits, not
    only for wind but for solar and for batteries, will continue to
    drive clean energy deployment, create good-paying jobs, and
    spur new investments in communities around the economy? How are
    these provisions in the IRA helping us to compete with China?
    You can fight it out. No, I was just kidding.
        Ms. Fendley. Well, I will pick up on your question about
    China. It has been a conversation by most of the witnesses here
    today, and I think China has had a long-term industrial
    strategy on many of these technologies that you are talking
    about. The Inflation Reduction Act, along with the CHIPS bill,
    along with pieces of the Bipartisan Infrastructure Law, are
    industrial policy for the U.S. They are providing some long-
    term policies that manufacturers can take some certainty from,
    that will help us build and deploy here in the U.S. and,
    hopefully, export to the rest of the world.
        Mr. Widmar. Yes. As it relates to growth and adoption of
    solar, it has been a significant catalyst. You know, some of us
    were meeting with a handful of customers a week or so ago, and
    one of our key partners, who is developing about 10 gigawatts
    of solar across the U.S., said he had no issue right now with,
    he referred to it as ``customer acquisition.''
        There is a tremendous amount of demand right now. It is a
    matter of how to best serve that, or what are the constraints
    that we are dealing with right now in order to address the
    underlying market demand? There are issues like grid capacity
    or transformers. Certain equipment today is a little bit more
    challenging in order to meet the requirements of the build
    schedules that we are starting to see, so those are becoming
    some challenges.
        So, the catalyst in the market is strong. The other
    challenge, I would say, is just certainty. With the onslaught
    of the collapse in global pricing for solar modules right now,
    with the excess supply that China has dumped into the
    international markets that have been heavily subsidized by
    their domestic industry and then exported into international
    markets, it is creating some concern right now in terms of the
    ability to deliver against the vision that a lot of people have
    set out to accomplish.
        So that is something that needs to be addressed. And when
    you lack certainty, you lack ability to move investments
    forward through investment committees. And lack of
    understanding of announcements that were made here in the U.S.
    for new manufacturers--you know, First Solar is unique in our
    technology, right? So our technology is thin film. I do not
    have the same constraints of the supply chain that my
    competition does.
        But we all do one thing. We take photons, and we make
    electrons with a semiconductor that is sitting between two
    sheets of glass. That is what we do, and the world of
    electrification cannot happen unless somebody's making photons
    and changing them into electrons, at least enabled through
    solar. So we need the innovation and the capabilities here in
    the U.S. market, to really aspire to accomplish the vision.
        Senator Bennet. Thank you.
        Thank you, Mr. Chairman.
        The Chairman. We have a vote on, and we are going to try
    and get everybody in.
        Senator Tillis is next.
        Senator Tillis. Thank you, Mr. Chairman. I will be brief.
    First, I want to welcome everybody here to the committee, but I
    also have to favor Ms. Silver, who happens to represent a North
    Carolina manufacturer that is only about 25 minutes from my
    house. So thank you all for being here.
        I am glad that we are having a hearing about how tax policy
    can basically improve economic circumstances for everybody. I
    think we proved that in 2017 when we passed the Tax Cuts and
    Jobs Act. There is no question, by any reasonable measure, that
    the economy had an immediate response to it. In fact, I am so
    glad that we did it. It was a partisan maneuver made through
    reconciliation, but thank goodness that the economic activity
    was where it was before we encountered the pandemic.
        Can you imagine if our economic activity had been at the
    rate that it was in 2016? I think it would have been
    devastating, and quite honestly, we would not have had the
    resources, or at least the optimism about future resources, to
    commit the trillions of dollars that we did without paying for
    it when we were passing those bills. We did it solely on the
    basis of the need to address something that no Congress had had
    to deal with for 100 years.
        So, Mr. Chairman--I really appreciate the chair's
    leadership. We have a difference of opinion about how we get
    some of these tax provisions done this year, but I appreciate
    his leadership. In fact, I like him so much I try to coordinate
    my wardrobe to look like yours on hearing day, Mr. Chairman.
    [Laughter.]
        But we have an honest disagreement about timing and
    packaging. I have had several CEOs call me since I stated my
    concerns with the Wyden-Smith bill as it currently stands, and
    they would be CEOs of companies that you all would recognize. I
    let them build the case for me supporting the bill, and I went
    on to say I would consider you to be guilty of malpractice if
    you did not make this phone call, because your job and your
    fiduciary responsibility to your investors, to your employers
    is to maximize your business performance.
        My job is to do the same for the U.S. Government, and so,
    while I understand--and none of these CEOs, incidentally, have
    an opinion on the Child Tax Credit, the $34-trillion, 3-year
    program that arguably, I think, should be scored at $600
    billion over 10 years. They are not taking a position on that.
    They are taking a position on the tax provisions. I have the
    unfortunate circumstance of having to take a position on both,
    and then judging the measure on the whole. On the whole, I
    think that we are making a mistake to move it forward in its
    current form, and I hope that Senator Crapo and Senator Wyden
    get to a point where I do not have to take this position.
        We have a number of bipartisan bills that have been filed--
    supported by Democrats and Republicans--on the tax provisions
    that are in this package. It is a bipartisan package. What we
    do not have is bipartisan agreement on a number of the tax
    provisions that we need to extend next year. I think we have to
    have a fulsome discussion about the entirety of the tax
    measures that need to be in place for us to continue to move, I
    think, to a positive place in terms of economic performance.
    Without that, it is very difficult for me to support the
    package as it is. I think we have to have a discussion about
    whether or not we're setting a precedent on future tax
    provisions, having a payfor. We have not normally done that,
    but we have done that in this bill to the tune of about $34
    billion.
        So what does that mean next year when we are having a
    debate about $2 or $3 trillion to extend the tax provisions
    from the Tax Cuts and Jobs Act? Do we get opposition from my
    Democrat colleagues because we do not have a payfor, because
    most of us believe dynamic scoring will prove, as it did in
    2017, you create economic activity and cover it.
        So, the reason I do not have a question for any of you is,
    what I wanted to do is come here and explain why if you want an
    argument, you've got to pick another subject on the tax
    provisions. But I alone do not have the luxury of only
    considering the tax provisions. I have to consider Child Tax
    Credit policy, and I want to provide help to people who are
    struggling. I am not sure that this is the best way to do it. I
    am not sure if 91 percent of it being fully refundable is the
    smartest way to do it to create a sustainable policy for people
    who need help.
        I look forward to working with the chair, because I
    consider him a good chair, and the ranking member, to hopefully
    get to a good place on this bill. Thank you, Mr. Chairman.
        The Chairman. I thank my colleague. Too much for me to
    respond to, and we've got a lot of colleagues waiting.
        Next in order of appearance would be Senator Warren.
        Senator Warren. Thank you, Mr. Chairman.
        So, under President Biden, the U.S. economy has added
    80,000 manufacturing jobs, partly because of tax incentives for
    semiconductor and clean energy manufacturing. But some tax
    breaks do not actually incentivize job creation. They are just
    corporate handouts.
        Right now, Congress is considering a bipartisan tax package
    that includes two big pieces: number one, tax breaks for giant
    corporations championed by Republicans; number two, a boost to
    the Child Tax Credit to help the poorest families buy diapers
    and school shoes, which Democrats are fighting for.
        Let's take just one of the corporate tax breaks that
    Republicans are demanding: a more generous deduction for
    research and experimentation, or R&E. This break goes mainly to
    the largest corporations, subsidizing investments they would
    make anyway, and here is the kicker: Republicans want to make
    this break retroactive, subsidizing decisions that giant
    corporations made years ago.
        Ms. Fendley, you represent the United Steelworkers, who
    know a thing or two about American manufacturing. Is there any
    evidence that giving giant corporations billions in retroactive
    tax breaks for investments made years ago will incentivize
    investment and create jobs?
        Ms. Fendley. I am not aware of any.
        Senator Warren. Yes. Well, they do not have a time machine,
    so it is pretty hard to figure out how this would change
    things.
        So let's take a look at how these tax giveaways--who is
    really being benefited here. Ms. Fendley, which companies would
    be the largest benefactors of this tax break, and how much
    would they receive from the R&E investments that they made back
    in 2022?
        Ms. Fendley. My understanding is that the tech industry
    would largely be the benefactors, in the order of billions of
    dollars. I do want to underscore, for manufacturers, the
    importance of some of these business credits, right? The
    innovation the steel industry has been able to do to make
    lighter, stronger, more formable steel has been really helpful
    to people. But that is separate from what I think you are
    talking about.
        Senator Warren. Well, all I am talking about is, as I look
    at the numbers now, it is two companies that would receive $13
    billion--that is billion with a ``b''--in terms of tax breaks
    here in 1 year, and that is more than we spend in the entire
    year on all Federal child-care funding for the entire country.
        At the same time that Republicans push for retroactive
    corporate handouts, some are fighting against a modest
    expansion of the CTC called ``the lookback,'' and that would
    ensure that when a working family has a temporary drop in
    income, their CTC benefit does not also drop at the same time.
        So, Ms. Fendley, let me ask you about this. Could this
    happen to a steelworker, that they or their spouse could lose
    their job or have to cut back on hours--and the ultimate
    question is, should a family get less help when their income
    has gone down, which is what this proposal would do?
        Ms. Fendley. I think the short answer is ``no,'' right?
    When a family is going through a hard time, maybe the hardest
    time, they should not get less help. I think for our union,
    getting it right on the Child Tax Credit is incredibly
    important, and we strongly urge the Senate to do its work here.
        Senator Warren. I appreciate that, and I agree with you. We
    do need to do our work. You know, I think we need to be clear
    about what is going on here. Republicans are outraged about
    modest help for our most vulnerable children, at the same time
    that they are shamelessly fighting for billions of dollars in
    retroactive tax breaks for a handful of giant corporations. I
    believe that is wrong, and we should not let it happen.
        Thank you, Mr. Chairman.
        The Chairman. I thank my colleague.
        Senator Hassan?
        Senator Hassan. Thank you very much, Mr. Chairman, and
    thanks to our witnesses for being here. I want to thank the
    chair and Ranking Member Crapo for holding this important
    hearing today. It is very well-timed.
        In January, the House overwhelmingly passed, on a 357 to 70
    vote, a bipartisan tax package that would boost U.S.
    manufacturing through the tax code. This bipartisan package
    would restore full and immediate deductions for R&D
    investments, an effort I have long worked on with Senator
    Young, among other major tax priorities for our manufacturers
    and our small businesses. In addition to supporting our
    domestic manufacturing sector, the bipartisan tax package would
    also cut taxes for hardworking families through the Child Tax
    Credit.
        The package is a bipartisan win-win, and the Senate needs
    to pass it as soon as possible, before we reach the end of the
    tax filing season in April. So I urge my colleagues to come
    together to clearly identify a path forward for this bill that
    is so important to small businesses--and I will emphasize that
    point: thousands of small businesses across the country, and
    families all across the country.
        So I am grateful to our witnesses today, because each
    brings to the table a unique understanding of the importance of
    passing this bipartisan package. I am going to start with a
    question to you, Ms. Silver, because you are a small business
    owner, as I understand it.
        In your opening statement, you spoke about how incentives
    for research and development can help small and mid-size
    manufacturers like your business. So, just following up a bit
    on what Senator Wyden was asking you questions about, can you
    explain, from your perspective, how the bipartisan tax package
    would help small manufacturers invest in their communities and
    create jobs?
        Ms. Silver. Sure. Thank you for the question. So,
    specifically about R&D--I have an example of that. I have been
    doing business with a software company that provides software
    solutions for the manufacturing industry. They have a business
    in Texas. I have been doing business with them for 17 years,
    and it is what we run our entire company on.
        And they were dramatically affected with the change in the
    R&D tax provisions expiring. They created less jobs, they had
    less liquidity in their company to grow, to innovate, and
    therefore the product that I use every day to run my business
    was affected. So, like I said in my testimony, manufacturing is
    a team sport, and so it does not matter the size, the
    structure--if you are a C corporation, a pass-through entity
    like mine--we are all affected by these tax provisions. And
    when my large manufacturing customers do well, we do well.
        Senator Hassan. Gotcha. Thank you very much.
        To Ms. Janis, first of all, just a ``thank you'' to onsemi
    for having a wonderful facility in Hudson, NH. We are very
    proud of the work you do and grateful for the jobs that you all
    have created there.
        You discussed in your opening statement how other countries
    are starting to outpace the United States in R&D. China, for
    example, offers Chinese businesses a super-deduction of up to
    200 percent of their R&D costs. Again, following up on Senator
    Wyden's question, how would passing the bipartisan tax package
    help U.S. manufacturers outcompete their counterparts in China?
        Ms. Janis. You are correct, Senator Hassan. China, along
    with other nations, provides a 200-percent deduction for R&D
    expenses. So, this means that Chinese companies can deduct $200
    for every $100 spent on innovation. U.S. companies face
    capitalization rules that hinder immediate expensing for R&D,
    especially R&D salaries and wages. To enhance U.S.
    competitiveness, as I recommended before, I strongly recommend
    that Congress make immediate R&D expensing permanent, to
    provide businesses with the clarity and assurance with the
    associated costs on R&D projects.
        Senator Hassan. Thank you.
        And finally, to Ms. Fendley: the bipartisan tax package
    would not only boost U.S. manufacturing as we have just been
    talking about, it also cuts taxes for working families through
    the Child Tax Credit, and helps increase affordable housing
    through the Low-
    Income Housing Tax Credit.
        Could you please talk about how the bipartisan tax bill
    would benefit both businesses and hardworking families?
        Ms. Fendley. Sure. Thank you for the question. We have
    talked a lot about how it would impact businesses, which
    obviously creates long-term stability for working families. But
    of course the Child Tax Credit is so important to working
    families, particularly those at the margins. I think it is
    incredibly important that we look at the most expansive version
    of that that we can, to help lift many, many children out of
    poverty.
        Senator Hassan. Understood, and this is a good compromise
    bill. Thank you very much.
        The Chairman. I thank my colleague. I am looking around the
    room, and I see four champs of the research and development tax
    provision. I cannot just call a vote among the five of us, but
    I can dream.
        Senator Cortez Masto?
        Senator Cortez Masto. Thank you, Mr. Chairman. Thank you
    for this great discussion. I appreciate all the panel members
    and the comments, and the written comments.
        Ms. Fendley, let me start with you, and thank you for
    recognizing the importance of the 45X manufacturing tax credit
    in your testimony. Congress's intent with this credit was to
    provide incentives for businesses to build domestic
    manufacturing capacity for energy components to reduce reliance
    on China, Russia, and other hostile nations. That's why it's
    key that we included critical minerals in 45X. As we all know,
    China dominates the market for many minerals essential for
    defense and energy.
        I know my home State of Nevada has the capacity to mine and
    process many of the critical minerals that we need, and that is
    why I have been concerned with Treasury's proposed rule for
    45X, which excludes mineral extraction as a credible cost. Now,
    I know USW has also raised the same concern. Would you please
    expand upon this a little bit more, and explain to maybe some
    of my colleagues and those who are watching, why this is so
    important?
        Ms. Fendley. Sure. I appreciate the question. Mining is
    going to be critically important to this Nation as we move
    forward in our energy economy. And as the largest mining union
    in the U.S., we want to make sure that we are passing policies
    that will enable that.
        You are right that we sent some more comments to Treasury
    that extraction materials cost should be part of 45X. That
    really has to do with the high cost of standing up a mine or a
    processing facility and the threats that you outlined from
    China. There is so much potential for the mining industry at
    this point, not only because of what we have in the ground, but
    also because of the potential for innovation. We are seeing all
    kinds of minerals being extracted from waste for the first
    time. So I think that this is a really exciting space, and I
    appreciate you highlighting it.
        Senator Cortez Masto. Thank you, and thank you for your
    comments. Mr. Chairman, I would like to submit for the record
    my comment letter on 45X, signed by eight other Senators, as
    well as two industry comment letters on the same subject.
        The Chairman. Without objection, so ordered.
        [The letters appear in the appendix beginning on p. 64.]
        Senator Cortez Masto. Thank you.
        Ms. Janis, thanks so much for your testimony regarding the
    importance of the semiconductor industry to American security.
    Listen, whether we like it or not, China is enacting policies
    to dominate certain industries, and there has to be a response
    from the U.S. and our allies. I am proud Congress came together
    to help ensure that the U.S. maintains its advantage in chips.
    But there is another area which has not gotten as much
    attention, and that is rare earth magnets. These are essential
    components of our defense systems, and yet China has a near
    monopoly on magnet manufacturing.
        Now, I have a bipartisan bill with Senator Mullin to
    provide tax incentives for domestic magnet manufacturing, and
    the bill was included as a bipartisan recommendation from the
    House Select Committee on China. Ms. Janis, can you speak to
    how important it is to see an incentive in these key industries
    when you are competing with China, which is providing massive
    subsidies and other forms of support?
        Ms. Janis. Yes, yes, the importance of having tax
    incentives in the area of semiconductors is extremely
    important. We need to drive all of that production that went
    offshore, we need to drive it home onshore in order to create
    supply chain resiliency, as well as give our customers
    assurance on and consistency on their products.
        Senator Cortez Masto. Thank you, and let me add--and I just
    so appreciate this conversation. There is more to be done, and
    let me ask all of you. As we are looking at these tax
    incentives to drive industry in a certain direction, to clean
    energy, to build out, bring manufacturing back here, one of the
    things is, we do not want to go backward. We do not want to
    repeal what we have already done.
        But where are the things that we should continue to focus
    on? Are there gaps in that supply chain? Are there gaps
    somewhere that we are not thinking about that we need to
    incentivize? To me, I am hearing about critical components that
    are necessary for this clean energy economy if we want to bring
    the manufacturing here. But that is just not happening yet
    because there is no incentive to build out.
        I am curious of your thoughts, if anybody has any thoughts
    on that.
        Mr. Huntsman. Senator, thank you very much. I do not
    believe that we are being at all realistic. We do not make
    chips in this country. We do not mine in this country without
    the chemical industry. You eventually dig a hole in the ground,
    but you've got to process these chemicals. You've got to do
    something with them, and you do not do that without chemistry,
    and you do not do that without new chemistry, without cleaner
    chemistry that can eliminate waste in the byproducts and so
    forth.
        And while we sit and we wait for years and years for the
    EPA to get approval on this chemistry, our chips and our mining
    industries, they can go overseas and build these facilities and
    do it cheaper. And so it is not just the end product and it is
    not just the beginning, but it is the entire supply chain that
    we need to be focused on. How do we do it efficiently, how do
    we do it cleanly, and how do we do it profitably?
        Senator Cortez Masto. Thank you. I know my time is up.
        Thank you, Mr. Chairman.
        The Chairman. I thank my colleague.
        Next is Senator Brown.
        Senator Brown. Mr. Chairman, thank you, and I know we have
    a vote coming up, and I know Senator Daines is next. I thank
    you for a really, really, really important hearing. This really
    matters; welcome very much. Thanks for being here.
        Mr. Widmar, I want to first start with you, and then I want
    to move to the Steelworkers and what they are doing.
        First Solar was founded 25 years ago in the glass city,
    Toledo. Much of the development of glass in this country was in
    Toledo. Toledo still leads; the University of Toledo took that
    science and made it even better. And what you have done with
    First Solar--I think that is the reason for your location
    there. Twenty-five years ago, founded; now with three factories
    in Ohio.
        They have made panel wafer cell modules under one roof
    during the company's entire existence. They have grown and
    innovated in the face of Chinese competitors, who receive
    massive state subsidies, who engage in the theft of
    intellectual property, who wantonly--and I think wantonly is
    the right adverb--violate our Nation's trade laws.
        First Solar's manufacturing activity in Ohio, along with
    its national supply chain, as you all know, supported 16,000
    jobs, created $1.6 billion with a ``b'' in labor income. Mr.
    Chairman, I would like to enter into the record a recent report
    demonstrating First Solar's tremendous economic impact in my
    State and all over the country.
        The Chairman. Without objection, so ordered.
        [The report appears in the appendix beginning on p. 45.]
        Senator Brown. Thank you, Mr. Chairman.
        The Inflation Reduction Act, as you know, included new tax
    incentives to support American manufacturing and the
    development of genuine domestic--underscore domestic--supply
    chains for growing industries like yours. Tell us about the
    importance, Mr. Widmar, of the 45X Advanced Manufacturing
    Credit.
        Mr. Widmar. Yes. It is going to be transformational to
    enable crystalline silicon innovation that we largely have been
    without for most of those 25 years. First Solar has innovated
    in new technology that we were able to get to scale, and
    innovate in a way that creates an advantaged technology in the
    marketplace that is going to enable the world of
    electrification that we all envision in front of us.
        The world of electrification, as I alluded to in a prior
    comment, starts by taking photons and making electrons. It
    cannot be a one-horse race. We need to have capabilities here
    in the U.S. that have other types of technology, whether it is
    existing crystalline silicon technology or evolution toward new
    technologies that could evolve over the next several years. The
    manufacturing tax credit is going to be an enabler of doing
    that. That is going to allow companies to make investments,
    allow them to scale, and allow them to compete, right?
        We still need to focus on how to ensure a level playing
    field, but it is clearly going to allow them to compete and to
    scale, and by the time, if the IRA runs its course, I think we
    are going to have a thriving domestic industry, and we will be
    a technology leader here in the U.S.
        Senator Brown. Thank you, and thanks for the conciseness of
    that answer.
        Our tax code is supposed to support American manufacturing
    in building out the domestic supply chain that should not be
    exploited by the Chinese Communist Party. I am working with
    colleagues, as you know, on both sides of the aisle, to tighten
    the restrictions of the 45X credit to ensure that taxpayer
    money is not going to Chinese companies and other Foreign
    Entities of Concern. We have passed restrictions on Federal
    support going to Foreign Entities of Concern on a bipartisan
    basis. Would you support adding these so-called FEOC
    restrictions on the 45X credit?
        Mr. Widmar. Absolutely, yes. I think it is nonsensical for
    an industry that is heavily subsidized domestically then to
    benefit from U.S. taxpayer dollars to fund incentives here in
    the U.S. It does not make any sense to me.
        Senator Brown. And how do those restrictions--how will that
    help specifically?
        Mr. Widmar. So, what I am most concerned about right now is
    that the decisions that are being made right now on the
    manufacturing that is coming into the U.S., I think are
    temporary in nature. It is basically module assembly. It is not
    bringing any real technology advancements that we need here
    into the U.S., and it is done in such a way that all the tools
    that are being sent from China, the construction in some cases,
    are just leased buildings, they are not investing in the
    building site. It is something that can easily be turned down
    and walked away from were the IRA to expire.
        And by doing something that is enduring, that says now we
    are going to invest in U.S. companies--we will make those
    capital investments with a view of making this enduring and
    sustainable--I think will help us achieve the intent of what
    the IRA was set out to do, which is to make us, as a Nation, a
    technology leader in renewable energy.
        Senator Brown. Thank you.
        I will shift in my last minute to Ms. Fendley of USW. Your
    testimony points out the importance of a comprehensive tax and
    trade agenda. You know in February the International Trade
    Commission ruled against an antidumping and countervailing duty
    case brought jointly by the United Steelworkers and by
    Cleveland-Cliffs, which makes the cleanest steel in the world--
    and I would add, tinplate products produced at the facility in
    Weirton, WV. Talk about why we need stronger trade enforcement
    as a critical piece of our domestic economy strategy in the
    last few seconds. Thank you.
        Ms. Fendley. Sure. I will just say that none of these
    policies live by themselves. They are all interlocked, and no
    other organization has been a supporter or party to as many
    antidumping cases as we have. We know that trade has been an
    important factor here. We would urge Congress to update our
    trade enforcement laws with the Leveling the Playing Field 2.0
    Act.
        The other factor here for our members in Weirton, who are
    going through possibly the worst time in their lives, is they
    need Trade Adjustment Assistance, which Congress has yet to
    reauthorize.
        The Chairman. Thank you, Senator Brown. Very important
    points.
        Senator Daines?
        Senator Daines. Mr. Chairman, thank you.
        I will tell you, as somebody who has spent most of my
    career in the private sector, the foundation of businesses back
    in Montana is pass-through businesses. These pass-through
    businesses in Montana are 95 percent of all businesses. They
    employ the majority of workers in our country. In Montana, just
    in terms of employment, not just entities, 75 percent of
    private-sector employees come through pass-throughs. Back in
    2017, we placed these businesses on more equal footing with
    their C corp counterparts by providing them a 20-percent tax
    deduction on qualified business income.
        These businesses are absolutely critical to our
    communities. If you look at data in terms of when you come out
    of a recession, it is the pass-throughs that typically take the
    lead on rehiring and growing and so forth faster than the C
    corps. That is why I am proud to be leading the bill that would
    make this deduction permanent. The Main Street Tax Certainty
    Act protects tens of millions of small businesses, allowing
    them to keep more of their profits, create more jobs, and
    strengthen the economy. The thing is, the core word in
    capitalism is ``capital.'' This allows these businesses to have
    more capital to invest, to let these businesses decide in the
    free market society where to make these capital investments,
    versus the government taking more of those dollars and
    allocating them in this city called Washington, DC--and most
    voters understand we are not the best stewards of those
    resources.
        If we do not act to make this provision permanent, these
    businesses are facing an immediate 20-percent tax hike at the
    end of 2025. That is coming very soon. President Biden made it
    clear in his State of the Union address that he wants to
    increase taxes on Americans to further his agenda. In fact,
    just yesterday President Biden released a reckless budget
    riddled with tax hikes, including an increase in taxes on pass-
    through businesses. Under this administration, small businesses
    have already fought record levels of inflation and economic
    uncertainty. The last thing we need to do is create more
    uncertainty with the sunsetting of the 2017 tax as it relates
    to pass-throughs, and an increased tax burden of more than 20
    percent.
        Ms. Silver, in your testimony you shared that you benefit
    from that 199A deduction. Could you provide some of the ways
    that your company reinvests the money it saves from this
    deduction?
        Ms. Silver. Thank you for the question, Senator. So that is
    one of my favorite things to do, to reinvest in the company,
    because that is what it is all about. And I talked earlier
    about investing in machining technology and equipment, advanced
    robotics, passing along those savings to a customer.
        But I would like to highlight another story. Another
    example is, a couple of years ago, we were able to take our
    profits and create and launch a high school internship program.
    We call it ``Opportunity Knocks.'' It is a partnership with our
    local high school. Seventy percent of the students there are
    minority; 100 percent are in economically disadvantaged
    situations, and these students have never been exposed to
    manufacturing before.
        They come over for 4 days a week. They are on the shop
    floor with their mentors. They are job shadowing. The fourth
    day, they are in our conference room, more of a classroom
    setting, where they go through the ``craftsman with character''
    curriculum, where we discuss things: virtuous skills, things
    like leadership, team work, communication. And that has been
    absolutely impactful, not only for them--it has been a tipping
    point for recruitment and retainment in our machining skilled
    trade, but it has also just been so impactful to watch men and
    women who have been in manufacturing for 30 years be able to
    pour into these students. And then also for the students to try
    on manufacturing, see if it is something they like.
        I have a student right now who is going to graduate in May;
    very bright. His parents immigrated here from Mexico, his dad
    is a bricklayer, and he loves machining, and he is going to
    continue on with us and stay full-time. I have another student
    who graduated last year who is now in our certified
    apprenticeship program.
        So in addition to that, I went out and bought a piece of
    capital equipment last year because I realized, how am I going
    to do training and job shadowing without a piece of equipment
    to train on? So we actually bought a piece of expensive capital
    equipment to not have that in our production schedule, so we
    can actually train on it as well.
        Senator Daines. And so, what you have just demonstrated too
    is a problem we are trying to solve in this country, in terms
    of more manufacturing here in America. Check that box. And
    second, workforce development, check that box as well, because
    you had this additional capital to invest. It works. Thank you
    for those comments.
        I want to, as I am wrapping up here, talk about the Federal
    estate tax. I think it is one of the most immoral taxes in
    America. Look at the OECD. So from a private-sector career, I
    spent a lot of time managing operations around the world.
        I think maybe sometimes it is a surprise when you realize
    that 40 percent of OECD countries do not have a death tax. I
    remember when I was in Australia doing business in Sydney--we
    had an office there selling American software. I remember I
    said, ``We have this thing called a death tax in America,'' and
    they said, ``What in the world is that? Is it something that
    Americans invented?''
        Forty percent of OECDs do not have any estate tax. When
    someone loses a loved one, they should not have to worry about
    the family business too. In addition to placing more burdens on
    already grieving families, the death tax is a direct threat to
    agriculture, and that is our number one economic driver, the
    farms and ranches in my great State of Montana.
        As lawmakers look to the expiration of the 2025 tax cliff,
    it is really important we avoid any changes that would
    introduce more uncertainty, because I will tell you, who
    benefits from all this are tax lawyers and estate planners
    trying to game out what is going to happen here in Washington,
    DC. Let's allow these families to continue to focus on their
    businesses and not having any of these elaborate estate plans
    because they do not know what is going to happen here in
    Washington, DC.
        Ms. Silver, as a third-generation family-owned company,
    could you share what a change to the estate tax exemption would
    do to companies like your own? And I know we are about out of
    time, so I just need a quick answer from you.
        Ms. Silver. Okay. Just to talk from my personal life, so my
    husband passed away of brain cancer, and he was the sole
    shareholder/owner of Ketchie. So upon his passing, I became
    president and owner. Thinking back then, I do not know if it
    would have made sense. I don't know, even if it did make sense,
    and I had the risk tolerance for it, if I would have been able
    to pay a tax liability, because so much of our assets are not
    liquid. I run a very capital-intensive business, so the impact
    is huge, and other small manufacturers should not be faced with
    these decisions.
        Senator Daines. Yes; thank you. I am sorry for your loss as
    well. Thank you for your comments.
        The Chairman. Yes. You can only imagine what it is like for
    a spouse to walk into a situation like that, where husband and
    wife have been working on it together for years, and then
    suddenly their future is shattered. So we all think about that.
        Now, under normal circumstances, I would either shoot
    baskets or something, in order to stall for Senator Young for a
    couple of minutes, or find some other diversion. But I have one
    other question, and then we will wait for Senator Young in all
    seriousness.
        The House of Representatives actually voted to repeal the
    IRA altogether. What would be the impact on your work if that
    was to pass the Senate and it was to vanish? Maybe we start
    with you, Mr. Widmar, and you, Ms. Fendley, while we are
    waiting for Senator Young.
        Mr. Widmar. So, from our standpoint, if the IRA were to be
    repealed in its entirety, it would basically bring us to a
    complete stop, because we would not have clarity on the policy
    environment and how to continue to operate and grow our
    business and continue to invest in R&D. We need that long-term
    vision and understanding to make informed decisions today.
        The Chairman. Ms. Fendley?
        Ms. Fendley. I completely agree. The IRA is part of our
    industrial policy. It provides both supply-side and demand-side
    levers to help manufacturers have certainty moving forward,
    making decisions moving forward. It would frankly be
    devastating if that was repealed, not only for manufacturing,
    but the IRA includes other important provisions like letting
    Medicare negotiate drug prices for the first time. That will
    really impact seniors' pocketbooks in a positive way. So you
    know, we would certainly fight back on a repeal effort.
        The Chairman. We will also be looking at health care some
    more. I was codirector of the Oregon Gray Panthers for about 7
    years, back when I had a full head of hair and rugged good
    looks, and we started talking about those kinds of drug policy
    reforms, and now we are finally reaping the fruits of it. We
    are seeing, for example--in this room, we drafted the provision
    that I call the price-gouging penalty, where if the companies
    raise their prices over inflation, they pay a penalty.
        But he is worth waiting for. Senator Young is here, and I
    have appreciated all his leadership, particularly when you
    looked across the room and you saw Senator Young and Senator
    Hassan. They have been the bipartisan leadership here on R&D,
    and we appreciate it.
        Senator Young?
        Senator Young. Well, I thank the good chairman for his
    leadership on this and other issues.
        I know that some of my Republican colleagues have
    highlighted the impact of the 2017 Tax Cuts and Jobs Act. It
    has bolstered the U.S. economy. It has encouraged U.S.
    innovation, and as we have heard today, these progrowth tax
    policies have driven growth in not just the manufacturing
    sector, but in countless other sectors as well.
        But today I want to focus on another important piece of
    legislation that has increased U.S. global competitiveness and
    benefited the U.S. economy, and there is pretty significant
    bipartisan support here in Congress but also back home, and it
    is called the CHIPS and Science Act. It is a piece of
    legislation that Senator Schumer and I saw through the
    congressional process. It was signed into law. It authorized
    $53 billion worth of incentives for private companies investing
    in semiconductor manufacturing, R&D, and workforce development.
    Since the bill was passed in 2022, the semiconductor industry
    has announced over $240 billion in private-sector investment.
        Now, almost none of the public money has even flowed, and
    we have seen $240 billion unlocked in the production of both
    foundational and leading-edge microchips. The CHIPS Act, as we
    call it, also established the Microelectronics Commons program,
    under which my home State of Indiana has been designated the
    leader of Silicon Crossroads Microelectronics Commons Hub. This
    regional partnership was designed to accelerate the prototyping
    of advanced microchips. The Hub will bolster private
    investments that will secure our country's advantage in
    leading-edge semiconductor design--of course, very important to
    our national security. This and other partnerships have already
    drawn more than $2 billion in publicly announced investments
    into the State of Indiana alone. So, great things are being
    made in Indiana, thanks to the passage of the CHIPS Act.
        And I would like to use that lead-in to ask Ms. Janis to
    start. Can you please share how you've seen the CHIPS and
    Science Act empower chip manufacturers, like onsemi, to invest
    in emerging technologies in the United States?
        Ms. Janis. Thank you, Senator Young. onsemi is investing in
    the next-generation development of image sensors and analog
    mixed-signal semiconductors at our domestic manufacturing
    facility in East Fishkill, NY. We plan to qualify and
    manufacture at this facility starting in 2025. Remaining cost-
    competitive is key in delivering these onshore production
    capabilities. This will provide supply assurance to onsemi's
    customers, who currently depend on foreign production sites,
    and will enable automotive and industrial-grade products with
    increased performance in automation technology.
        Senator Young. Thank you for that, Ms. Janis. And for those
    who are in the semiconductor design and production business
    like onsemi, you know that we cannot develop and strengthen our
    domestic chips production without a prepared and ready
    workforce. Indiana's esteemed colleges and universities are
    ensuring that not only are great technological advancements
    made in Indiana, but the innovators and leaders of tomorrow are
    made there too.
        As Secretary of State Blinken said when he came and visited
    the State of Indiana not too long ago, we have a talent fab in
    Purdue University, and in Ivy Tech Community College. Purdue in
    fact has established its Semiconductor Degrees Leadership Board
    to solicit input and guidance from industry leaders, to ensure
    that Purdue graduates have the skills they need to succeed in
    their careers, and onsemi is a member of that board. So thank
    you, Ms. Janis.
        Ms. Janis, can you please explain how university-industry
    partnerships like the Semiconductor Degrees Leadership Board at
    Purdue improve worker readiness and allow companies like onsemi
    to continue innovating?
        Ms. Janis. Absolutely. To onsemi, workforce development is
    critically important. onsemi actively recruits top talent, of
    course, wherever it can be found. We have an active college
    recruiting program with 11 preferred schools including Purdue.
    This consortium includes Penn State, Texas A&M, as well as
    Prairie View A&M University and Howard University, two HBCUs.
        onsemi has committed more than $8.5 million to university
    programs, and is actively working with universities in the U.S.
    on workforce development. Last year in STEM education grants,
    onsemi awarded over $1.3 million to help students in
    underserved communities, focusing on semiconductor awareness at
    middle schools.
        Senator Young. Thank you, Ms. Janis, to you and to onsemi
    for that testimony today. Thanks again to our witnesses.
        I see I am out of time. Before I pass it back to the
    chairman, I would just like to go on record, once again, and
    indicate the importance from my eyes that we restore
    businesses' ability to fully and immediately deduct the expense
    for research and development costs under section 174 of the tax
    code.
        I know the chairman has helped negotiate a deal that would
    include that provision, and I will submit questions for the
    record on this for the benefit of our witness.
        The Chairman. Well, I thank my colleague. And before you
    go, I think, Senator Young, your name is now synonymous with
    innovation. If you look at your agenda and what you have done
    with chips and competition with China with respect to AI, I
    just so appreciate it, because I think that, as we look at tax
    policy, tax policy is really about innovation and fairness.
        Those are the two most important kind of ideas, and I am
    just going to say, as I close today, that I want to touch on a
    couple of points with respect to what we are about to vote on,
    and put in the record some nonpolitical material.
        The Joint Committee on Taxation is the group that we use
    around here to do objective, nonpolitical analysis. And we
    wanted them particularly to look at this issue of what our work
    is going to mean for work generally, because some of those who
    have criticized this say it is going to discourage work, that
    it is somehow going to cause people to walk out on the
    workforce and just see if they can get $1,000 or $1,500 or
    something, and then maybe they will jump back into the
    workforce some other time.
        The Joint Committee on Taxation rejects this argument that
    our bill will discourage work. They say, and I quote, ``The
    proposed expansion of the Child Tax Credit on net increases
    labor supply.'' That is the view of people who are not trying
    to grind a political axe and are not saying, well, we are
    Democrats or Republicans. That is what they are saying, and I
    am going to ask unanimous consent to put the entire document
    into the record.
        [The report appears in the appendix beginning on p. 106.]
        They go on to talk about whether the sample size is the
    right size and the like. But they have been specific with
    respect to--they do not believe that this will discourage work.
        And what I take out of here, because I listened to
    everybody, haven't budged for 2 hours like you--thank you very
    much, every one of you--is witnesses representing communities
    across the country have said specifically--because I asked you,
    and other colleagues did as well--you said it would be bad for
    your businesses and your workers to postpone this legislation,
    the Tax Relief for American Families and Workers Act.
        There was no ambiguity in that. You all said it would be a
    mistake, a mistake for workers and businesses. The reality is,
    we know we are going to have a big, big tax debate in 2025.
    Senator Young and I have talked about it, and everybody is
    going to go at it, and that is what our system of government is
    all about.
        But the question becomes, are we going to harm businesses
    and families and workers like yours when we have a bipartisan
    bill that got so many votes in the House of Representatives,
    that when people read it initially, Senator Young, they thought
    they had read the wrong number. They thought that maybe there
    was a mistake in the number. You do not get 357 votes for
    getting a soda at this point.
        So you have really, I think, been a very important
    contributor to this debate, and as long as I am in public
    service, I am going to try to work as hard as I can with
    Senators like Todd Young of Indiana, because I think if you are
    innovating and you are working to try to find common ground,
    that is what public service is all about.
        So, thank you all for giving us a chance to get this input,
    get it on the record as we move to the final efforts to try to
    get this passed and passed quickly, a bipartisan piece of
    legislation. Everybody gives speeches about being bipartisan,
    gives speeches about research, and competing with China. We are
    going to give them a chance to have that opportunity.
        With that, I thank you. We are adjourned.
        [Whereupon, at 12:31 p.m., the hearing was concluded.]

                                A P P E N D I X

                  Additional Material Submitted for the Record

                                  ----------

                       Submitted by Hon. Sherrod Brown,
                            a U.S. Senator From Ohio

                        FIRST SOLAR: US ECONOMIC IMPACT

    The Value of American Vertically Integrated Solar Manufacturing at
    Scale

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    INTRODUCTION FROM MARK WIDMAR

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    .epsSince our founding 25 years ago, First Solar has invested in
    America, building our first manufacturing facility in Perrysburg, Ohio
    in 1999 and setting ourselves on the path to achieving 14 gigawatts of
    annual nameplate vertically integrated manufacturing capacity across
    the United States by 2026.

    Today, First Solar is unique among the world's largest solar
    manufacturers for being the only US-headquartered company and for
    competitively producing advanced thin film photovoltaic (PV) solar
    panels at a scale unparalleled anywhere in the world. Our proprietary--
    and uniquely American--thin film solar technology was developed and has
    evolved in labs in California, Colorado, and Ohio. It is the world's
    second-most common PV semiconductor after crystalline silicon and is a
    significant enabler of the utility-scale solar fleet in the United
    States.

    Each of our factories manufactures advanced thin film solar panels
    using a process that integrates the production of wafers and cells in a
    single process that transforms a sheet of glass into a fully functional
    solar panel in approximately 4 hours and under one roof.

    We are expanding our American footprint to an unprecedented level.
    Between 2016 and 2026, we expect to have invested approximately $4
    billion in manufacturing and research and development facilities in the
    United States. Between 2024 and 2026, we anticipate that our three
    operating factories in Ohio will be joined by new facilities in Alabama
    and Louisiana to make up a 14 GW American manufacturing footprint.

    Later this year, we plan to commission the largest PV research and
    development innovation center outside of China, which will form part of
    our Ohio campus and accelerate the cycles of innovation needed to
    ensure that American innovation drives the energy transition not just
    here at home but globally.

    And we are not just innovating and manufacturing in America. We are
    sourcing our raw materials from across the country. In 2019, we put
    into place a strategy that would see us localize our value chains,
    setting into motion the changes that allowed us to source materials and
    services from large, medium, and small businesses across the US.

    Today, our American-made solar panels are produced with American-made
    glass and steel. The steel value chain that serves our Ohio
    manufacturing footprint is located within a 100-mile radius of our
    factories, and we are one of the largest buyers of American-made float
    glass, consuming approximately 15% of the country's capacity.

    Every day, we go to work making solar panels to support America's
    energy security and cleantech supply chain resilience, helping ensure
    that our country's energy future is not dependent on China.

    And we are enabled by thousands of hardworking people across the
    country: soda ash miners in Wyoming, silica miners in Michigan, copper
    miners in Utah, steelworkers in Alabama, Louisiana, and Ohio,
    glassworkers in Illinois, Ohio, and Pennsylvania, woodworkers in
    Indiana, truckers, railroad workers, and many more. With these indirect
    and induced jobs forecasted to pay an estimated average salary of over
    $83,000 per year in 2026, our investments are providing American
    workers with an opportunity to earn happiness.

    This is the real value of solar technology that is made in America, and
    not simply assembled here using imported components. This is the real
    value of American Solar.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    And while we know that our investments are enabling jobs and
    prosperity in places such as Lawrence County, Alabama, Iberia Parish,
    Louisiana, and Crawford County, Pennsylvania, we recognize the need to
    quantify the real extent of our contribution to the US economy.

    This comprehensive analysis, conducted by the Kathleen Babineaux Blanco
    Public Policy Center at the University of Louisiana, Lafayette, maps
    First Solar's impact on America in meaningful terms: jobs, economic
    output, and value created in 2023 and forecasts for 2026 when we expect
    to achieve 14 GW of annual nameplate capacity across the US.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    The data, unique to First Solar and a direct result of our
    operating model, which currently has no parallel in the solar
    manufacturing industry, creates yet another differentiator that further
    separates us from the competition.

    It also confirms just why we have earned the right to call ourselves
    America's Solar Company.

    Mark Widmar
    Chief Executive Officer
    First Solar, Inc.

    EXECUTIVE SUMMARY

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Founded in 1999, First Solar is an American manufacturer of solar
    modules that is unique within the industry as having both a
    headquarters and large-scale manufacturing based in the United States.
    The company employs a unique, fully vertically integrated manufacturing
    process, enabling the transformation of raw materials and components to
    a finished module in approximately 4 hours.

    First Solar's thin film photovoltaic semiconductor further
    differentiates it within the solar industry, which primarily utilizes
    crystalline silicon (c-Si) semiconductor material. While c-Si panel
    manufacturing can require three to four different factories and
    multiple days to produce and assemble, First Solar's entire process
    takes place under one roof in a matter of hours. These differentiating
    factors allow the company to offer greater transparency, traceability,
    and localization of its supply chain.

    This study examines the economic benefits of the company's operations
    in 2023, which the company ended with over 6 GW of operational US
    capacity, and in 2026, by which time it expects to have 14 GW of annual
    nameplate capacity in the country. Additionally, the study also
    evaluates the impacts of constructing First Solar's facilities in
    investments in Ohio, Alabama, and Louisiana, in 2023.

    All of First Solar's activities are considered new to the national
    economy because in the absence of First Solar, it is likely that demand
    for solar panels would be met by a foreign company given the
    concentration of solar manufacturing overseas, especially in China.

    Key Findings:

          While First Solar is currently undergoing a rapid expansion, the
    company's 2023 operations are estimated to support a total of 16,245
    direct, indirect, and induced jobs and nearly $1.6 billion in labor
    income in the US economy. The company's operations are also estimated
    to support a total of nearly $2.8 billion in value added and almost
    $5.3 billion in total output when including indirect and induced
    economic effects.

          After the ongoing expansions in Alabama, Louisiana, and Ohio are
    complete, annual operational impacts on the US economy starting in 2026
    are projected to grow to a total of more than 30,000 jobs and almost
    $2.8 billion in labor income. Operating at that scale will support
    nearly $5 billion in value added and over $10 billion in output to the
    US economy including direct, indirect, and induced economic effects.

          First Solar's construction activities in 2023 are estimated to
    create a total of 5,765 jobs and $637.8 million in labor income
    nationally including indirect and induced effects. These activities are
    also estimated to have supported more than $900 million in value added
    and $1.9 billion in output, or total sales, within the national
    economy.

          While the unique impacts of a specific industry, or company, can
    vary based on a wide range of factors, First Solar's impacts can be
    attributed at least in part to longstanding efforts to cultivate a
    domestic supply chain, which helps capture a larger portion of indirect
    and induced economic activities within the national economy.

    ------------------------------------------------------------------------
                                                                   2026
                                                  2023          (Expected)
    ------------------------------------------------------------------------
    Annual US nameplate capacity                      6GW+             14GW
    ------------------------------------------------------------------------
    Employment *                                    16,245           30,060
    ------------------------------------------------------------------------
    Labor Income *                                  $1.59B           $2.78B
    ------------------------------------------------------------------------
    Value Added *                                   $2.75B           $4.99B
    ------------------------------------------------------------------------
    Output*                                         $5.33B         $10.19B
    ------------------------------------------------------------------------
    * All values represent direct, indirect, and induced impacts, and
      exclude construction-related jobs and spending.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Glossary of Terms

    Capital Expenditure Impact: The economic effects resulting from the
    company's investments in capital assets or infrastructure. This
    includes the construction, maintenance, or improvement of long-term
    assets such as buildings, factories, equipment, machinery, or
    technology.

    Direct Impact: The immediate effects generated by the company's
    activities, such as employment, salaries and wages, and direct spending
    on goods and services.

    Employment Impact: The effect of the business's activities on job
    creation or loss, including both direct employment within the company
    and indirect employment in related industries.

    Indirect Impact: The secondary effects resulting from the spending of
    businesses in the supply chain associated with the company, including
    supplier purchases and additional economic activity stimulated by the
    company's operations.

    Induced Impact: The broader economic effects that arise from the
    spending of employees and other individuals who receive income directly
    or indirectly from the company, such as household spending.

    Labor Income: The total wages and salaries of direct and indirect
    workers associated with the company, including the value of employment
    benefits.

    Operational Expenditure Impact: The effects that a company's day-to-day
    operations and activities have on the economy, including production
    output, employment levels, and purchases of goods and services from
    suppliers to run the business.

    Output: The total economic output generated by the company,
    encompassing the value of goods and services produced and sold by its
    operations.

    Ratio or Multiplier Effect: The amplification of economic impact as
    money circulates throughout the economy, creating a ripple effect
    beyond the initial investment or spending.

    Value Added: The contribution of the company to the economy, or GDP,
    measured by the difference between its total revenue and the cost of
    intermediate goods and services purchased.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      FIRST SOLAR'S SUSTAINED IMPACT
                               ON THE US ECONOMY

    2023

    Operational Impacts

    The long-term recurring impacts of First Solar's operations create a
    stable and lasting impact on the economy by creating long-term, good-
    paying jobs.

    Table 1 shows estimated economic impacts of First Solar's 2023
    operations on the US economy. In total, First Solar's 2023 operations
    include an estimated $2.1 billion in direct output, which combined with
    indirect and induced economic effects generates $5.3 billion total
    output. An important component of that output is the $485.7 million in
    direct labor income to support the 2,700 direct First Solar jobs.

    First Solar embarked on a strategic diversification of its supply chain
    in 2019, and thanks to years of cultivating a domestic supply chain the
    direct First Solar activities generate large indirect effects including
    nearly 6,000 jobs and more than $1.6 billion in output.

    Thanks to highly skilled induced jobs that generate substantial labor
    income, the average labor income associated with the 12,400 indirect
    and induced jobs created by First Solar operations is over $81,000 per
    year, well over the national median income.

    First Solar supported over 16,000 direct, indirect, and induced jobs
    across the US economy with a total labor income of over $1.5 billion in
    2023, or six jobs for every direct job it added.
    _______________________________________________________________________

    By the Numbers
    First Solar Operational Impacts: 2023 US

    16,245
    Estimated jobs supported

    6x
    Jobs supported for every First Solar job

    $1.59 Billion
    Estimated contribution to national labor income

    $2.75 Billion
    First Solar's estimated value added to the US economy
    _______________________________________________________________________
    Note: All data includes direct, indirect, and induced effects.

                               Table 1: First Solar National Operational (US) Impacts 2023
    ----------------------------------------------------------------------------------------------------------------
                      Impact                       Employment      Labor Income *    Value Added *       Output *
    ----------------------------------------------------------------------------------------------------------------
    Direct                                               2,700             $485.7           $977.9         $2,133.9
    ----------------------------------------------------------------------------------------------------------------
    Indirect                                             5,965             $608.4           $903.0         $1,649.3
    ----------------------------------------------------------------------------------------------------------------
    Induced                                              7,580             $497.8           $876.9         $1,545.2
    ================================================================================================================
    Total                                               16,245           $1,591.9         $2,757.8         $5,328.4
    ----------------------------------------------------------------------------------------------------------------
    Ratio                                                  6.0                3.3              2.8             2.5
    ----------------------------------------------------------------------------------------------------------------
    * Labor income, value added, and output are reported in millions of dollars.

    A Coast-to-Coast Value Chain

    First Solar's uniquely American supply chain reflects the value it
    creates for the country. The company began a strategic pivot to a
    domestic supply chain in 2019, a business decision designed to reduce
    its exposure to overseas supply chains and risks to operational
    continuity. Given the current political appetite to buy American, this
    strategic shift gave First Solar a significant advantage over the
    competition, with its Series 7 module being manufactured with 100% US-
    made components identified in the current Inflation Reduction Act (IRA)
    domestic content guidance issued by the US Department of Treasury. The
    strategic shift also accounts for First Solar's impact on the US
    economy as its value chain spans the country from South Carolina in the
    East to California in the West, and covering states such as Alabama,
    Arizona, Georgia, Illinois, Indiana, Louisiana, Michigan, Ohio,
    Pennsylvania, Utah, and Wyoming.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Construction Impacts

    Over 2022 and 2023, First Solar announced approximately $2.8 billion in
    investments in Alabama, Louisiana, and Ohio, including two new
    factories, the expansion of its current manufacturing footprint, and a
    new research and development center. These investments translate into a
    significant amount of construction activity spread across three states.

    Table 2 shows the economic impacts of First Solar's 2023 construction
    activities on the US economy. The national economy is impacted by large
    investments in the new Ohio and Alabama manufacturing facilities. At
    the time this study was conducted, the company had yet to begin
    meaningful construction activity on its just-announced facility in
    Louisiana. These investments support 775 direct jobs as well as a large
    number of indirect and induced jobs created by First Solar's direct
    construction expenditures. In total, First Solar construction
    activities in 2023 create an estimated 5,765 jobs and a total of nearly
    $640 million in labor income including direct, indirect, and induced
    effects.

    For every First Solar construction job in 2023 there are approximately
    7.4 jobs created in the US economy, with an average of $110,600 in
    total annual labor income per job. First Solar's construction
    activities contribute $280.4 million in direct value added and direct
    output of $755.6 million, which generate a total of $907.1 million in
    value added and more than $1.9 billion in total output in the US
    economy including indirect and induced economic effects.

                                  Table 2: First Solar US Construction Impacts in 2023
    ----------------------------------------------------------------------------------------------------------------
                      Impact                       Employment      Labor Income *    Value Added *       Output*
    ----------------------------------------------------------------------------------------------------------------
    Direct                                                 775             $273.8           $280.4           $755.6
    ----------------------------------------------------------------------------------------------------------------
    Indirect                                             1,955             $164.9           $276.2           $550.2
    ----------------------------------------------------------------------------------------------------------------
    Induced                                              3,035             $199.1           $350.4           $617.4
    ================================================================================================================
    Total                                                5,765             $637.8           $907.1         $1,923.2
    ----------------------------------------------------------------------------------------------------------------
    Ratio                                                  7.4                2.3              3.2             2.5
    ----------------------------------------------------------------------------------------------------------------
    * Labor income, value added, and output are reported in millions of dollars.

                       FIRST SOLAR'S ECONOMIC IMPACT AND
                              JOB CREATION IN OHIO

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    2023

    First Solar's presence in Ohio dates to its founding in 1999 and the
    company has manufactured in the Buckeye State for over 2 decades. The
    Toledo area, with its deep ties to the glass industry, was a natural
    incubator in First Solar's early years and the company has continued to
    build an ecosystem of suppliers and service partners around its campus,
    currently the largest solar manufacturing footprint in the Western
    Hemisphere with over 6 GW of annual nameplate capacity at the end of
    2023. As a result of First Solar's presence, the state can uniquely
    claim to be home to every aspect of the solar value chain, from R&D and
    manufacturing to recycling.

    Given the longstanding presence and large concentration of First Solar
    operations in Ohio, state-level impacts were also analyzed in the
    state. Table 3 shows First Solar's Ohio operational impacts in 2023, a
    year of significant growth with the company's third manufacturing
    facility in the state coming online during the year.

    From operations alone in 2023, First Solar employs 2,400 workers in the
    state and is estimated to have generated more than 10,000 total jobs
    including direct, indirect, and induced economic effects. In other
    words, every First Solar job created 4.4 total jobs in the Ohio economy
    in 2023. Those jobs are estimated to have added more than $1 billion in
    labor income to the Ohio economy including more than $580 million in
    indirect and induced effects.

    First Solar's direct economic output is estimated at more than $1.6
    billion in the state including creating more than $563 million in value
    added in Ohio's economy. In total, First Solar's activities supported
    more than $3.2 billion in output including nearly $1.5 billion in value
    added within Ohio in 2023.

                                  Table 3: First Solar Ohio Operational Impacts in 2023
    ----------------------------------------------------------------------------------------------------------------
                      Impact                       Employment      Labor Income *    Value Added *       Output *
    ----------------------------------------------------------------------------------------------------------------
    Direct                                               2,400             $450.5           $563.0         $1,663.0
    ----------------------------------------------------------------------------------------------------------------
    Indirect                                             3,980             $353.7           $500.3           $896.9
    ----------------------------------------------------------------------------------------------------------------
    Induced                                              4,125             $229.0           $415.6           $724.7
    ================================================================================================================
    Total                                               10,505           $1,033.2         $1,478.9         $3,284.6
    ----------------------------------------------------------------------------------------------------------------
    Ratio                                                  4.4                2.3             42.6            42.0
    ----------------------------------------------------------------------------------------------------------------
    * Labor income, value added, and output are reported in millions of dollars.

    Investing in an Ohio Value Chain

    First Solar's strategic decision to develop a domestic supply chain in
    parallel with the expansion of its manufacturing footprint has spurred
    investment and job creation in the state. In response to the company's
    expansion plans, the NSG Group constructed its first new float glass
    plant in the US in 4 decades. The facility, which is in Luckey and
    started operations in 2020, represented a $380 million investment and
    created 150 new jobs. Similarly, Ice Industries invested $9 million and
    created 120 new jobs when it established a new facility in Bowling
    Green to produce steel back rails for First Solar's advanced thin film
    modules. Significantly, First Solar's steel value chain is located
    within a 100-mile radius of its Perrysburg campus, with the steel made
    in Cleveland, processed in Delta, and fabricated into back rails in
    Bowling Green.

    Construction Impacts

    Given the historical concentration of First Solar's US activity in
    Ohio, construction impacts are examined at the state level in Ohio as
    part of the more targeted assessment of economic impacts within the
    state.

    Table 4 shows economic impacts of First Solar's 2023 construction
    activities in Ohio. The 275 construction workers directly engaged in
    constructing First Solar's third manufacturing facility earned $29.8
    million in labor income, but also created an estimated 865 indirect and
    induced jobs, adding nearly $60 million in labor income to the total
    economic impact of construction activities within the state.

    These construction activities are also estimated to have generated
    $136.6 million in total value added and $367.7 million in total output
    to the Ohio economy. Based on 2023 construction activities, the total
    economic impact of building First Solar's new facilities shows a jobs
    multiplier of more than four total jobs in Ohio for each job directly
    engaged in construction.

    The average labor income per construction worker on a First Solar site
    in Ohio is $108,400 while the average labor income for the associated
    indirect and induced jobs is $66,500 illustrating the high pay for
    high-skilled workers needed to build the company's manufacturing and
    R&D facilities.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                 Table 4: First Solar Ohio Construction Impacts in 2023
    ----------------------------------------------------------------------------------------------------------------
                      Impact                       Employment      Labor Income *    Value Added *       Output *
    ----------------------------------------------------------------------------------------------------------------
    Direct                                                 275              $29.8            $36.5           $178.2
    ----------------------------------------------------------------------------------------------------------------
    Indirect                                               515              $38.1            $64.8           $128.0
    ----------------------------------------------------------------------------------------------------------------
    Induced                                                350              $19.4            $35.3            $61.5
    ================================================================================================================
    Total                                                1,140              $87.3           $136.6           $367.7
    ----------------------------------------------------------------------------------------------------------------
    Ratio                                                  4.1                2.9              3.7             2.1
    ----------------------------------------------------------------------------------------------------------------
    * Labor income, value added, and output are reported in millions of dollars.

    A Decades-Long Partnership

    Headquartered in Wallbridge, Ohio, the Rudolph Libbe Group (RLG) has
    constructed every First Solar facility in the state since the company's
    first manufacturing facility in 2002. Today, the partnership has
    expanded beyond Ohio as RLG constructs First Solar's new facilities in
    Alabama and Louisiana. By 2026, RLG will have completed approximately 9
    million square feet of manufacturing and R&D infrastructure across the
    three states. The Ohio projects alone accounted for approximately 4.5
    million square feet and were constructed by union tradespeople. In
    fact, the three facilities constructed by RLG for First Solar in Ohio
    since 2016 consumed an estimated 2.5 million union hours.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                         LOOKING FORWARD: PROJECTED US
                              OPERATIONAL IMPACTS

    2026

    Catalyzed by the Inflation Reduction Act (IRA) of 2022, First Solar has
    embarked on an expansion plan that is expected to see it achieve 14 GW
    of annual nameplate capacity in the US across three states by 2026.
    Given that the company is expected to double its nameplate capacity
    between 2023 and 2026, this study examined its 2026 operational impacts
    on the national economy.

    The company's national output nearly doubles in scale from 2023 to
    2026, with indirect jobs growing at an even faster pace as domestic
    supply lines expand to support First Solar's operations.

    Table 5 shows the expected annual economic impacts of First Solar's
    operations on the US economy by 2026. Once the expansions that are
    currently underway in Ohio, Alabama, and Louisiana are complete, First
    Solar expects its operations to create more than $1.5 billion in value
    added in the national economy, while generating a total added value 3.2
    times larger after accounting for direct and induced economic impacts.
    The total output generated in the national economy is nearly $10.2
    billion, which is 2.6 times larger than direct output.

    The expansion of First Solar's impacts extends to job creation as the
    company expects to grow its US workforce from 2,700 in 2023 to 4,100
    people in 2026. This increase in direct employment, in turn, allows
    First Solar to support a total of more than 30,000 jobs across the
    economy with nearly $2.8 billion in labor income. In other words, every
    person First Solar directly employs supports 7.3 direct, indirect, and
    induced jobs across the US.

    Furthermore, First Solar's operations directly are expected to create
    more than $1.5 billion in value added in the national economy but
    generate total added value 3.2 times larger after accounting for direct
    and induced economic impacts. The total output generated in the
    national economy is forecasted to be nearly $10.2 billion, which is 2.6
    times larger than direct output.
    _______________________________________________________________________

    By the Numbers
    First Solar Expected US Operational Impacts: 2026

    30,060
    Number of jobs supported

    7.3x
    Jobs supported for every First Solar job

    $2.78 Billion
    Estimated contribution to national labor income

    $4.99 Billion
    First Solar's estimated value added to the US economy
    _______________________________________________________________________
    Note: All data includes direct, indirect, and induced effects.

                                    Table 5: First Solar US Operational Impacts 2026
    ----------------------------------------------------------------------------------------------------------------
                      Impact                       Employment      Labor Income *    Value Added *       Output *
    ----------------------------------------------------------------------------------------------------------------
    Direct                                               4,100             $622.9         $1,540.9         $3,979.6
    ----------------------------------------------------------------------------------------------------------------
    Indirect                                            12,675           $1,291.9         $1,916.8         $3,499.7
    ----------------------------------------------------------------------------------------------------------------
    Induced                                             13,285             $872.3         $1,536.4         $2,707.4
    ================================================================================================================
    Total                                               30,060           $2,787.1         $4,994.0        $10,186.7
    ----------------------------------------------------------------------------------------------------------------
    Ratio                                                  7.3                4.5              3.2             2.6
    ----------------------------------------------------------------------------------------------------------------
    * Labor income, value added, and output are reported in millions of dollars.

    Renewing American Communities

    A glassmaking facility in Meadville, Pennsylvania, which had been
    operational since 1968, was forced to shut down in 2020 in response to
    slowing demand from the US automotive industry and the economic effects
    of the pandemic. In 2023, the facility was given a new lease on life as
    First Solar signed an agreement with its owner, Vitro Architectural
    Glass, to manufacture float glass for use in its American-made solar
    modules. In response, Vitro announced it would invest $93.6 million to
    rebuild and modernize the plant, creating approximately 130 new high-
    quality jobs, subsequently increasing its investment to approximately
    $180 million to adapt and upgrade its current facilities, effectively
    doubling the plant's output. The plant is expected to be operational in
    2025, bringing the jobs, economic growth, and tax revenues that
    domestic manufacturing stimulates.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Conclusion

    Beyond the one-time boost created by large capital investments like
    construction of a new manufacturing facility, the long-term recurring
    impacts of a company's operations are often most valued because of
    their stable and lasting impact. For First Solar, those impacts were
    analyzed in 2023 to assess the company's current impact as it undergoes
    continued growth and expansion, but also in 2026 after the current
    expansions in Ohio, Alabama, and Louisiana will be complete and the
    company will be operating at a significantly larger scale.

    In 2023, total national impacts include more than 16,000 jobs, nearly
    $1.6 billion in labor income and just over $5.3 billion in total
    economic output including indirect and induced effects. Notably, the
    total jobs created by First Solar's operations represent an effective
    economic impact multiplier of 6.0 meaning that for each of First
    Solar's 2,700 direct jobs, a total of 6 jobs are created in the US
    economy. Within Ohio, the total economic impacts include 10,505 jobs,
    over $1 billion in labor income, and nearly $3.3 billion in total
    economic impact.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    First Solar's impacts can be attributed at least in part to
    longstanding efforts to cultivate a domestic supply chain, which helps
    capture a larger portion of indirect and induced economic activities
    within the national economy.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    By 2026, First Solar's operations are expected to grow to include
    4,100 direct employees and total direct output of nearly $4 billion
    nationally. The national economic impact of operating at that scale
    includes creation of more than 30,000 jobs, $2.8 billion in labor
    income, and $10 billion in total output including direct, indirect, and
    induced effects. In 2026, it is expected that First Solar's effective
    national jobs multiplier will reach 7.3, meaning that for every First
    Solar job, the company will create a total of 7.3 jobs in the national
    economy.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    These results compare favorably to other industries such as highway
    construction, which has a jobs multiplier of 2.1; small electronics
    manufacturing, which has a jobs multiplier of 4.2; and even a high
    impact industry like oil and gas extraction, which has a jobs
    multiplier of 6.7.

    While the unique impacts of a specific industry, or company, can vary
    based on a wide range of factors, First Solar's impacts can be
    attributed at least in part to longstanding efforts to cultivate a
    domestic supply chain, which helps capture a larger portion of indirect
    and induced economic activities within the national economy.

    Learn more about First Solar's US value chain at https://
    www.americassolar
    workers.com/.

     CONTEXTS: A HIGHLY DIFFERENTIATED SOLAR MANUFACTURING AND TECHNOLOGY
                                    COMPANY

    First Solar has consistently leaned into and leveraged its
    differentiators to deliver growth and navigate unprecedented change and
    industry volatility. The company is unique among the world's largest
    solar manufacturers for being the only US-headquartered company and for
    producing thin film solar panels that are not dependent on Chinese c-Si
    supply chains.

    Moreover, First Solar's commitment to Responsible Solar and
    sustainability, its distributed manufacturing strategy, the strength of
    its localized supply chains, its technology advantage, and the strength
    of its balance sheet all drive value creation for its investors and for
    America. From 2016 to 2026, First Solar expects to have invested almost
    $4 billion in US manufacturing and R&D infrastructure, demonstrating
    its commitment to America.

    This section explains some of First Solar's key differentiators that
    help drive its impact on the US economy.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

    Uniquely American Solar Technology

    The US is the global leader in cadmium telluride (CdTe) manufacturing
    \1\ having developed the technology in the 1950s, although it was only
    commercialized by First Solar in 2002. Today, CdTe is the second most
    common PV semiconductor after c-Si, which is dominated by Chinese
    companies.
    ---------------------------------------------------------------------------
        \1\ Source: https://www.nrel.gov/pv/cadmium-telluride-solar-
    cells.html.

    CdTe's qualities include lower cost, superior scalability, and a higher
    theoretical efficiency limit. Over time, and with almost $2 billion
    invested in research and development, First Solar has been able to
    harness other advantages that are unique to CdTe. Its strategic
    advantages include reduced dependence on China's crystalline silicon
    supply chains, supporting US energy security and supply chain
    ---------------------------------------------------------------------------
    continuity through rapid deployment of new manufacturing capacity.

    The semiconductor uses two byproducts from zinc and copper mining waste
    streams, cadmium and tellurium, which are combined into a stable
    compound. Each First Solar module includes a layer of semiconductor
    that is only 3 percent the thickness of a human hair.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Fully Vertically Integrated Manufacturing Process

    First Solar's fully vertically integrated manufacturing template, which
    was developed and operationalized in Ohio, is unique in its ability to
    integrate the manufacturing of thin film wafers and cells in its module
    manufacturing process. The semiconductor is deposited on sheets of
    glass in a high-tech process that has more in common with producing
    flat screen televisions than it does assembling a c-Si solar panel.

    This streamlined process allows First Solar to convert a sheet of glass
    into a fully functional module under one roof in approximately 4 hours,
    compared to c-Si's batch processing approach, which has not
    fundamentally changed in the past 2 decades and requires three to four
    different factories, multiple companies, and multiple days to achieve
    the same result. Significantly, First Solar's manufacturing template
    has allowed it to deploy vertically integrated manufacturing at a
    location of its choosing in fewer than 24 months.

    First Solar's factories exemplify America's manufacturing prowess,
    operating 24 hours a day, 7 days a week, 365 days a year, with the
    industry's highest utilization rates. The factories are believed to set
    the standard for capacity utilization and manufacturing cost,
    demonstrating how American manufacturing can effectively compete
    globally.

    First Solar also stands apart from the competition for its early
    embrace of a distributed manufacturing strategy. Enabled by its easily
    replicable manufacturing template, the company took the decision to
    site new manufacturing capacity close to demand to accelerate the speed
    at which it could deliver solar panels to its customers without the
    risk of relying on transoceanic shipping.

    Respect for People and the Planet

    First Solar has long understood its responsibility towards the planet,
    the community, and its customers. The company places sustainability at
    the heart of everything it does, setting its sights on exceeding
    industry standards, not merely meeting them. Today, First Solar has a
    long history of establishing benchmarks in recycling, supply chain
    transparency, the carbon and water footprint of PV technology, and
    health and safety.

    First Solar's solar technology has the lowest environmental footprint
    in the industry. Its Series 7 module has a carbon and water footprint
    that is nearly four times lower than conventional crystalline silicon
    modules manufactured in China and an energy payback time that is
    approximately five times faster.

    The company pioneered recycling of solar panels and its proprietary
    process allows it to recover approximately 90% of materials from each
    processed module. In fact, a kilogram of CdTe can be recycled 41 times
    to produce electricity for 1,200 years before it stops being effective.

    Crucially, First Solar has led the industry in taking a stance of zero
    tolerance for forced labor in solar supply chains. The company is one
    of the only solar manufacturers not to have any exposure to the Chinese
    province of Xinjiang, where state-sponsored forced labor is reportedly
    used to support elements of c-Si value chains, including the production
    of polysilicon.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                    METHODOLOGY

    Approach and Assumptions

    In addition to the direct expenditures and employment of a company, or
    other grouping of economic activities, economic impact assessments
    capture the broader set of economic activities generated by an initial
    infusion of new dollars into the economy. When new economic activity
    occurs, businesses will purchase additional inputs and workers will
    have additional dollars for purchasing goods and services. The total
    economic effect accounts for indirect spending by businesses and
    induced spending by workers benefiting from additional dollars.

    In general, these studies focus on new dollars entering a regional (or
    national) economy. On a national scale, this framework would consider
    money paid by foreign customers or investments by foreign companies as
    new dollars entering the national economy. In the present context, all
    of First Solar's activities are considered new to the national economy
    because in the absence of First Solar, it is likely that demand for
    solar panels would be met by a foreign company given the concentration
    of solar manufacturing overseas, especially in China.

    Economic impact analysis provides the tools to quantify the full impact
    of the indirect and induced effects within a regional economy due to an
    initial round of spending using jobs, earnings, value added, and output
    multipliers. This methodology is based on measuring inter-industry
    linkages across the economy and relies on the commonly used input-
    output method developed by Wassily Leontief. While input-output models
    have advanced considerably over time, the same fundamental principles
    apply.

    To analyze the economic impact of First Solar's expected economic
    impact in 2023 and following the expansion currently underway, this
    report accounts for the one-time expenditures involved in the
    construction of new facilities in Ohio, Alabama, and Louisiana and the
    ongoing domestic operational expenditures across the company once the
    new facilities have been commissioned. The study includes an analysis
    of First Solar's economic multipliers compared to various industries
    across the United States and in the State of Ohio. These benchmarks
    provide a gauge as to how First Solar's economic activity truly impacts
    the economy in comparison to other common industries.

    About the Study

    The Kathleen Babineaux Blanco Public Policy Center at the University of
    Louisiana at Lafayette serves as a hub for research and education on
    critical policy issues in Louisiana and beyond. Named after the state's
    first female governor, the center honors her legacy by addressing key
    challenges facing the region, including education, health care, and
    economic development. Through collaboration with policymakers,
    community leaders, and academics, the center aims to inform evidence-
    based policy solutions that promote the well-being and prosperity of
    Louisiana's citizens.

    The Researchers

    To lead and produce the study referenced in this report, First Solar
    commissioned Dr. Stephen Barnes, Executive Director of the Kathleen
    Babineaux Blanco Public Policy Center at the University of Louisiana at
    Lafayette and an Associate Professor of economics in the B.I. Moody III
    College of Business Administration.

    Dr. Barnes serves as the independent economist on the Louisiana Revenue
    Estimating Conference, a forecasting panel that sets income projections
    used to create the state budget. He has collaborated with federal and
    state agencies, industry partners and advocacy groups as well as
    scholars in more than a dozen disciplines on research addressing many
    aspects of the economy and population of Louisiana.

    Dr. Barnes has publications spanning the economics of education,
    environmental risks, health and health care, and transportation. Dr.
    Barnes holds a bachelor's degree in economics from Louisiana State
    University and a master's and Ph.D. in economics from the University of
    Texas at Austin.

    Dr. Barnes was assisted by Andrez Joseph, a Research Associate at the
    Kathleen Babineaux Blanco Public Policy Center. Joseph is originally
    from Roseau, Dominica, an island in the Caribbean, where he began his
    undergraduate studies in Mathematics and Physics prior to moving to the
    United States. Upon arrival in 2017, he completed his Bachelor of
    Science in Mathematics from the Louisiana State University at
    Alexandria and continued his education at the University of Louisiana
    at Lafayette where he attained a Master of Science in Applied
    Mathematics.

                                     ______

                   Submitted by Hon. Catherine Cortez Masto,
                           a U.S. Senator From Nevada

                          National Mining Association

                   101 Constitution Ave., NW, Suite 500 East

                              Washington, DC 20001

                              Phone: 202-463-2600

    February 9, 2024

    Internal Revenue Service
    CC:PA:01:PR (REG-107423-23)
    Room 5203
    PO Box 7604, Ben Franklin Station
    Washington, DC 20044

           Re: Comments on Proposed Regulations on Section 45X Advanced
    Manufacturing Production Credit.

    The National Mining Association (NMA) appreciates the opportunity to
    comment on proposed regulations (``proposed regulations'') for the
    Section 45X Advanced Manufacturing Production Credit (REG-107423-23).
    The NMA appreciated Congress' inclusion in the Inflation Reduction Act
    of 2022 of tax credits for certain critical minerals. The proposed
    Internal Revenue Service (IRS) rule, however, deviates from
    congressional intent by omitting availability of the credit for mining
    extraction costs.\1\
    ---------------------------------------------------------------------------
        \1\ 88 Fed. Reg. 86844 (Dec. 15, 2023).

    America's mining industry supplies the essential materials necessary
    for nearly every sector of our economy--from technology and healthcare
    to energy, transportation, infrastructure, and national security.
    Headquartered in Washington, DC, the NMA has a membership of more than
    250 companies and organizations involved in every aspect of mining,
    ---------------------------------------------------------------------------
    from producers and equipment manufacturers to service providers.

    The NMA is the only national trade organization that serves as the
    voice of the U.S. mining industry and the hundreds of thousands of
    American workers it employs before Congress, the federal agencies, the
    judiciary and the media, advocating for public policies that will help
    America fully and responsibly utilize its vast natural resources. We
    work to ensure America has secure and reliable supply chains, abundant
    and affordable energy, and the American-sourced materials necessary for
    U.S. manufacturing, national security, and economic security, all
    delivered under world-leading environmental, safety and labor
    standards.

    These comments focus on the aspects of the Sec. 45X credits that will
    stimulate U.S. production, processing and availability of critical
    minerals as Congress intended. Congress has articulated a bipartisan
    interest in addressing our increasing mineral import reliance and
    fragile supply chains. The U.S. is currently at a strategic
    disadvantage. Over the years, the U.S. has watched as geopolitical
    rivals and close allies alike have taken the lead in minerals
    production. In 1995, the U.S. was 100 percent import reliant for only 8
    minerals. Today, that number has nearly doubled to 15. Of the 50
    critical mineral commodities the U.S. Geological Survey lists as
    essential for U.S. economic and national security, China is the top
    producer or top supplier for 30 of them.\2\ Over the same period, the
    U.S. has seen the necessary processing and refining capabilities of
    minerals steadily drift overseas, with substantial processing now
    occurring in China.
    ---------------------------------------------------------------------------
        \2\ U.S. Geological Survey, Mineral Commodity Summaries, 2023,
    https://www.usgs.gov/centers/national-minerals-information-center/
    mineral-commodity-summaries.

    The risks inherent with that growing vulnerability are masked when
    trade agreements are secure and global supply chains are working. But
    recent lockdowns and closed borders significantly and adversely
    impacted the global supply chain. The need for expanded sources of
    critical minerals was apparent when, on a July 2020 earnings call,
    Tesla CEO Elon Musk all but begged miners for more nickel, saying,
    ``Tesla will give you a giant contract for a long period of time if you
    mine nickel efficiently and in an environmentally sensitive way.''\3\
    The U.S. currently has only one nickel mine, with the mine's useful
    life ending as early as 2026; however, in September 2023, the
    Department of Defense awarded $20.6 million to developers of the
    proposed Talon nickel mine.\4\
    ---------------------------------------------------------------------------
        \3\ Mining.com, Elon Musk pledges ``giant contract'' for
    responsible nickel miners, July 2020, https://www.mining.com/tesla-
    offers-giant-contract-to-responsible-nickel-miners/.
        \4\ See, Associated Press, ``Defense Department awards $20.6
    million to support nickel prospecting in Minnesota and Michigan''
    (Sept. 12, 2023).

    Trade tensions and political instability also play a role. The U.S. and
    China have been in a state of flux for the last several years, with
    China using its minerals dominance to limit the world's rare earths
    supply as a significant bargaining chip. In 2018, the Democratic
    Republic of the Congo (DRC) nearly tripled the royalty rate on cobalt.
    And Indonesia, once the world's biggest nickel exporter, banned exports
    ---------------------------------------------------------------------------
    recently in the hopes of expanding its domestic smelting industry.

    Section 45X, as added by the Inflation Reduction Act of 2022, provides
    a key incentive for U.S. domestic mineral production. Section 45X
    generally provides a tax credit for various types of ``eligible
    components'' produced by the taxpayer and sold to an unrelated person,
    but only if the production and sale is in a trade or business of the
    taxpayer and only if the eligible components are produced in the U.S.
    or in a U.S. possession.

    For purposes of section 45X, eligible components include, among other
    items, ``applicable critical minerals.'' The section 45X credits apply
    to eligible components produced and sold after December 31, 2022.
    Unlike other types of eligible components, applicable critical minerals
    are not subject to a credit phaseout for sales after 2029.

    Section 45X provides the following list of 50 minerals that, when
    converted or purified to specified purities, are considered an
    ``applicable critical mineral'' for purposes of the Sec. 45X credit:
    aluminum, antimony, arsenic, barite, beryllium, bismuth, cerium,
    cesium, chromium, cobalt, dysprosium, erbium, europium, fluorspar,
    gadolinium, gallium, germanium, graphite, hafnium, holmium, indium,
    iridium, lanthanum, lithium, lutetium, magnesium, manganese, neodymium,
    nickel, niobium, palladium, platinum, praseodymium, rhodium, rubidium,
    ruthenium, samarium, scandium, tantalum, tellurium, terbium, thulium,
    tin, titanium, tungsten, vanadium, ytterbium, yttrium, zinc, and
    zirconium. With respect to an applicable critical mineral, the section
    45X credit is equal to 10 percent of the costs incurred by the taxpayer
    with respect to the production of such mineral.

    Section 45X(d)(2) provides that the only sales taken into account under
    section 45X are for eligible components produced within the United
    States or a U.S. possession.

    Under the proposed section 1.45X-4(3), the only critical mineral
    production costs eligible to be counted for purposes of the tax credit
    are those for chemical conversion and purification (i.e., processing);
    direct or indirect material costs or costs related to the extraction or
    acquisition of raw materials would not count.\5\ This limitation fails
    to implement the intent of Congress and is simply nonsensical since the
    cost to mine a listed critical mineral is often 50 percent or more of
    the total cost of producing the mineral in its ultimate purified state.
    And, of course, critical minerals cannot be produced in their purified
    form without first being extracted from the ground. By limiting the
    type of production costs eligible to be counted, the proposed
    regulations would deny the domestic mining industry the benefits of the
    section 45X tax credit and thus frustrate the Congressional goal of
    stimulating new and improved domestic mines and domestic supply chains
    for critical minerals.
    ---------------------------------------------------------------------------
        \5\ 88 Fed. Reg. at 86868.

    The preamble to the proposed regulations apparently recognizes this
    crucial flaw and notes ``that a wide range of costs are incurred in the
    production of applicable critical minerals.'' Rather than providing for
    these costs, the preamble asks for comments on ``whether and how
    extraction and other similar value-added activities in the production
    of raw materials used in applicable critical minerals should be taken
    into account.'' The preamble says Treasury and the IRS are
    ``considering'' including extraction and similar costs in critical
    mineral production costs, but would do so only if the IRS could
    administer such an approach and it would not lead to multiple crediting
    of the same costs. NMA believes the final regulations absolutely must
    include extraction and other raw material costs in creditable
    production costs under section 45X. Congress tasked the IRS to
    implement the credit. Treasury and IRS have the authority and expertise
    to determine a path forward and have had more than a year to do so.
    They have promulgated similar rules with respect to section 30D and the
    bonus credits for domestic content. NMA would like to work with
    Treasury and the IRS to develop appropriate rules to take extraction
    and related costs into account under section 45X. One proposed
    ---------------------------------------------------------------------------
    methodology is described below.

    The proposed regulations essentially say that only the processor of the
    critical minerals is eligible to claim the credit unless the processor
    is acting as a contract manufacturer and has a written agreement with
    the other contract parties as to who will claim the credit. This
    concept would not accommodate the vast majority of situations in which
    a miner extracts the minerals and then transfers them to another
    (likely unrelated) party who refines or further refines them. While
    there is unlikely to be multiple crediting of the same costs in a
    vertically integrated company, mining and refining activities are not
    typically vertically integrated or done in partnership between miners
    and refiners. To make the section 45X credit work in the real world, it
    must permit each party in the U.S. supply chain from extraction through
    refining to claim a tax credit on the value-added costs the party
    incurs, provided the mineral ultimately reaches the requisite purity.

    NMA believes that parties incurring extraction costs can be made
    eligible for the section 45X tax credit without resulting in duplicate
    credit claims for the same costs. For example, a U.S. miner of critical
    mineral ore could use any reasonable method for tracing through the
    supply chain the minerals it extracted and could claim the tax credit
    in the year it receives a certification from the refiner that the
    minerals it originally extracted were refined to the requisite purity
    and sold to an unrelated party. The miner would claim the credit only
    for its extraction costs, while the refiner would claim the credit for
    the processing, transportation, and other costs it bears (but not the
    extraction/material costs). Refiners could be required to provide the
    necessary certification to their U.S. ore/raw material suppliers. Such
    certification process would require cooperation between otherwise
    unrelated miners and processors to take full advantage of the section
    45X credit, which would also improve transparency.

    As another example, a party extracting (or recycling) minerals and
    holding title to them throughout the entire extraction and refining
    process should be able to claim the section 45X tax credit on all its
    production costs, including extraction. In such a case, there would be
    no duplication of costs since no other party (including parties
    providing contracted refining services) would economically bear costs
    or be eligible to claim the tax credit. A contract manufacturer without
    title to the processed minerals would not legally be permitted to sell
    them to an unrelated party and, therefore, could not be an eligible
    credit claimant.

    The preamble to the proposed regulations asks for comment on whether
    ``extraction'' should be defined consistent with proposed regulation
    section 1.30D-3(c)(8). Under that section, ``extraction''

            means the activities performed to extract or harvest minerals
            or natural resources from the ground or a body of water,
            including, but not limited to, by operating equipment to
            extract or harvest minerals or natural resources from mines and
            wells, or to extract minerals or natural resources from the
            waste or residue of prior extraction. Extraction concludes when
            activities are performed to convert raw mined or harvested
            products or raw well effluent to substances that can be readily
            transported or stored for direct use in critical mineral
            processing. Extraction includes the physical processes involved
            in refining. Extraction does not include the chemical and
            thermal processes involved in refining.

    NMA believes proposed section 1.30D-3(c)(8) is a reasonable definition
    of extraction for use in permitting extraction costs to be counted
    under the section 45X tax credit.

    The section 45X tax credit is intended to stimulate domestic mining and
    production of critical minerals. Accordingly, if the final regulations
    permit extraction costs to be taken into account, they should count
    only the costs of extraction that occurred in the United States (or in
    a U.S. possession). To do otherwise would support foreign production
    because U.S. processors would be able to claim the credit on their
    extraction costs when the raw materials are extracted overseas. The
    section 45X tax credit for domestic production of critical minerals
    should not be available with respect to the costs of raw materials
    extracted in foreign countries or, in the case of recycling, sourced in
    foreign countries.

    The critical minerals production paradigm contemplated in the proposed
    regulations must be significantly modified to address real-world
    domestic mining and processing activities without forcing the creation
    of artificial business arrangements. To stimulate new and improved
    domestic critical mineral supply chains, the section 45X tax credit
    should count all of the costs of domestic production and processing of
    critical minerals.

    Respectfully submitted,

    Rich Nolan

                                     ______

                              United States Senate

                              washington, dc 20510

                               February 14, 2024

    The Honorable Janet Yellen
    Secretary
    U.S. Department of the Treasury
    1500 Pennsylvania Avenue, NW
    Washington, DC 20220

    Dear Secretary Yellen,

    We are writing in response to the notice of proposed rulemaking for the
    Section 45X Advanced Manufacturing Production Tax Credit. We request
    that the U.S. Department of the Treasury (Treasury) make revisions to
    the proposed rule to align the rule with the intent of Congress and to
    ensure the credit properly incentivizes the entirety of the domestic
    supply chain for applicable critical minerals and eligible components,
    including mineral extraction and electric vehicle battery production.

    As you know, Congress passed the Inflation Reduction Act (IRA) in part
    to support the domestic extraction and production of critical minerals
    and materials, as well as the manufacturing of batteries and their
    components. Recognizing our increasing foreign dependence on these
    materials, often from hostile nations, the section 45X credit provides
    a credit for taxpayers who produce certain critical minerals as well as
    various energy related products.

    We are concerned that Treasury's proposed rule for the 45X tax credit
    explicitly excludes direct and indirect material costs for taxpayers
    seeking to claim the credit. Treasury writes in the proposed rule that
    ``Direct material costs as defined in Sec. 1.263A-1(e)(2)(i)(A), or
    indirect material costs Sec. 1.263A-1(e)(3)(ii)(E), and any costs
    related to the extraction or acquisition of raw materials'' are not be
    included in production costs. The proposed rule goes on to say ``. . .
    the cost of acquiring the raw material used to produce the electrode
    active material, the cost of materials used for conversion,
    purification, or recycling of the raw material, and other material
    costs related to the production of the electrode active material would
    not be taken into account.''

    The clear purpose of section 45X was to encourage investment in the
    United States and to build a reliable and resilient domestic supply
    chain for critical minerals right here at home. The section 45X credit
    was designed to support responsible domestic mining and processing of
    these minerals. As members of the U.S. Senate we want to clarify that
    the blanket exclusion of materials costs is not consistent with the
    intent of Congress and should be expeditiously revised. Section 45X
    provides for a 10 percent credit for the production costs of applicable
    critical minerals, and raw materials costs were never intended to be
    excluded from this calculation. This exclusion is not aligned with the
    intent of Congress and significantly weakens the tax credit as the cost
    of extracting raw materials essential for renewable energy, battery
    technologies, and other critical materials are a significant portion of
    overall costs.

    Additionally, this exclusion weakens the credit's intended goal to
    strengthen the New Clean Vehicle Credit, established under Section 30D
    of the tax code. The 30D credit is designed to counter influence by any
    ``Foreign Entity of Concern'' (FEOC) over clean vehicle supply chains.
    Key to the success of the 30D credit are the 45X credit's incentives
    for domestic mineral extraction and processing. A final rule that
    excludes materials costs will substantially impact critical minerals
    supply, increasing the challenges for vehicle producers looking to
    manufacture clean vehicles in the United States.

    Private companies are ready and willing to invest in extraction and
    production of raw materials right here in the United States, and do so
    in a safe and responsible manner through developed environmental
    protection and labor standards. However, by excluding the majority of
    the production costs from the 45X credit, Treasury would disincentivize
    investment in the United States, and also increase our reliance on
    countries that do not share our democratic or geopolitical values. This
    result would be contrary to the intent of the legislation and
    detrimental to our national and energy security.

    We appreciate Treasury's caution and intent, noted in the proposed
    rule, to mitigate the risk of double counting and fraud. However, as
    proposed, the credit eliminates the ability to even single count direct
    and indirect materials costs and extraction costs, which significantly
    weakens the credit's primary purpose of developing a domestic critical
    mineral supply chain. The risk of double counting production costs can
    be mitigated using similar basis reduction mechanics and documentation
    requirements Treasury and IRS require to calculate the value of
    investment tax credits under sections 48 and 48C. Similarly, IRS is
    well equipped with the experience and tools necessary to understand and
    administer the deduction of expenses related to extraction and can
    apply these to the 45X credit. Additionally, we believe the statute,
    which directs the credit to be claimed for components ``produced by the
    taxpayer,'' provides flexibility for Treasury to establish other
    safeguards, such as audit and claw back measures, to prevent any type
    of fraudulent behavior.

    We appreciate your attention to these matters and look forward to
    working with you as you implement the Inflation Reduction Act.

    Sincerely,

    Catherine Cortez Masto              John Hickenlooper
    United States Senator               United States Senator

    Jacky Rosen                         Joe Manchin III
    United States Senator               United States Senator

    Mark Kelly                          Laphonza Butler
    United States Senator               United States Senator

    Kyrsten Sinema                      Robert P. Casey, Jr.
    United States Senator               United States Senator

    Patty Murray
    United States Senator

                                     ______

                                February 5, 2024

    The Honorable Janet Yellen
    Secretary
    U.S. Department of the Treasury
    1500 Pennsylvania Avenue, NW
    Washington, DC 20220

    Dear Secretary Yellen,

    We write to express our support for the renewed focus on securing
    America's economic competitiveness and national security by
    strengthening the domestic manufacturing sector for innovative energy
    technologies such as battery energy storage systems and electric
    vehicles (EVs). The onshoring of these critical industrial capabilities
    will not only benefit U.S. workers, their families, and communities but
    also comes at a vitally important time when more domestic investment is
    needed to remain competitive with our global adversaries.

    The undersigned organizations collectively represent every step of the
    supply chain for battery storage and electric vehicle manufacturing.
    Our operations are significant economic contributors that create
    thousands of high-paying jobs, millions of dollars in state tax revenue
    to fund essential community services, and research and training that
    ensures the U.S. remains globally competitive.

    We write today to urge the Department of the Treasury and the Internal
    Revenue Service to consider that direct and indirect material costs and
    costs related to the domestic extraction of raw materials are value-
    added activities and should be eligible to claim the Section 45X
    Advanced Manufacturing Production Tax Credit (45X).

    Critical Mineral Production Under 45X

    To date, the Biden-Harris Administration has worked to invest in
    America--from assessing our inherent vulnerability within mineral
    supply chains essential to modern renewable energy technologies to
    supporting domestic mine processing projects through once-in-a-
    generation public-private funding partnerships. Through these actions,
    a solid foundation for a new era of American manufacturing is being
    laid. The Inflation Reduction Act (IRA) of 2022 (Pub. L. 117-169)
    includes landmark programs essential to reducing our outsized reliance
    on imported minerals from countries that do not share our democratic
    values or align with the United States' globally leading environmental,
    labor, and safety standards.

    In December 2023, the U.S. Department of the Treasury and the Internal
    Revenue Service (IRS) issued draft guidance (88 FR 86844) to implement
    45X, a provision whose effective implementation underpins the success
    of the IRA and the clean energy transition.

    Section 45X creates a new tax credit that provides $35 per kWh for each
    battery cell, $10 per kWh for each battery module, and covers 10
    percent of the costs of production of the applicable critical
    materials, which will significantly drive down the costs of domestic
    clean energy manufacturing. Unlike other eligible components,
    applicable critical minerals are not subject to a credit phaseout after
    2029, underscoring Congressional intent that the IRA incentivizes the
    onshoring of the critical minerals supply chain.

    If implemented thoughtfully, the 45X credit will ensure the success of
    current American industrial policy over the next decade by facilitating
    the deployment of domestically produced clean energy technologies--
    particularly electric vehicles. However, the proposed guidance states
    that the only critical mineral production costs eligible to be counted
    toward the production tax credit are the downstream value-added
    activities that include chemical conversion and purification (i.e.,
    processing). This concept would not provide a tax credit for the costs
    of domestic extraction of critical minerals, a key part of onshoring
    the supply chain. Nor would it address situations in which an entity
    extracts the minerals and transfers them to another likely unrelated
    party who refines or chemically processes the raw mineral.

    45X and Clean Vehicle Incentives

    The Section 30D New Clean Vehicle Tax Credit (30D) was modified by the
    IRA and reduces the cost of new EVs by $7,500, provided the vehicle
    purchaser and manufacturer meet the necessary qualifications. For
    manufacturers, this means meeting increasingly stringent domestic
    content requirements that require sourcing battery components and
    critical minerals either domestically or from free trade agreement
    (FTA) countries. Because both requirements must be met for an EV to be
    eligible for the 30D credit, significant investment will continue to be
    necessary to scale domestic battery manufacturing and critical mineral
    production capacity and maximize the impact of the 30D credit.
    Thoughtful implementation of the 45X credit recognizes its role as a
    key enabling tool to meet 30D sourcing requirements and is central to
    the success of broader U.S. industrial strategy.

    The clean vehicle and manufacturing incentives in the IRA have two key
    policy objectives: to increase EV deployment and to counter foreign
    influence by building domestic clean energy supply chains. Designed to
    complement each other, the Section 30D New Clean Vehicle Tax Credit and
    the Section 45X Advanced Manufacturing Production Tax Credit will be
    the main drivers of these policy outcomes. As proposed, the 45X
    guidance will achieve neither and, in fact, could serve as a hindrance
    to the success of both credits. Without a robust, secure supply of
    domestic critical minerals and battery components, increasingly
    stringent sourcing requirements tied to 30D eligibility could make
    fewer vehicles eligible over time. The decision to deny the 45X credit
    for raw materials costs will curtail future domestic supply, worsening
    an increasing minerals bottleneck rather than alleviating it.

    We appreciate Treasury and IRS's concerns about preventing double
    counting and reducing fraud, waste, and abuse and strongly support the
    need for upholding the integrity of the 45X credit. We also share
    Treasury and IRS's goals of ensuring the value of the credit is
    retained domestically. However, as proposed, 45X would eliminate the
    ability to even single count direct and indirect materials costs and
    extraction costs, amounting to a missed opportunity to incentivize the
    development of a domestic critical minerals supply chain.

    Collectively, the undersigned organizations have serious concerns
    regarding the proposed guidance. As proposed, the impact of the 45X
    credit is significantly reduced. Further guidance must permit each
    party in the U.S. supply chain, including extraction and refining, to
    claim a tax credit on the value-added costs the party incurs, provided
    the mineral ultimately reaches the requisite purity.

    Congress intended the 45X tax credit to work in tandem with the clean
    vehicle credit's sourcing requirements to stimulate domestic production
    of critical minerals and reduce the United States' reliance on imported
    minerals. To stimulate greater security of our domestic critical
    mineral supply chains and unlock the intended impact of the statute,
    the undersigned organizations urge the Department of the Treasury and
    the IRS to consider that direct and indirect material costs and costs
    related to the domestic extraction of raw materials are value-added
    activities and should be eligible to claim the 45X credit.

    We appreciate your attention to this important issue and look forward
    to the agency's expeditious update to address the shortcomings in the
    draft guidance.

    Sincerely,

    Zero Emission Transportation
    Association (ZETA)                  National Mining Association (NMA)
    Alaska Miners Association           American Critical Minerals
                                        Association
    American Exploration & Mining
    Association                         American Lithium Corp.
    American Rare Earths Ltd.           Arizona Mining Association
    Battery Materials & Technology
    Coalition (BMTC)                    Coeur Mining
    Colorado Mining Association         Lundin Mining--Eagle Mine
    First Mode                          GraphiteOne
    General Motors                      Hecla Mining
    Idaho Mining Association            Ioneer USA
    Jervois                             Liebherr
    Lithium Americas                    Materion Natural Resources
    Metallic Minerals Corporation       Mining Minnesota
    Montana Mining Association          MP Materials
    Nevada Battery Coalition            Nevada Mining Association
    NewRange Copper Nickel              NioCorp
    Nyrstar                             Perpetua Resources
    Piedmont Lithium                    Ramaco Resources
    Rio Tinto                           Sibanye Stillwater
    Society for Mining, Metallurgy, and
    Exploration                         South32
    Talon Metals                        Teck Resources
    TerraVolta                          Tesla
    The Women's Mining Coalition        U.S. Battery Machine Builders
                                        Coalition
    USA Rare Earth, LLC.                Utah Mining Association

    CC:

    U.S. House of Representatives Committee on Ways and Means
    U.S. House of Representatives Committee on Natural Resources
    U.S. Senate Committee on Energy and Natural Resources
    U.S. Senate Committee on Finance

                                     ______

                    Prepared Statement of Hon. Mike Crapo,
                           a U.S. Senator From Idaho
        During last Thursday's State of the Union address, using ``fair
    share'' rhetoric, President Biden laid out his plans for making
    American manufacturers more competitive: tax them more. President
    Biden's proposed 28-percent corporate rate--about 32 percent when
    including State taxes--would leave the U.S. with one of the highest
    rates in the developed world.

        It gets worse: Biden would also hike the Democrats' book minimum
    tax--a fundamentally flawed proposal which harms American
    manufacturers--by 40 percent to 21 percent. Contrast that vision with
    what Republicans actually did in 2017.

        Prior to the Tax Cuts and Jobs Act (TCJA), the U.S. had one of the
    highest corporate income tax rates among developed countries. In 2017,
    Republicans lowered the rate and broadened the base, putting a stop to
    corporate inversions. It led to one of the strongest economies in
    generations prior to the pandemic: unemployment dropped to a 50-year
    low, economic gains flowed to all demographic groups and income levels,
    and American businesses reported record R&D investment.

        In the words of former President Obama's economic advisor, Jason
    Furman, ``taxes actually do matter.'' In response to a recent study on
    the impact of the TCJA's policy changes on domestic investment, Furman
    stated: ``These are the most convincing estimates of the response of
    investment to corporate tax rates that I've ever seen.''

        I agree--tax rates actually do matter. A competitive tax system is
    instrumental in manufacturers' decision of where to invest. Reducing
    business tax rates, paired with progrowth policies like immediate
    expensing of capital investments, drove historic growth in the
    manufacturing sector. According to the National Association of
    Manufacturers, in 2018, the year immediately following TCJA's
    enactment, manufacturing had the best year for job creation in 21
    years; manufacturing wages grew at the highest level in 15 years;
    manufacturing capital investment grew by 4.5 percent; and manufacturing
    production grew 2.7 percent, with December 2018 being the best month
    for manufacturing output since May 2008.

        Stability of tax policy is also key to maintaining strong
    manufacturing in the United States. We must protect the TCJA's
    progrowth tax policies and seek to make them permanent before they
    expire in 2025. We should also look to improve and build on those
    policies to ensure U.S. companies and workers can continue to compete
    globally.

        Another area of continued bipartisan interest is bolstering the
    domestic supply chain of semiconductors. American semiconductor
    manufacturers, represented here today by onsemi, are operating in an
    increasingly competitive market. While we must be circumspect when
    considering industry-specific tax incentives, bolstering domestic
    manufacturing of semiconductors is vital to safeguarding national
    security.

        Chairman Wyden and I have worked closely over the years on
    proposals to strengthen the U.S. semiconductor supply chain. The
    Advanced Manufacturing Investment Credit (AMIC) is the result of that
    bipartisan effort and has already led to increased investment across
    the U.S. In my home State of Idaho, Micron announced that it will
    construct a new memory chip plant, the first new memory semiconductor
    manufacturing fab built in the U.S. in the last 20 years. This
    expansion ensures the semiconductor industry will continue to innovate
    and develop new technologies that keep Idaho on the leading edge for
    research and development.

        In contrast to this bipartisan effort, the costs of the Inflation
    Reduction Act (IRA) energy incentives have quickly mushroomed from the
    original JCT score of $270 billion over 10 years to a June 2023
    estimate of $663 billion. One of our witnesses today will discuss his
    experience with how the administration is proposing to implement these
    incentives in a way that bolsters China and foreign manufacturing.

        Unfortunately, he is not alone: hundreds of domestic stakeholders
    have provided formal comments to various proposed energy incentive
    rulemakings which express significant concerns with the implementation
    of those energy incentives, including two other witnesses here today.
    Congress should closely scrutinize a law that both costs much more than
    promised and also fails to achieve key goals, like making the U.S. less
    reliant on our adversaries.

        I look forward to discussing how we can continue to encourage
    domestic manufacturing activity, including addressing the global
    semiconductor shortage and supply chain issues.

                                     ______

          Prepared Statement of Anna Fendley, Director of Regulatory
                  and State Policy, United Steelworkers (USW)
        On behalf of the members of the United Steelworkers (USW) union, I
    would like to thank Chairman Wyden, Ranking Member Crapo, and the
    members of the committee for holding this hearing today and for
    inviting me to testify.

        My name is Anna Fendley, and I am the director of regulatory and
    State policy for USW, the largest manufacturing union in North America.
    Our members supply almost every sector of the economy and produce a
    wide array of products, including paper, glass, ceramics, cement,
    chemicals, aluminum, oil, rubber, and, of course, steel. They do so in
    some of the most advanced, most efficient, and most environmentally
    friendly facilities in the world, and their jobs are the sort of good,
    family-supporting jobs that built the middle class in this country.
    These are the jobs that must be retained and created if America is to
    maintain its position in the global economy.

        We appreciate that this committee has spent many years considering,
    developing, and overseeing implementation of initiatives to grow U.S.
    manufacturing through the tax code. Over the last several years and
    through multiple pieces of legislation, Congress has enacted a once-in-
    a-generation investment in onshoring and growing the manufacturing base
    in this country using both supply- and demand-side drivers to
    incentivize growth. While I will only discuss a few of them in my
    testimony--those relevant to the tax code--they are only a handful of
    the interlocking series of policies all being simultaneously
    implemented by the Biden administration. USW is supportive of the work
    Congress has done--in a mostly bipartisan fashion--and is excited about
    the progress that has been made through executive action in
    implementation of the Bipartisan Infrastructure Law, the CHIPS and
    Science Act, and the Inflation Reduction Act (IRA).

        The efforts by Congress have already led to a boom in spending on
    manufacturing construction, reaching approximately $225 billion in new
    spending in January.\1\ U.S.-based companies like making investments in
    their facilities, such as Blue Bird Bus expanding capacity to allow
    USW-members to make up to 5,000 buses annually.\2\ Notably, foreign
    companies are also now choosing to make massive investments in the
    United States. For example, about a year ago Q-Cells, owned by South
    Korean company Hanwha, announced plans to invest approximately $2.5
    billion to expand its solar module manufacturing capacity in
    Georgia.\3\
    ---------------------------------------------------------------------------
        \1\ Federal Reserve Economic Data, ``Total Construction Spending:
    Manufacturing in the United States,'' accessed March 7, 2024, https://
    fred.stlouisfed.org/series/TLMFGCONS.
        \2\ Electrive, ``Blue Bird to Produce 5,000 Electric School Buses
    Per Year,'' May 26, 2023, https://www.electrive.com/2023/05/26/blue-
    bird-lays-foundations-to-produce-5000-zev-school-buses-a-year/.
        \3\ https://www.georgia.org/press-release/qcells-more-double-
    production-georgia-create-2500-new-jobs.

        We have worked hard with Congress, the administration, our employer
    partners, and other stakeholders to help develop and implement these
    policies and will continue to do so. This is an ongoing process, and
    the continued focus of the Finance Committee on ensuring success is
    very much appreciated, as is the committee's continued interest in the
    perspective of labor unions like USW.
              section 45x advanced manufacturing production credit
        The first provision I would like to highlight is the section 45X
    Advanced Manufacturing Production Credit that was enacted in the
    Inflation Reduction Act. Section 45X provides a tax credit for the
    domestic production and sale of certain clean energy products,
    components, and critical minerals. USW strongly supported, and
    continues to support, this provision because it presents huge potential
    to help build the critically needed stable and resilient domestic
    supply chains for an array of clean energy technologies that will allow
    American workers to rapidly scale the deployment of these technologies
    while protecting our energy security.

        Our union was particularly supportive of congressional efforts to
    create this tax credit to reshore solar manufacturing capacity after
    the majority of it was lost to China over decades; to use tax
    incentives to ensure that a new domestic offshore wind industry is
    supplied by U.S.-made components; and to boost the production of
    critical minerals in this country. As the largest mining union, our
    members are particularly keen to see responsible mining and mineral
    processing grow in this country to ensure we are supplying our own
    needs.

        We have provided input to the Department of the Treasury (Treasury)
    since the passage of the IRA in its ongoing regulatory process to
    implement section 45X. USW is grateful for the careful work being done
    by the Internal Revenue Service (IRS) to implement this provision so
    far, including the efforts by the agency to solicit public input on
    certain key questions in the notice of proposed rulemaking. Although
    like all iterative regulatory processes in an interim stage, there are
    certain outstanding and occasional new issues that arise that require
    more consideration before rulemaking is complete.

        An example of what I mean is in the definition of aluminum under
    45X, which is of great importance to USW, the primary union in the
    aluminum industry. USW was one of several stakeholders that sought
    clarification about the wording of the IRA statutory language that, if
    interpreted one way, could have inadvertently excluded most primary
    aluminum production from eligibility. In its proposed rule, the IRS
    both cleared up some of that confusion while, potentially, introducing
    a different bit of confusion. Clearly, the IRS had the correct goal in
    its guidance, which stated that the relevant definition of aluminum
    ``should be interpreted in light of the dynamics of the aluminum
    industry and the role that critical materials like aluminum play in the
    renewable energy and energy storage industry.'' As such, it clarifies
    the intent of Congress that eligibility should encompass both aluminum
    oxide (i.e., alumina) and commodity-grade aluminum.

        This is a welcome clarification for USW members who work at the
    only remaining domestic alumina refinery in Gramercy, LA, and for the
    USW members who work at primary aluminum facilities owned by Alcoa and
    Century Aluminum in Kentucky, New York, and Indiana.\4\ Although, even
    then, there are still anomalies. For example, the rule states both that
    ``commodity-grade aluminum'' means primary production of unwrought
    aluminum forms, and that it be ``in a form sold on international
    commodity exchanges.'' This creates a different potential ambiguity
    because while commodity-grade aluminum is produced and sold in several
    unwrought forms (ingots, t-bars and sows, slab, billet, etc.), only one
    of those forms (P1020 ingot) is typically sold on the primary
    international commodity exchange for aluminum (the London Metal
    Exchange), so if read overly literally this could be restrictive in a
    way that neither the IRS, nor Congress, intended.
    ---------------------------------------------------------------------------
        \4\ AL Circle, ``Atlantic Alumina welcomes the advancement of 45X
    advanced manufacturing credits,'' January 23, 2024, https://
    www.alcircle.com/press-release/atlantic-alumina-welcomes-the-
    advancement-of-45x-advanced-manufacturing-credits-105692.

        I raise this once again to note the fact that the implementation of
    this important credit is an iterative, as-yet-incomplete, process. USW
    is pleased that Treasury and the IRS seem to agree with our
    recommendation that the definition of primary aluminum include all
    unwrought primary aluminum smelted from aluminum oxide and that primary
    aluminum producers should be allowed to include all of their costs of
    ---------------------------------------------------------------------------
    production when calculating the credit.

        Getting this right really matters to the domestic aluminum industry
    and USW members. This industry has struggled significantly in recent
    years due to low-cost imports, high costs of electricity, and other
    factors that have resulted in the loss of domestic capacity and jobs.
    This is not news, and governmental support for this critical industry
    has taken many forms. We continue to work on all of them, and are
    especially focused on helping the IRS and Treasury get it right with
    regard to 45X. This credit can be a huge help in re-growing this
    industry in the United States after decades of predatory trade
    practices, and other issues, have destroyed so much domestic capacity.

        The example of aluminum is just one of several things that are
    going on in this rulemaking process, many of which USW has also
    commented on directly with the IRS and Treasury. We have urged Treasury
    to seek alignment with the Made in America office on methodology to
    develop clear and transparent origin requirements for the ``produced in
    the United States'' aspect of 45X. This is critically important for the
    credit to achieve the intent of Congress to build a domestic supply
    chain for these products, components, and minerals.

        To that end, we applaud the definition that Treasury has proposed
    to ensure that eligible components are substantially transformed into a
    distinct component that will function differently from that, which
    would result from assembly or superficial modification. This will
    prevent credit for activities, such as simply painting blades for wind
    turbines or conducting other superficial work, that do not bring the
    bulk of the economic activity and job gains to U.S. workers.

        However, we have also encouraged further clarification to ensure
    that there are not unintended consequences, such as improperly
    excluding critical mineral processors who constitute the bulk of the
    transformation, but send product to customers without completing the
    final step of refining.

        We have also urged Treasury to consider incorporating direct and
    indirect material costs, as well as the costs related to critical
    mineral extraction and mining in the definition of production costs.
    This is important to achieving the goals of both Congress and our
    union's many members in mining, that this credit can grow responsible
    domestic extraction and recycling of critical minerals, and ensure
    competitiveness of the domestic industry in a global market.

        Finally, we have urged Treasury to ensure that there are strong
    enforcement procedures. We have suggested a risk-based audit model to
    prevent abuse of this credit.

        All this is to say, USW is very excited about the prospect of this
    credit to help build U.S. domestic manufacturing and supply chains for
    clean technologies. The transition to a clean energy economy will
    result in lots of jobs somewhere in the global economy, and we look
    forward to continuing to work with Congress and Treasury to ensure that
    these jobs are good, family-supporting, union jobs for American
    workers.
             section 48c qualifying advanced energy project credit
        USW also strongly supported the revival of the section 48C
    Qualifying Advanced Energy Project Credit. We supported 48C when it was
    originally enacted in 2009 as part of the American Recovery and
    Reinvestment Act (ARRA), and like many others, were disappointed that
    it was not replenished when its initial tranche of funding ran out
    years ago.

        The IRA's revival and expansion of 48C provides an exciting
    opportunity to advance decarbonization efforts through the domestic
    manufacture of an expanded list of energy technologies and their
    components, processing of critical minerals, and direct efforts to
    decarbonize industrial processes.

        These efforts will both help build sustainable supply chains in the
    United States and promote the retention and growth of manufacturing
    jobs for American workers, although, again, the challenge is again in
    the implementation. We want these investments to achieve the greatest
    bang for the buck, which requires that applications outline technology,
    benefits, and risks that are clear, understandable, and predictable.

        The appetite for this credit has been as huge as expected, and the
    first round of applications for the first $4 billion in credit
    availability attracted concept papers from applicants seeking $42
    billion in funding across all the various categories of projects for
    which 48C can now apply. Needless to say, competition is fierce.

        This is not a surprise given how oversubscribed 48C was in its
    original incarnation under ARRA. Since then, the demand for this credit
    has only grown and it already seems that the $10 billion authority for
    48C in the IRA is not nearly enough.

        The IRA's 48C helpfully directs 40 percent of the available funding
    to designated energy communities, which will ensure that the benefits
    of the transition to a clean energy economy accrue to those communities
    that may suffer the most harm from the loss of fossil-fuel-related
    jobs. Those communities are responding with $11 billion worth of
    projects in energy communities applied for the first $1.6 billion set
    aside for projects there. This is both due to the extensive outreach
    done by the administration in those communities and an increasing
    understanding that these communities are poised to lead the way into
    the clean energy economy with the right governmental support.

        Because awarding of the 48C credit functions more like a grant
    process than a typical tax credit, I would be remiss not to mention the
    important role that the Department of Energy (DOE) to assist the IRS in
    managing the selection process. Our union strongly supports the work
    that DOE has done to include Community Benefits Plans into the scoring
    criteria for funding opportunities, including 48C. These plans are
    based on the following four elements to ensure that government support
    for a project is broadly shared: (1) engaging communities and labor;
    (2) investing in America's workers through quality jobs; (3) advancing
    diversity, equity, inclusion, and accessibility through recruitment and
    training; and (4) implementing Justice-
    40.\5\
    ---------------------------------------------------------------------------
        \5\ U.S. Department of Energy, ``About Community Benefits Plans,''
    accessed March 7, 2024, https://www.energy.gov/infrastructure/about-
    community-benefits-plans.

        The implementation of this scoring mechanism shows that there is
    widespread potential for projects that can catalyze clean energy
    manufacturing, critical minerals processing, and industrial
    decarbonization while simultaneously engaging with communities and
    labor organizations, putting quality jobs first, and helping
    ---------------------------------------------------------------------------
    communities that need assistance.

        Our union was proud to support some project applications by USW-
    employers seeking to make significant investments in the long-term
    viability and efficiency of their facilities in the first round of
    applications for 48C funding. The process outlined by DOE helped drive
    productive conversations between our members and their employers on the
    shared goal of ensuring that their jobs are there for many decades to
    come.

        Unfortunately, this hearing is being held prior to the announcement
    of selectees under the first tranche of $4 million of the 48C credit
    from the IRA. I wish we could collectively celebrate the selected
    projects specifically today, but that will have to wait to do that
    until a date in the future.
                              demand-side drivers
        The credits I have discussed, 45X and 48C, are both excellent
    examples of one aspect of how Congress can grow U.S. manufacturing
    through the tax code, but both work by driving the supply side of the
    equation. These will help producers build supply chains in clean
    energy, critical minerals, and drive industrial decarbonization, but in
    order to be fully effective, producers need certainty that making these
    investments will be worth it. Even with a tax credit, these projects
    are not free and undertaking them entails risk for producers.

        That risk can be mitigated by ensuring strong demand-side drivers
    to give producers confidence that, if they make the necessary
    investments, they will be rewarded with a strong and stable market for
    their products. These demand-side drivers for American made products
    are somewhat new to the tax code, but there are a few already being
    enacted now. For example, the IRA also included a bonus credit for
    clean energy projects that use American iron, steel, and manufactured
    goods, and the section 30D tax credit now includes requirements for
    vehicle assembly in North America and provisions around critical
    mineral and battery production.

        We strongly support these provisions, which are a critical piece of
    the puzzle that will unlock the potential for companies to take
    advantage of the supply-side tax credits and to garner private
    investment.

        To illustrate the importance of demand-side drivers and a
    comprehensive tax and trade agenda, I'll reference back to testimony
    that USW member Joe Wrona gave before this committee almost exactly 3
    years ago in a hearing titled, ``Fighting Forced Labor: Closing
    Loopholes and Improving Customs Enforcement to Mandate Clean Supply
    Chains and Protect Workers.''\6\ In his testimony, Joe told this
    committee about the $35 million investments that his employer,
    Ferroglobe, planned to make in their Niagara Falls plant in 2009 to
    increase production of metal silicate, largely for polysilicon
    production for solar panels. They expected strong demand from the solar
    manufacturing industry that never materialized because the growth of
    China's industry undercut global prices and ultimately harmed workers,
    like Joe and his colleagues.
    ---------------------------------------------------------------------------
        \6\ U.S. Senate Finance Committee, ``Fighting Forced Labor: Closing
    Loopholes and Improving Customs Enforcement to Mandate Clean Supply
    Chains and Protect Workers,'' March 18, 2021, https://
    www.finance.senate.gov/hearings/fighting-forced-labor-closing-
    loopholes-and-improving-customs-enforcement-to-mandate-clean-supply-
    chains-and-protect-worker.

        The solutions to these problems require a range of policy actions
    under the Senate Finance Committee's jurisdiction from improved trade
    enforcement to manufacturing tax credits. We applaud this committee for
    hearing testimony like Joe's and ensuring that the legislation that
    followed both helps stand up production capacity and creates a demand
    for it. Measures such as these ensure that government dollars are not
    wasted and private investment is not lost.
                                  path forward
        This is a very exciting time for American manufacturing, and tax
    policies are key drivers of that excitement. Still, there is a lot of
    work to be done.

        These and other IRA provisions are not yet fully finalized and
    operational, and more outreach needs to be done in order to educate
    producers of their benefits and fully implement these credits. Small
    and mid-sized manufacturers, in particular, have not yet been fully
    brought into these programs as much as they can be. There needs to be a
    dedicated outreach strategy to those producers in particular.

        The Senate Finance Committee, in its legislative role, should also
    build on these tax credits. Congress should continue to ensure that our
    tax code follows our values, like limiting foreign countries of concern
    use of tax credits, creating demand for American products, and
    guaranteeing American workers access to their federally guaranteed
    labor rights without employer interference. The union urges Congress to
    consider conditioning tax credits to ensure that credit dollars are not
    used to fight workers' choice to form a democratic union.

        We look forward to continuing to work with Congress and the
    administration as they further the implementation of the IRA, build and
    expand these outreach efforts, and think about the next generation of
    policies that can grow American manufacturing, both through the tax
    code and otherwise. Again, thank you to the committee for allowing us
    to be a constructive partner in these efforts, and for inviting me to
    testify today.

                                     ______

               Questions Submitted for the Record to Anna Fendley
                     Question Submitted by Hon. Mike Crapo
        Question. The United Steelworkers recently provided comments on
    proposed rulemaking related to ``foreign entities of concern'' that
    three times called upon the administration to ``strengthen'' the
    proposed rule that ``falls short'' of key Inflation Reduction Act (IRA)
    goals.

        What will the impact to U.S. manufacturing be if the administration
    fails to strengthen this proposed rule as you request?

        Answer. The foreign entity of concern (FEOC) rule is an important
    piece of the industrial policy in the Inflation Reduction Act. Failing
    to strengthen the FEOC provisions from the proposal will result in
    vulnerabilities for U.S. manufacturers in relation to competition with
    China.

                                     ______

                 Question Submitted by Hon. Benjamin L. Cardin
        Question. As you may know, U.S. Wind won a major new Federal grant
    of $47.7 million to support a plan to establish an offshore wind and
    manufacturing hub called Sparrows Point Steel in Baltimore County. This
    grant was provided through the U.S. Maritime Administration's Port
    Infrastructure Development Program. The site was once the home of
    Bethlehem Steel when it was the largest steel production facility in
    the world. It is estimated that this project will produce around 500
    Steelworker jobs, and a total labor income of $1,019,056,500 could be
    generated over 20 years.

        U.S. Wind is a Baltimore-based offshore wind developer that holds
    the lease rights to a Federal lease area off the coast of Ocean City,
    MD. The lease area, about 80,000 acres in size, has the capacity to
    generate 1,800 megawatts (MW) of offshore wind energy, which is enough
    clean electricity to power more than half a million homes each year.

        In 2021, U.S. Wind announced that it would be establishing an
    offshore wind manufacturing facility, Sparrows Point Steel, at
    Tradepoint Atlantic in Baltimore County. The site is almost 100 acres
    in size. Sparrows Point Steel will produce the towers, foundations, and
    other steel components needed for U.S. Wind's first two Maryland
    offshore wind products--MarWin and Momentum Wind--and have the
    capabilities to service the entire U.S. offshore wind market on the
    east coast.

        Could you speak about the importance of establishing Sparrows Point
    Steel in Maryland and what it means for the resurgence of the steel
    industry and the growth of the renewable energy market in Maryland?
    Additionally, could you speak on the relationship between an increase
    in good union jobs an increased investment in renewable energy
    manufacturing in the United States?

        Answer. The historic unionized jobs at Bethlehem Steel in Sparrows
    Point built the middle class in that community. When the steel mill
    closed, that community suffered greatly, not just with the loss of jobs
    but also cuts to pensions for retirees. The siting of Sparrows Point
    Steel on the footprint of an iconic former steel mill demonstrates the
    opportunity of offshore wind to bring manufacturing jobs back to port
    communities.

        The vast majority of jobs that will be created in offshore wind
    will be in manufacturing the many components for these projects,
    meaning that a core goal of renewable energy policy should be to
    capture those jobs for American workers. We applaud Congress for
    creating the 45X tax credit in the Inflation Reduction Act as a way to
    incentivize domestic manufacturing of offshore wind foundations and
    towers, like those that will be made at Sparrows Point Steel.

        Importantly, these new clean energy manufacturing jobs should be
    union jobs due to the vast benefits that unions provide to workers and
    communities. Last year, the U.S. Treasury Department outlined many of
    those benefits including higher wages, higher job satisfaction, and
    more equity in the workplace.\1\ Congress and the administration must
    work to ensure that companies, particularly those receiving Federal
    funding, respect workers' rights to organize and collectively bargain.
    ---------------------------------------------------------------------------
        \1\ https://home.treasury.gov/news/featured-stories/labor-unions-
    and-the-us-economy.

                                     ______

         Prepared Statement of Peter R. Huntsman, Chairman, President,
               and Chief Executive Officer, Huntsman Corporation
                              why i am here today
        Chairman Wyden, Ranking Member Crapo, members of the committee,
    thank you for this opportunity to appear before the committee to
    testify on how to best calibrate the tax code to grow U.S.
    manufacturing. It is an honor. I take very seriously our First
    Amendment right to engage directly with elected officials and
    policymakers of both parties to help educate and inform them about how
    Huntsman Corporation and American chemical manufacturers manage risk,
    make capital decisions, grow our employee base, return capital to
    shareholders, and safely deliver the products that make modern life
    possible.

        The primary reason I am here today is to share my observations on
    policy, political, business, and cultural forces that are shaping
    investment decisions by U.S. manufacturers, especially those that are
    energy intensive. I am not a tax expert; I rely heavily on our company
    finance and tax teams to help me understand the complexity of the tax
    code. However, after 4 decades in the chemical industry, I do
    understand how the tax code--and other inputs--incentivize or
    disincentive manufacturing investment decisions in the United States.

        I hope members of the committee come away with the following
    conclusions from my testimony:

            1.  American manufacturing dominance, prosperity, security, and
            power are based predominantly on access to cheap, abundant, and
            reliable energy, primarily in the form of hydrocarbons.
            2.  The safe and environmentally secure extraction, processing,
            and transportation of hydrocarbons makes modern life possible.
            That is not hyperbole. It is physical, immutable reality.
            3.  Under existing technology, organizing the American economy
            and government to entirely eliminate greenhouse gas emissions
            will create scarcity of the chemical building blocks of modern
            life, increase the costs of all goods and services, inhibit
            U.S. economic growth, and weaken America in the world.
            4.  To enable society to reduce greenhouse gas emissions, tax
            policy should be calibrated to increase U.S. natural resource
            extraction, material refining capacity, and chemical
            manufacturing more efficiently and productively here in the
            United States, where we have the strongest, risk-based
            environmental laws and regulation in the world. It is the
            chemical sector that develops the molecules that allow
            individuals and society collectively to lower their greenhouse
            gas emissions.
            5.  Long-term taxpayer subsidy of intermittent and unprofitable
            electricity production is already creating market distortions
            across the entire manufacturing value chain and supplanting
            reliable and profitable sources of energy.
            6.  Only when EVs become affordable and reliable to buyers and
            profitable for manufacturers will there be meaningful EV
            adoption.
            7.  If the threat of climate change is existential to humanity,
            the U.S. Congress should directly finance or incentivize the
            construction of emissions free nuclear energy facilities across
            the entire Nation.
                               the huntsman story
        The Huntsman story is the story of American manufacturing.

        Through the vision and tenacity of my father, Jon Huntsman, Sr.,
    and supported by tens of thousands of employees over a half century,
    Huntsman Corporation today is a New York Stock Exchange (NYSE) traded
    company headquartered in The Woodlands, TX with 2023 revenues of
    approximately $7 billion, 6,000 employees, and operations in 25
    countries. My father's life began in 1937 in a Blackfoot, ID home with
    no indoor plumbing. By the end of his life in 2018, he had donated
    nearly $1 billion dollars to endow the Huntsman Cancer Institute (HCI)
    at the University of Utah in Salt Lake City. Today, HCI is the leading
    cancer hospital in the Mountain West region and has saved tens of
    thousands of lives through world leading cancer treatment.

        After dropping out of college, I started my career in 1983 as a
    truck driver delivering oil across the Intermountain West. In 2000, I
    became president of the company and in 2017 chairman and CEO. As our
    company grew from a small California packaging company into a
    multinational chemical company, I have witnessed boom and bust business
    cycles, mergers and acquisitions, multiple iterations of ``peak oil,''
    the collapse of the Soviet Union, reunification of Europe, the rise of
    China, the creation of the Internet, and the transformational impact of
    hydraulic fracturing, among others. Today, I am eager watch how
    artificial intelligence changes the chemical industry and world. I have
    also observed the tax policy and regulatory environment impacting U.S.
    manufacturing ebb and flow across Democrat and Republican
    administrations and Congresses. Our company and the chemical industry
    have played a role in all of it.
       raw materials, feedstocks, chemical manufacturing, and innovation
        I want to provide a basic primer on what chemical companies do
    because chemicals are the building blocks of all American
    manufacturing. In the most basic form, we take atoms and molecules,
    break them apart and then put them back together to make the building
    blocks of virtually everything you see and touch in modern life.
    Automobiles, passenger airplanes, solar panels, wind blades,
    smartphones, computers and televisions, residential and commercial
    buildings, pharmaceuticals, missiles, fighter planes, clothing, soap,
    shampoo, shoes, clean drinking water, and crop fertilizer are just a
    few examples of modern miracles made possible by chemical
    manufacturing.

        The most utilized starting atoms, or ``feedstocks,'' for chemical
    manufacturing are hydrocarbons derived from petroleum, natural gas,
    natural gas liquids and coal, otherwise known as fossil fuels. Without
    abundant access to fossil fuel feedstocks, we cannot manufacture
    chemicals. Without chemicals, virtually all U.S. manufacturing would
    cease.

        The scientists and engineers in the American chemical sector go to
    work in laboratories across the country every day and work to improve
    existing molecules and develop new ones. When commercially viable,
    their laboratory innovations move to manufacturing plants and into the
    marketplace. While abstract to the average person, that molecular
    innovation ultimately manifests itself in our sustainable modern
    lives--lighter airplanes and cars, longer lasting clothes, stronger
    building materials, clean drinking water, new medicines and cancer
    treatments, and larger crop yields. Human lives are enriched and
    lengthened through chemical sector innovation and manufacturing.
                  lack of understanding of how things are made
        I am increasingly concerned that many government and business
    leaders lack an understanding of how ``things'' are made. In the post-
    Cold War era of globalization, the United States underwent a low-level
    form of deindustrialization as the appeal of cheap labor and growth
    markets in Asia pushed supply chains out of North America. Two examples
    of this trend in the 1990s and 2000s were the Pennsylvania steel
    industry and textiles in North Carolina, among others. Wall Street
    became the highest paying sector in the 1990s and 2000s. It was then
    followed by Silicon Valley and the tech boom. Quite simply, ``making
    things'' went out of vogue because it was done ``out of sight and out
    of mind.''

        Looking back with the benefit of hindsight, I believe the post-Cold
    War manufacturing exodus led many policymakers and business leaders to
    simply forget how things are manufactured at the most basic molecular
    level or, as we say in the chemical industry, ``upstream.'' This trend
    is best encapsulated by Apple's famous ``Designed in California
    Assembled in China'' label on their products. To most people, the
    iPhone is a supercomputer we use every few seconds connecting us to the
    entire world. As a chemical industry leader, I see a device consisting
    of minerals and elements extracted from the Earth and refined thousands
    of times over into chemicals, plastic, glass, and materials brought to
    market via one of the most sophisticated supply chains ever developed.
    The same is true of millions of other products we use in our daily
    lives.
              natural resource extraction is the base of american
                   manufacturing and the american way of life
        One of the biggest threats to American manufacturing power,
    security, prosperity is the belief that we can choose not to extract
    our natural resources and convert them into the materials that enable
    our citizenry to thrive. Since the beginning of recorded history to the
    modern-day international system, human beings and nation-states have
    used natural resources to survive, prosper, trade, and project power.
    This has been an invariable part of human nature and will always be so.

        In the current policy, political and business arenas, opposition to
    natural resource extraction manifests itself in the idea that American
    society--and the world--can somehow ``transition'' away from fossil
    fuels and their derivative materials, including chemicals, and somehow
    maintain our way of life. Until the advent of new technology or a
    massive expansion of nuclear power, this is simply untrue and not
    physically possible. To believe so is both naive and dangerous. Serious
    countries and people understand this reality. On the issue of fossil
    fuel extraction, I fully align myself with J.P. Morgan Chase & Co.
    chairman and CEO Jamie Dimon when he testified in the U.S. House of
    Representatives in September 2022 that stopping capital investment in
    fossil fuel development would be ``the road to hell for America.''

        Until relatively recently, the notion that we could eliminate
    fossil fuels while still sustaining modern society was mostly a fringe
    idea and dismissed by serious leaders in government and industry. Over
    the last 2 decades, as seemingly well-intentioned policy proposals
    developed to attempt to manage an ever-changing climate, anti-
    fossil-fuel-extraction policy has become normalized in Europe and, more
    recently, in the United States. Many governments have organized
    themselves around stopping natural resource extraction in the name of
    reducing greenhouse gas emissions to ``net zero.'' In the business
    community, many companies have made ``commitments'' that may (or may
    not) come to reality in less than 3 decades.
                  ``net zero'' and german deindustrialization
        The most notable example of the danger of ``net zero'' government
    policy is Germany. Through a series of government decisions over 2
    decades and exacerbated by Russia's invasion of Ukraine, Germany finds
    itself a cold winter or supply chain disruption away from having to
    choose between allowing industry to operate or permitting its citizens
    to warm their homes. Without a policy course correction around energy
    and natural resource extraction, Germany may be on the cusp of a once-
    in-a-century deindustrialization that will have enormous global
    impacts, including in the United States.

        Just 2 years ago, it would have been inconceivable that the
    birthplace of the chemical industry could be deindustrializing. Yet
    here we are, waiting to see whether one of the most advanced economies
    and societies in modern history will be able to provide cheap,
    reliable, and abundant heat and electricity to power its economy. I
    encourage all U.S. elected officials to study deeply the policy
    decisions Germany made as it presents a real-life example of how not to
    organize manufacturing, natural resource, energy, and industrial
    policy.
     the chemical sector enables society to lower greenhouse gas emissions
        If the goal of government and business is to reduce carbon dioxide
    emissions across society, U.S. Government tax policy should be
    calibrated to increase domestic natural resource extraction and
    chemical manufacturing more efficiently and productively. It is the
    chemical sector that develops the molecules that allow individuals and
    society collectively to lower their emissions. This is evident in
    almost every sector across the economy. In the aerospace sector, fossil
    fuel derived carbon composite airplanes fly longer distances using less
    fuel than their aluminum predecessors. Automobiles are constructed
    using carbon fiber material versus steel in years past. Modern homes
    include insulation materials that create a building envelope, securing
    the valuable hot and cold air inside the home. The world population
    recently reached 8 billion people and, for the most part, everyone has
    access to food. The mass starvation that we witnessed as recently as
    the mid-1980s in sub-Saharan Africa is virtually obsolete. This is a
    new phenomenon in human history and has been made possible only by
    chemical fertilizer and cold chain storage. Simply stated, a vibrant
    chemical industry means it is within our ability to lower emissions,
    grow the economy, and improve lives.
                energy efficiency and modern building technology
        One product Huntsman manufactures is called methylene diphenyl
    diisocyanate (MDI), which is a hydrocarbon-based ``polymer of
    prosperity.'' MDI has versatile uses, including as a component of spray
    foam insulation. Spray foam insulation is by far the most efficient and
    effective way to insulate a building and can reduce energy consumption
    by up to 50 percent.

        We worked closely with Senators Maggie Hassan (D-NH), Susan Collins
    (R-ME) and other members of the committee on legislation that
    modernized and updated the standards and definitions in the Energy
    Efficient Home Improvement Tax Credit (25C). These updates were
    subsequently included in the Inflation Reduction Act of 2022 and help
    ensure that government support for energy efficiency will favor modern
    insulation technology versus outdated and less energy efficient
    technology.
               electrification of the u.s. transportation sector
                          and the battery supply chain
        Huntsman Corporation manufactures products for automakers all
    around the world. We defer to automakers on whether consumers want to
    drive electric vehicles (EVs) or internal combustion engines (ICE)
    cars. We will manufacture the products needed by car companies to meet
    their market goals and technology specifications.

        The IRA committed hundreds of billions of taxpayer dollars to
    incentivize American consumers to purchase electric vehicles with the
    goal of creating a U.S. EV supply chain. Simply put, a car battery is
    an amalgamation of refined elements, minerals, and chemicals. When
    developing the legislation, policymakers seemingly failed to consider
    that the global battery supply chain is almost totally controlled by
    China. As a result, the IRA directly subsidizes the extraction and
    refinement of battery materials and chemicals from China. Thus, any
    increased adoption of EVs in the United States will increase our
    Nation's dependence on China in the automotive industry.

        Despite tens of billions of announced investments in battery
    assembly in the United States since the IRA passed, almost 100 percent
    of the battery raw materials we need will continue to be sourced from
    China for the foreseeable future. If the U.S. wants to ensure battery
    supply chain security and resilience, Federal, State and local
    governments must collectively enable a massive expansion of mining and
    chemical refining in the United States. These changes must come to pass
    if American companies are to have any hope competing against lower cost
    Chinese labor, Chinese coal based manufacturing and Chinese pricing
    actions in the global marketplace.
              thwarted huntsman investment in u.s. ev supply chain
        Huntsman is the only North American manufacturer of a EV battery
    input called ethylene carbonate (EC), a chemical that is central to the
    production of electrolyte for EV batteries. You simply cannot have an
    EV battery without an electrolyte, and you cannot have an electrolyte
    without EC.

        Before the IRA became law, Huntsman made the decision to invest $50
    million at our Conroe, TX manufacturing plant to increase our U.S. EC
    production capacity by 530 percent to supply the domestic EV battery
    supply chain. Almost immediately after the IRA passed, Chinese
    producers slashed prices of EC by 75 percent to a point far below
    Huntsman's cost of production in the United States. Unfortunately, I
    had to suspend this project expansion until prices stabilize and the
    investment makes economic sense for Huntsman shareholders to whom I owe
    a clear fiduciary duty.
                   tax policy, permitting, and overregulation
        U.S. tax policy can only incentivize capital investment and unleash
    American manufacturing if companies are also able to obtain permits to
    put shovels in the ground to build and regulatory approvals to sell
    what we make. In the chemical sector, it takes almost 3 years to get a
    new molecule approved by the U.S. Environmental Protection Agency (EPA)
    for sale in the marketplace based on bipartisan legislation passed in
    2016.

        For example, if Huntsman were to develop a new material or chemical
    that would enable the transportation sector to massively reduce the
    weight of trucks and cars and simultaneously lower tailpipe emissions,
    it would take at least 3 years to be approved by EPA. If it takes 3
    years to get a new chemical approved by EPA, how can an American
    chemical company ever commit capital to increase large scale
    manufacturing of the product? What is the impact on greenhouse gas
    emissions while a new chemical awaits EPA approval?
                    american manufacturers welcome strong,
                      effective, and risk-based regulation
        The United States has the strongest and most effective
    environmental laws governing clean air and water in the world. It was
    not always that way and industry has made mistakes. However, when you
    compare the environment in the developed world today to even 1980, the
    progress is staggering. The water in the Potomac River, the air in Los
    Angeles, and our rivers and streams throughout the United States are
    all cleaner. This is due to the combination of strong government
    regulation, corporations being held legally accountable for wrongdoing
    and because wealthy nations have the financial resources to prioritize
    the environment. The more prosperous a society becomes, the better it
    can manage the environment.

        Every single day the chemical sector manufactures, handles, stores,
    transports, and sells hazardous materials across the world. To deliver
    the products that make modern life possible does incur risk. We spend
    billions of dollars on environmental, health, and safety of our
    employees and in the communities where we operate. Safety is a deeply
    ingrained value and our license to operate. In my 40 years in the
    industry, I can state unequivocally that we have greatly improved our
    safety record. As in all human endeavors, mistakes and failures occur.
    Our safety record demonstrates we constantly strive to learn and
    improve as a company and industry.
     complex industrial systems, ``transitions,'' and policies that do no
                                      harm
        The United States possesses the most sophisticated energy
    production and electricity delivery system in the world. It also has
    the world's best automotive manufacturing sector with an enormous
    supply chain supporting it, including the chemical sector. Every day,
    the energy system delivers electricity to 330 million people so they
    can power their businesses and lives. Every single American has on-
    demand access to refined petroleum products to fuel their automobiles.
    Together, the energy and automotive sectors employ millions of
    Americans and generate hundreds of billions of dollars in wealth for
    Americans.

        They are two bedrocks of American manufacturing strength. They are
    also two of the most amazingly complex manufacturing systems in human
    history. They are the envy of every other nation in the world, and
    their processes have been refined over 150 years through efficiency and
    human innovation. Yet, we take them for granted and often fail to
    appreciate how easily they can be irreparably harmed by bad government
    policy and improperly incentivized business decisions.

        I encourage the committee members to consider that, over the last
    decade, European and U.S. Governments have collectively committed
    trillions of taxpayer spending to ``transition'' away from energy
    sources that successfully power modern economies to energy sources that
    cannot do so. European and U.S. Governments have subsidized a
    ``transition'' to passenger vehicles for which no mass market demand
    exists and the electricity generation needed to fuel them is not
    possible. In both cases--maybe for the first time in modern American
    history--we are investing a huge portion of American productive
    capacity into duplicative and parallel energy and transportation
    systems that will do very little to improve lives or lift people out of
    poverty. We already have the best energy system and automotive sectors
    in the world. Why are we spending trillions of dollars of public and
    private capital to try and replicate the exact same system?

        Today, government and business leaders talk about ``transitions''
    of the U.S. energy system and automotive sector as a forgone conclusion
    that will just happen without massive financial, human, and reliability
    costs. Complex systems that profitably mass produces materials society
    wants and needs are very hard to ``transition'' away from because they
    represent the essence of free market capitalism. An energy or
    automotive ``transition'' will only happen when new, undeveloped
    technology is scaled to meet mass market demand at a profit. No amount
    of government spending can supplant these systems without enormous
    damage to American manufacturing and American lives.

        As committee members consider changes to the tax code to spur
    American manufacturing, I encourage you to examine what has worked
    consistently over time and ``do no harm'' when harnessing the power of
    government on large, complex industrial systems.
                                 looking ahead
        I am highly optimistic about the future. The United States, with
    its combination of freedom, capitalism, scientific inquiry, deep
    capital markets, legal protection, and entrepreneurial spirit,
    possesses the power to solve humanity's problems. As the geopolitical
    tides churn and countries reassess their priorities in a more dangerous
    world, regionalized supply chains will take precedence.

        Government policy around natural resources, self-sufficiency, and
    manufacturing have returned to the forefront of policymaking.
    Industrial policy, regulatory decisions, and capital expenditures made
    today by government and business leaders will impact America and the
    world for generations to come. We don't need to look far to see the
    damaging impact of bad public policy around taxes, natural resources,
    energy, chemicals, and material innovation.

        History shows that such policy decisions determine the fate of
    nations and societies.

        I look forward to your questions.
                                     ______

            Questions Submitted for the Record to Peter R. Huntsman
                     Question Submitted by Hon. Mike Crapo
        Question. President Biden recently released his budget, and he once
    again called for tax increases on America's job creators. Under
    President Biden's budget, the corporate tax rate would increase to 28
    percent. When combined with State and local taxes, many companies would
    face an income tax rate far higher than China's and Europe's.

        Would raising the corporate income tax rate make the U.S. a more or
    less competitive place to invest?

        Answer. The reduction in the corporate rate enacted as part of TCJA
    helped to make the U.S. a more competitive market to invest in.
    Huntsman operates in a global market makes decisions on where to deploy
    capital across different countries. Tax rates are a factor in that
    analysis. Further, if Huntsman needs to pay higher taxes it will need
    to find that money somewhere. That means raising prices to our
    customers or cutting jobs or other costs or both.

                                     ______

                    Question Submitted by Hon. Bill Cassidy
        Question. Your company employs over 700 people in Geismar, LA, my
    home State. With innovative hydrogen technologies like those produced
    by Huntsman and Federal policy like the section 45V tax credit, cleaner
    energy sources are around the corner that will allow America to lead.
    Huntsman is the only company that produces carbon nanotubes and
    hydrogen at the same time. However, Biden's Treasury has proposed a 45V
    rule that is counter to unleashing these investments and instead
    creates uncertainty in the market. The proposed section 45V clean
    hydrogen production tax credit from the Department of Treasury risks
    stifling innovation and impeding the success of critical Federal
    initiatives like the Regional Clean Hydrogen Hubs.

        If a final rule is crafted properly and hydrogen investment is
    unleashed, what types of economic benefits will Huntsman bring to the
    South?

        How is this delay in final rules impacting companies like yours?

        How could the 45Q final rules create better certainty for CCUS and
    DAC project developers and help America lead the way in this industry?

        On investment in carbon capture technologies, what specific
    provisions or clarifications do you hope to see in the final rules to
    provide greater clarity and incentives for project developers?

        Considering the importance of the 45Q tax credit in fostering
    innovation and investment in carbon capture technologies, what specific
    provisions or clarifications do you hope to see in the final rules to
    provide greater clarity and incentives for project developers?

        Answer. Huntsman supports the expansion of the scope of the 45Q tax
    credit to ensure that methane pyrolysis qualifies for the tax credit.

                                     ______

                     Question Submitted by Hon. John Thune
        Question. Can you please speak to how your company has benefited
    from the 2017 tax reform bill and what provisions you believe are most
    important for Congress to make permanent, or at the very least extend,
    next year to give your business and other businesses in the chemical
    industry certainty?

        Answer. The international tax reform included in TCJA enabled
    Huntsman to repatriate significant income from overseas back to the
    U.S. Huntsman was able to use some of this income to invest in our
    production operations in Louisiana. Additionally, Huntsman benefited
    from the 100-percent expensing provision in TCJA to also help enable
    these investments. Making the 100-percent expensing provision permanent
    is very important. When Huntsman makes investment decisions it does so
    over a 30- to 40-year time horizon. Permanently addressing these
    provisions will provide certainty and remove risks that would otherwise
    cause capital to sit on the sidelines. If that provision were
    permanent, Huntsman would have the certainty to make investments that
    will benefit its associates, customers, and the products we produce.

                                     ______

                    Prepared Statement of Shannon M. Janis,
                      Vice President of Global Tax, onsemi
        Chairman Wyden, Ranking Member Crapo, and members of the committee,
    thank you for the invitation to testify today. My name is Shannon
    Janis, vice president of global tax at onsemi. I am here today to share
    what we do at onsemi and discuss how U.S. tax policy shapes our
    decisions regarding domestic manufacturing.

        onsemi is a Fortune 500 semiconductor company with over 4,000
    employees in the U.S. and 31,000 employees worldwide. We are
    headquartered in Scottsdale, AZ and specialize in delivering industry-
    leading intelligent power and sensing solutions that greatly improve
    the safety, sustainability, and power efficiency of end-products in the
    automotive and industrial markets.

        In the automotive market, our products enable lighter and longer
    range EVs, increased gas mileage in traditional vehicles, deploy
    automatic emergency braking and pedestrian detection systems, and
    adaptive headlights to reduce blinding drivers in oncoming traffic, to
    name a few.

        With respect to the industrial market, our products are used to
    enable highly efficient energy storage and renewable energy systems, EV
    charging infrastructure, industrial automation, smart cities and
    buildings, motor control and robotics, hearing health, and diagnostic
    therapy and monitoring for chronic disease such as diabetes.

        We also manufacture products used in end-use applications related
    to computing, consumer networking and communications such as 5G base
    stations and smart phones.

        To support these applications, we offer a robust portfolio of
    semiconductor products and technologies that include silicon carbide,
    image sensors, power modules, wireless connectivity, and more. These
    applications help our customers create
    cutting-edge products that solve challenging problems, enhance safety
    standards and support the transition to electrification for a more
    sustainable future.
                  manufacturing and site operations at onsemi
        We operate 19 manufacturing sites across 8 countries worldwide--
    including the United States; these sites consist of front-end materials
    and wafer fabrication facilities (known as fabs) as well as back-end
    assembly and test site factories.

        In the U.S., our materials and fab operations are located in five
    States; Oregon, Idaho, Pennsylvania, New York, and New Hampshire. Each
    of these factories are an integral part of onsemi's in-house global
    manufacturing network.
                                  gresham, or
        onsemi's Gresham wafer fab is the third largest fab globally,
    employing more than 600 people. Over 50 percent of Gresham's volume
    supports the automotive market with over 35 different technologies
    manufactured at this site. This fab has been accredited by the U.S.
    Defense Department as a Category 1A Trusted Foundry and is ITAR
    registered.
                                   nampa, id
        The Nampa wafer fab employs over 260 people and supports our award
    winning and lifesaving image sensor business. Image sensors are a key
    component in machine vision cameras, including digital cameras and
    security cameras. Today, onsemi is a leading producer of image sensors,
    inductive and ultrasonic sensors used in advanced safety, Advanced
    Driver Assist Systems (ADAS), and Autonomous Vehicle (AV) technologies.
                                mountain top, pa
        Our Mountain Top fab employs over 240 people making power
    semiconductors for automotive and other applications and is the only
    union fab in the U.S.
                            east fishkill, ny (efk)
        EFK is onsemi's largest manufacturing facility in the U.S.
    employing over 1,000 people and it is the only 12-inch power discrete
    and image sensor fab in the U.S.
                                   hudson, nh
        Our Hudson facility is the cornerstone to onsemi's silicon carbide
    products. Through a rigorous proprietary process, crystals are
    converted to valuable silicon carbide boules which are further
    processed at other factories into silicon carbide power devices for use
    in high-power and high-efficiency applications. Today, onsemi is the
    only U.S.-based company that has fully integrated end-to-end silicon
    carbide manufacturing.
    And Why Is This Important?
        Silicon carbide semiconductors play a pivotal role in enabling the
    transition to electric vehicles and renewable energy systems.
    Manufacturing silicon carbide semiconductors is more complex than
    traditional silicon semiconductors due to higher temperatures,
    specialized equipment and unique expertise. We are proud that our New
    Hampshire site enables our network of factories to deliver the end-to-
    end silicon carbide power solutions from crystal growth to fully
    integrated power modules necessary for EVs, hybrid vehicles and
    renewable energy.

        In addition to our fabs, we have Solution Engineering and Design
    Center operations in nine U.S. States that include Arizona, California,
    Idaho, New York, Oregon, Pennsylvania, Rhode Island, and Texas, as well
    as design centers located in 18 other countries.
                           workforce talent at onsemi
        The importance of hiring and retaining a skilled workforce in the
    semiconductor industry cannot be overemphasized. At onsemi we
    proactively seek new candidates and talented individuals to enrich our
    innovative, diverse and inclusive work environment. To achieve this, we
    developed an extensive U.S. workforce strategy that includes:

              Outreach Programs: We engage with high schools, community
            colleges, universities and other organizations, including our
            military.

              Country-wide and Local Initiatives: Our talent acquisition
            efforts extend beyond traditional channels. We operate both
            country-wide programs as well as local programs near our
            facilities.

              University Collaboration: We collaborate closely with
            university faculties, particularly those in semiconductor-
            related fields. Through workshops, capstone projects, and
            student events, we actively engage students and recruit
            graduating students through career fairs and online
            advertisements.

              Investing in Education: Recently, we announced a commitment
            to donate $500,000 over 10 years to Rochester Institute of
            Technology in New York. This investment supports semiconductor
            educational programming and research, benefiting both students
            and faculty with increased co-op opportunities and new research
            initiatives.\1\
    ---------------------------------------------------------------------------
        \1\ onsemi to donate $500,000 to RIT to further semiconductor
    educational initiatives, RIT, https://www.rit.edu/engineering/news/
    onsemi-donate-500000-rit-further-semiconductor-educational-initiatives.
    ---------------------------------------------------------------------------
          importance of the chips act and its incentives for the u.s.
        As this committee is aware, the steady decline in United States-
    based semiconductor manufacturing capacity poses a risk to America's
    supply chain and national security. This decline has been decades in
    the making and will require persistent attention to achieve a
    sustainable reversal. A key contributing factor to the decline has
    largely been due to the substantial manufacturing incentives provided
    by the governments of our global competitors. These incentives have
    placed the U.S. at a competitive disadvantage in attracting new
    construction of semiconductor manufacturing facilities.\2\
    ---------------------------------------------------------------------------
        \2\ See ``Government Incentives and US Competitiveness in
    Semiconductor Manufacturing,'' by Antonio Varas, Raj Varadarajan, Jimmy
    Goodrich, and Falan Yinug, September 2020, available at https://
    www.semiconductors.org/wp-content/uploads/2020/09/Government-
    Incentives-and-US-Competitiveness-in-Semiconductor-Manufacturing-Sep-
    2020.pdf.

        Although the U.S. has taken the initial steps to curb this decline,
    other countries both within the European Union as well as countries
    such as South Korea, Japan, and China are significantly increasing
    their investments in the semiconductor industry and its workforce. Many
    of these countries have legislation similar to the CHIPS Act to support
    their domestic companies as well as incentivizing other companies to
    invest in their regions. The CHIPS Act, and in particular the section
    48D advanced manufacturing tax credit has played a critical role in
    ---------------------------------------------------------------------------
    enhancing the global competitiveness of the U.S.

        However, there is a noteworthy disparity: Federal investments in
    semiconductor research have historically remained flat as a share of
    GDP. While other country governments have prioritized investments in
    R&D initiatives to strengthen their semiconductor capabilities, our
    U.S. R&D tax incentives lag behind those of our international
    counterparts.

        Semiconductor companies carefully evaluate multiple factors in
    making investment decisions. These include overall business conditions,
    regulatory environmental compliance, supplier networks, site
    availability, infrastructure, and the access to a skilled workforce.
    Given this, rebuilding the semiconductor supply chain in the U.S. is
    not an easy task. The complex technology, and advanced process of
    designing and manufacturing semiconductors requires high levels of
    sustained investment in people, fabs, and equipment due to the
    sophistication of the technology and the rigorous and exacting
    standards needed for construction, equipment, and infrastructure.

        Additionally, the cost of a fab can range from $1 billion to $20
    billion depending on the type and scale of the project plus it can take
    anywhere from 2 to 5 years to complete construction. Furthermore, fab
    construction requires a highly skilled workforce to build and install
    support systems and advanced structures that deliver high purity gases,
    ultra-pure water, and state-of-the-art air recirculation systems. With
    the U.S. workforce talent being more expensive than other low-cost
    countries, incentives are critically needed to help offset these costs
    and enable competitive pricing.

        On another crucial front, the U.S. has set aggressive targets to
    reduce greenhouse gas emissions by 50 percent by 2030 and achieve net-
    zero economy-wide by 2050. Meeting these timelines will require the
    U.S. to make significant investments in clean energy and power
    efficiency--all dependent on semiconductors that go into the design of
    electronic applications. With the government's support, onsemi will
    continue to drive innovation across our portfolio of products and
    increase the energy-efficiency and reduce carbon emissions in key
    sectors that extend from electricity generation, transportation,
    industry and agriculture--which all play a pivotal role in helping the
    U.S. achieve these goals.

        Preliminary reports appear to indicate that investments from the
    industry, facilitated by incentives under the CHIPS Act, are working to
    grow domestic semiconductor manufacturing and strengthen the resiliency
    of our supply chains. With the help of the U.S. CHIPS Act, the U.S. is
    expected to attract roughly one-quarter of total global semiconductor
    investment. But areas of vulnerability in the ecosystem remain and
    additional work is needed to maintain this momentum and further
    strengthen key areas of the chip supply chain. Policymakers in the
    United States and elsewhere should consider additional measures to
    maintain momentum in strengthening the semiconductor supply chain and
    ensuring increased resilience in the future.

                                 in conclusion
        As a U.S.-based company, onsemi welcomes the opportunity to expand
    and bring new domestic production onshore. We are committed to
    implementing projects that will keep onsemi competitive in the long
    term--which is a core responsibility to our shareholders, employees,
    suppliers, communities, and other stakeholders.

        The enactment of the CHIPS and Science Act was a landmark step
    towards reinvigorating domestic semiconductor manufacturing and
    innovation. The mission is clear: establishing our leadership role is
    vital for the U.S. to win the global technology race in the
    semiconductor industry. Ongoing support from the CHIPS Act with its
    section 48D advanced manufacturing tax credit will enable companies
    like onsemi to continue to invest in the U.S., compete with companies
    that are located offshore, and strengthen the resiliency of our
    critical supply chains.

        Mr. Chairman, I appreciate your calling for this hearing and this
    committee's support of the U.S. semiconductor industry. Thank you for
    the opportunity to testify at today's hearing.

                                     ______

             Questions Submitted for the Record to Shannon M. Janis
                     Question Submitted by Hon. Mike Crapo
        Question. The Tax Cuts and Jobs Act (TCJA) sought to move away from
    industry-specific incentives in favor of a competitive domestic tax
    rate and broader progrowth tax policies to incentivize domestic
    manufacturing. However, there are certain situations that may call for
    a targeted tax incentive to put U.S. manufacturers on a more even
    playing field with their foreign competitors.

        One example is strengthening the U.S. semiconductor supply chain,
    because it not only affects American jobs and workers but also impacts
    our economic and national security. The Advanced Manufacturing
    Investment Credit (AMIC) was enacted to bolster domestic investment in
    this vital industry.

        Can you discuss how the AMIC has impacted onsemi's domestic
    investment decisions?

        Answer. onsemi conducts a comprehensive cost and gap analysis when
    evaluating potential investment locations. This analysis compares costs
    across various jurisdictions to identify promising investment
    opportunities. While not the sole determinant, the gap cost analysis
    influences our decision-making process. The Advanced Manufacturing
    Investment Credit (AMIC) has played a pivotal role in narrowing the
    cost disparity between U.S. investments and those in other countries.
    Although U.S. companies prioritize domestic investment due to its
    robust technology infrastructure, intellectual property protections,
    and skilled workforce, cost disparities--especially related to labor,
    construction, and utilities--remain. The AMIC contributes to leveling
    the playing field among jurisdictions by addressing these cost
    disparities.

        The AMIC is an important incentive that addresses key supply chain
    gaps and vulnerabilities for manufacturing semiconductors and
    semiconductor equipment. These facilities will require ongoing
    investments to remain competitive, and additional facilities will need
    to be built to further strengthen the semiconductor ecosystem in the
    U.S. Stability in the U.S. tax code is important for long-term
    investments. Extending the credit beyond 2026 will provide needed
    certainty and a competitive investment climate to sustain new U.S.
    manufacturing capacity.

                                     ______

                   Questions Submitted by Hon. Maria Cantwell
        Question. I worked closely with Senators Wyden and Cornyn, among
    others, to include their 25-percent semiconductor manufacturing tax
    credit in the final CHIPS and Science Act.

        This tax credit will encourage companies to build and expand
    domestic semiconductor manufacturing facilities, which is incredibly
    important in the State of Washington and in the Pacific Northwest more
    broadly, a region which accounts for 15 percent of the Nation's
    semiconductor workforce.

        The Department of Treasury guidance released last June would not
    include eligibility for the manufacturing of materials critical to the
    semiconductor ecosystem like polysilicon. I am concerned that as these
    companies look to reshore and strengthen domestic facilities,
    uncertainty around their eligibility is delaying investments and
    expansions.

        Do you agree that in order to ensure our domestic semiconductor
    companies remain internationally competitive, we must make sure that
    companies from all parts of our ecosystem are confident in their
    ability to benefit from both the Department of Commerce manufacturing
    incentive programs and the tax incentive?

        Answer. Ensuring confidence among ecosystem participants regarding
    access to benefits from the Department of Commerce manufacturing
    incentive programs and tax incentives is pivotal for our domestic
    semiconductor companies' global competitiveness. Moreover, maintaining
    certainty in these incentives, along with preserving the current
    benefit levels, is essential. When expanding the ecosystem eligible
    under the credit, we must also safeguard the effectiveness of these
    incentives to ensure a sustainable competitive edge for the U.S.
    semiconductor industry. Striking the right balance is crucial.

        To ensure integral activities are covered under the advanced
    manufacturing investment credit, we encourage the Department of
    Treasury to revise the definition of ``semiconductor manufacturing'' by
    including (1) the production of semiconductor-grade polysilicon and
    compound semiconductor substances, such as silicon carbide (SiC), used
    in the production of wafers; and (2) the full range of steps in the
    process of manufacturing wafers, like crystal/boule growth. These
    highly complex manufacturing processes are integral to the
    semiconductor manufacturing process and comprise the first steps in
    manufacturing a semiconductor device. Put another way, the production
    of silicon carbide and similar substances are the ``semiconductor'' in
    the finished semiconductor device. Through crystal/boule growth, the
    ingot will be imbued with the final semiconductor parameters such as
    diameter, crystal orientation, resistivity, and supporting elements
    such as oxygen, nitrogen, and carbon, all of which are defining aspects
    of final chip performance.

        Question. What will be the impact on fabrication facilities like
    yours if materials suppliers aren't able to fully take advantage of the
    CHIPS Act 48D tax credit?

        Answer. The worldwide demand for silicon carbide materials is
    currently outpacing supply, with many suppliers investing heavily in
    low-cost regions such as China to develop lower-cost materials. The
    omission of these integral activities in the semiconductor
    manufacturing process from the definition of semiconductor
    manufacturing under section 48D of the Internal Revenue Code poses
    challenges. Specifically, excluding the production of silicon carbide
    and crystal/boule growth from being eligible for the 48D credit creates
    uncertainty for onsemi seeking to invest in domestic facilities. onsemi
    conducts a comprehensive cost and gap analysis when evaluating
    potential investment locations. This analysis compares costs across
    various jurisdictions to identify promising investment opportunities.
    While not the sole determinant, the gap cost analysis influences our
    decision-making process.

        Our Hudson, NH facility is the cornerstone of onsemi's production
    of silicon carbide products. Through a rigorous proprietary process,
    crystals are converted to valuable silicon carbide boules which are
    further processed at other factories into silicon carbide power devices
    for use in high-power and high-efficiency applications. Silicon carbide
    is a fundamental material for advanced semiconductor production
    enabling the sustainability ecosystem including electrification,
    alternative energy and factory automation. Silicon carbide reduces
    system cost while offering higher efficiency and simpler cooling
    mechanisms.

        As the regulations are currently proposed, the activities at this
    facility may not be eligible for the credit. Excluding the production
    of silicon carbide from being eligible for the IRC 48D credit causes
    U.S.-based silicon carbide production to be uncompetitive to foreign
    locations, including China.

                                     ______

                     Questions Submitted by Hon. Todd Young
        Question. As I mentioned during the hearing, restoring full and
    immediate expensing under section 174 of the Internal Revenue Code is
    critical to maintaining American competitiveness. As you know, the
    shift to amortization of research and development (R&D) investments
    comes at a time when countries across the globe are increasing the
    generosity of their R&D incentives. For example, companies conducting
    R&D in the United States are forced to amortize their R&D expenses over
    5 years while companies conducting those same activities in China are
    receiving a 200-percent super-deduction.

        Can you please explain the importance of R&D incentives in
    maintaining U.S. global competitiveness in the semiconductor industry?

        Answer. Making the U.S. an attractive destination for semiconductor
    companies to grow their research and development (R&D) will spur
    economic activity and support U.S. national security, supply chain
    resilience, and technology leadership. U.S. semiconductor companies
    invest heavily to innovate and maintain technology leadership by on
    average reinvesting 20 percent of revenue into R&D--with $58.8 billion
    invested in 2023.

        As the U.S. incentives for R&D fail to keep pace with global
    competitors, we risk our industry leadership. To remain a competitive
    place to conduct R&D, at a minimum, the U.S. must restore the full and
    immediate expensing of all R&D expenditures on a permanent basis. As
    you know, the shift to amortization of research and development
    investments comes at a time when countries across the globe are
    increasing the deductibility as well as providing increased funding of
    R&D initiatives in their jurisdictions. For example, companies
    conducting R&D in the United States are forced to amortize their R&D
    expenses over 5 years while companies conducting those same activities
    in China are receiving a 200 percent super deduction.

        Question. How has the expiration of immediate R&D expensing
    impacted companies like onsemi?

        Answer. For onsemi, a leader in semiconductor solutions focused on
    enabling the sustainability ecosystem, the immediate expensing of R&D
    is a catalyst for innovation. The ability to deduct expenses in the
    same tax year they were incurred allowed for increased cash flow to put
    towards capital and R&D investment activities. The expiration of this
    provision means that onsemi must now spread the deduction of these
    expenses over several years, reducing the funds available for
    reinvestment in R&D and slowing down the pace of innovation.

        This also highlights a critical ripple effect of the expiration of
    immediate R&D expensing. The financial strain extends beyond primary
    companies like onsemi to our suppliers and the broader semiconductor
    ecosystem. This policy change has slowed the overall pace of innovation
    within the semiconductor industry. This interconnected impact
    underscores the urgency for policy measures that reinstate and make
    permanent immediate R&D expensing to bolster innovation and sustain the
    industry's growth.

        Question. My Republican colleagues and I are closely tracking the
    Treasury Department's negotiations of the OECD's Global Anti-Base
    Erosion Model Rules (``Pillar 2''). We are concerned that the agreed-
    upon framework threatens U.S. domestic tax incentives championed by
    both Republicans and Democrats.

        How have the current OECD Pillar 2 negotiations jeopardized the
    effectiveness of U.S. domestic research and development tax incentives?

        Answer. It is important that the U.S. continues to engage at the
    OCED as these new international tax regimes are implemented.

        While we are encouraged by the reports that the Treasury Department
    intends to provide relief for the nonrefundable R&D credit in the
    context of Pillar 2, as currently drafted, Pillar 2 presents a
    challenge to the efficacy of domestic research and development tax
    incentives. Specifically, it negates the advantages of U.S. R&D credits
    if a taxpayer's effective tax rate, influenced by these credits, dips
    below the 15-percent global minimum set by Pillar 2. Furthermore, the
    Under-Taxed Payment/Profit Rule (UTPR) within Pillar 2 allows other
    nations to levy taxes on the benefits derived from U.S. R&D credits.
    So, under Pillar 2, an R&D credit received in the U.S. can be taxed by
    a foreign jurisdiction; the U.S. company and its affiliated companies
    would then lose additional capital that could be invested in research
    and development and undermines the intent of the U.S. tax code.

        Pillar 2 poses a significant risk to U.S. research and development
    incentives because it will reduce the amount of tax revenue that the
    U.S. receives. This reduction in tax revenue will further limit the
    U.S.'s ability to offer R&D incentives (or support other important
    business and social programs). The approach taken by the OECD, as
    drafted, has negative consequences on the United States' interests.
    Under the rules devised by the OECD, Pillar 2 requires all countries to
    tax subsidiaries of all large multinational companies in their
    jurisdiction (these are the Qualified Domestic Minimum Top-up Taxes or
    QDMTTs), and then the OECD prioritized these QDMTTs even though this
    same income was being already taxed by the U.S. under its Global
    Intangible Low-Taxed Income regime (``GILTI''). The OECD could have
    developed rules consistent with or respecting the U.S. GILTI regime but
    chose not to. Rather, Pillar 2 is a direct override of U.S. taxing
    rules and taxing rights in a manner that the JCT estimates will give
    rise to a loss of greater than $100 billion in tax revenue over a 10-
    year period.\1\
    ---------------------------------------------------------------------------
        \1\ Joint Committee on Taxation, ``Possible effects of adopting the
    OECD's Pillar Two, both worldwide and in the United States,'' June
    2023.

        Finally, Pillar 2 undercuts the effectiveness of U.S. domestic R&D
    incentives because it causes our incentives to become vastly inferior
    to the state subsidies and the qualified refundable tax credits
    (referred to collectively as ``subsidies'') generally provided by the
    People's Republic of China and the European Union. Pillar 2 imposes no
    penalties or limitations on these subsidies even though academic
    articles and analytical tools currently used by the U.S. and scores of
    other countries have shown that subsidies and U.S.-style incentives are
    economically equivalent.\2\ The structural failure to treat subsidies
    and U.S. incentives as economically equivalent is a gaping hole in the
    logic of Pillar 2 and provides a competitive advantage to European
    countries and China that primarily support R&D through subsidies. In
    fact, publicly available information shows that some Chinese companies
    receive subsidies greater than their annual revenue, and yet the OECD
    seems preoccupied by nonrefundable U.S. R&D credits that decrease a
    U.S. company's rate below 15 percent. Ultimately, the inexplicable
    decisions of the OECD to punish U.S. incentives and ignore subsidies
    hollows out the effectiveness of U.S. R&D credits as it creates an
    obvious advantage to Europe and China to support R&D and related
    innovation in their countries.
    ---------------------------------------------------------------------------
        \2\ See, Noam Noked, ``From Tax Competition to Subsidy
    Competition,'' University of Pennsylvania, Vol. 42:2, (2020); Mindy
    Herzfeld, ``Who Wins Out in the Latest Pillar 2 Guidance?'' Tax Notes,
    posted Feb. 13, 2023; Stephen Bonovich, ``The U.S. as the Biggest
    Casualty of Pillar 2's Fatal Flaw--the Bias for State Subsidies,'' Tax
    Notes International, September 18, 2023; Alan Cole, The Fatal Flaw of
    Pillar Two, The Tax Foundation, posted February 27, 2024.

        Question. The CHIPS Act established a 25-percent Investment Tax
    Credit (ITC) for certain ``qualified property'' which includes advanced
    manufacturing facilities--for which the primary purpose is the
    manufacturing of semiconductors--or semiconductor manufacturing
    equipment. The purpose of the ITC is to incentivize investment in the
    United States, strengthen our global competitiveness, and bolster our
    ---------------------------------------------------------------------------
    national security.

        The U.S. Department of Treasury and the Internal Revenue Service
    (IRS) published the first Notice of Proposed Rulemaking for the ITC on
    March 23, 2023, just shy of 1 year ago. Yet, Treasury and the IRS have
    not decided on what constitutes a ``qualified property.''

        How has the administration's failure to provide timely guidance on
    the implementation of the ITC weakened U.S. global competitiveness in
    semiconductor manufacturing?

        Answer. The lack of prompt guidance on the Investment Tax Credit
    (ITC) for semiconductor manufacturing has raised concerns about the
    United States' competitiveness in the global market. The absence of
    clear criteria and related recapture provisions has created uncertainty
    among investors and businesses, leading to hesitation in committing to
    advanced manufacturing facilities or semiconductor equipment. This
    uncertainty is detrimental to investor confidence, as stability and
    predictability are key factors in investment decisions.

        Moreover, semiconductors are vital to modern technology, and
    countries that offer well-defined incentives for their production are
    more likely to attract investment and drive innovation. The U.S. faces
    a competitive disadvantage due to the delay in defining ``qualified
    property,'' risking its position in an industry that is critical to
    consumer electronics and national defense.

        The global semiconductor supply chain is already under strain from
    shortages and geopolitical tensions. Strengthening domestic
    manufacturing is crucial for supply chain resilience. Timely ITC
    guidance would encourage investments in U.S. facilities, reducing
    dependence on foreign suppliers and enhancing national security.

        In conclusion, the administration's delay in providing clear ITC
    guidelines has significant implications for U.S. competitiveness in
    semiconductor manufacturing. Establishing clear guidelines is
    imperative to attract investment, foster innovation, and maintain a
    strong position in the global semiconductor industry.

                                     ______

                       Submitted by Hon. James Lankford,
                          a U.S. Senator From Oklahoma

              American Exploration and Production Council (AXPC)
               and the Domestic Energy Producers Alliance (DEPA)

    March 12, 2024

    The Honorable Ron Wyden             The Honorable Mike Crapo
    Chairman                            Ranking Member
    U.S. Senate                         U.S. Senate
    Committee on Finance                Committee on Finance
    Washington, DC 20510                Washington, DC 20510

    RE: Support for S. 3381, the ``Promoting Domestic Energy Production
    Act.''

    Dear Chairman Wyden and Ranking Member Crapo,

    The American Exploration and Production Council (AXPC) and the Domestic
    Energy Producers Alliance (DEPA) are writing to highlight the critical
    role of the independent oil and natural gas exploration and production
    industry in ensuring the Nation's energy security and economic
    prosperity. We appreciate the committee's dedication to holding a
    hearing on domestic manufacturing, and urge your support for Senator
    Lankford's S. 3381, the ``Promoting Domestic Energy Production Act.''

    AXPC is the voice of the leading independent energy producers and
    underscores the industry's pivotal contributions to the U.S. economy,
    including significant employment opportunities and technological
    advancements that enhance both energy efficiency and environmental
    stewardship. DEPA is a nationwide collaboration of 39 coalition
    associations--from California to West Virginia, Texas to Montana--
    representing individuals and companies engaged in domestic onshore oil
    and natural gas exploration and production.

    Considering the recent enactment of the Corporate Alternative Minimum
    Tax (CAMT) as part of the Inflation Reduction Act, AXPC and DEPA seek
    to address a pressing issue that undermines the competitiveness of the
    domestic energy sector. Our concerns center around the unequal tax
    treatment of intangible drilling costs (IDCs), a key investment
    mechanism that underpins much of our industry's operations. For these
    reasons, AXPC and DEPA strongly support S. 3381, the ``Promoting
    Domestic Energy Production Act'' which will ensure parity in the tax
    treatment for similarly situated taxpayers.

    IDCs represent a substantial portion of the capital expenditure in oil
    and gas exploration and production, crucial for maintaining and
    expanding domestic energy capabilities. Historically, the ability to
    deduct IDCs in the year incurred has facilitated rapid reinvestment in
    further development, a practice vital for sustaining energy production
    and innovation within the industry.

    However, under the current CAMT framework, the lack of explicit
    provisions for IDC deductions parallels an unintentional discrepancy,
    disadvantaging energy producers compared to other capital-intensive
    industries. This disparity not only hampers our ability to invest in
    new projects but also contradicts the broader objectives of energy
    independence and economic growth.

    Therefore, AXPC and DEPA respectfully urge the Senate Committee on
    Finance to consider the unique characteristics of the energy sector in
    the CAMT's implementation. Senator Lankford's legislation will address
    this issue. Additionally, we request guidance from the U.S. Department
    of the Treasury that aligns the treatment of IDCs under CAMT with their
    handling in traditional corporate income taxation, ensuring a level
    playing field across all sectors of the American economy.

    Senator Lankford's legislation will support equitable tax policy which
    is essential for fostering continued investment in domestic energy
    production, which is paramount for achieving long-term economic
    resilience and environmental goals.

    We appreciate your attention to this matter and look forward to
    engaging with the committee to find a solution that supports the
    Nation's energy producers and, by extension, the American people.

    Sincerely,

    Jerry R. Simmons                    Troy M. Lyons
    President & CEO                     Vice President, Government Affairs
    Domestic Energy Producers Alliance  American Exploration & Production
                                        Council

                                     ______

                    Prepared Statement of Courtney Silver,
                       President and Owner, Ketchie, Inc.
        Chairman Wyden, Ranking Member Crapo, and distinguished members of
    the committee, thank you for holding today's important hearing focused
    on how the U.S. tax code impacts manufacturing in America.

        My name is Courtney Silver, and I am president and owner of
    Ketchie, Inc. located in Concord, NC. Ketchie is a third-generation,
    full-service precision machine shop that was established in 1947. Our
    mission is to support the entire U.S. manufacturing supply chain by
    delivering competitively priced, high-quality machined parts on time.
    We invest in machining equipment and technology, people and processes
    to make it easy for our customers to focus on what they do best and to
    have confidence in their supply chain.

        My testimony will focus around one main theme today, and I hope if
    members take away anything from me, it is this: manufacturing is a team
    sport.

        Like any great sports franchise, a team can only excel if every
    player is operating at their peak. If not, the team falls apart.
    Similarly, the manufacturing supply chain is only as strong as its
    weakest link. At the core of any sport are clear, sensible rules that
    don't unfairly handicap any players in the game. These rules are
    consistent, rather than constantly changing, so that the game does not
    devolve into chaos. In this context, the rules of the game are the U.S.
    tax code. Our tax code needs to be simple, consistent, and progrowth so
    that it supports manufacturing and gives us all a chance to compete to
    our fullest potential.

        The 2017 Tax Cuts and Jobs Act was revolutionary for the
    manufacturing sector. After the legislation was signed into law,
    Ketchie experienced the best year in our 7-decade history. I know
    others further up our supply chain were booming as well, because I can
    clearly remember our typically organized shop floor covered in pallets
    of materials in every available space to keep up with orders. My
    customers were able to plan facility expansions, introduce new product
    lines, invest in R&D and enter into long-term stocking agreements with
    Ketchie due to this industry boom. This was great for us too: our sales
    revenue increased 25 percent in that first year.

        As a result, in 2018, we were able to invest more than $1 million
    into capital equipment, which helped us meet the surge of demand as our
    customers ramped up production. We expanded our shop floor workforce by
    20 percent, developing our team at Ketchie to keep pace with the ever-
    evolving manufacturing industry.

        When you want to succeed, the only choice is to use your profits
    productively and pour them back into your team. We made major
    investments in capital, such as new machining equipment and technology,
    advanced robotics, tooling, fixtures, HVAC systems for our facilities,
    and new security and safety systems for our team members. We were able
    to provide 100 percent of our team members, no matter how long they had
    been with the company, with pay raises and quarterly bonuses. We
    expanded our team members' benefits, including enhanced 401(k)
    matching. I was excited to see that because of these choices, our
    dedicated team members were buying their families their first homes and
    first cars. Ketchie was also able to do more to support our community,
    grow our charitable giving and take on more volunteer opportunities.

        Ketchie has made a commitment to focus our resources on bringing up
    the next generation of manufacturers. In 2023, I created ``Opportunity
    Knocks,'' an internship program for high school students that allows
    them to shadow experienced machinists in our factory while earning
    school credit. The local high school we partnered with consists of 70
    percent minority students, and almost 100 percent come from
    economically disadvantaged situations. I would not have been able to
    establish this program or invest in the machinery and the team members
    necessary to make it a success without the TCJA. Because we have been
    able to expand and invest in exciting technologies, students are
    learning valuable trade skills while also preparing for careers that
    will bring them fulfillment and pride.

        Members of this committee must understand that small and medium-
    sized manufacturers operate on extremely slim profit margins, so all of
    these changes--higher wages, investments, increased charitable giving--
    were thanks to these progrowth tax reforms.

        Of course, our growth trajectory was disrupted during the COVID-19
    pandemic like the rest of the world. However, thanks to the TCJA
    policies having such an impact on Ketchie in 2018 and 2019, we were
    able to withstand the shutdowns and supply chain disruptions, even as
    some of our customers went out of business or were unable to pay tens
    of thousands of dollars in open invoices for the better part of 2020.
    This would not have been possible--and Ketchie might not be here
    today--if we didn't have an economic boom in the years prior to the
    pandemic.

        Small manufacturers across the country realize how significant the
    job was for Congress to advance generational tax reform in 2017. The
    alterations made to our tax code allowed a small manufacturer like me
    to play on a global scale by making it an easier call for my customers
    to invest their dollars here rather than in a competitor overseas.
    Manufacturers are facing stiff competition around the globe from
    countries enticing companies to bring their business out of the United
    States. A strong domestic manufacturing sector directly correlates to
    increased national security and economic prosperity for all Americans.

        Beginning in 2022, the rules of the game began to change making it
    much more difficult for manufacturers to thrive in America. Crucial
    policies enacted by the TCJA began expiring or phasing out, including
    the ability to immediately deduct research and development expenses,
    enhanced interest deductibility on business loans and the ability to
    deduct the cost of capital investments in the year acquired. These
    provisions, along with many others in the TCJA, gave us the confidence
    and stability we needed to invest and grow our operations.
    Manufacturers rely on stability from our tax code for assurance that we
    can make decisions in the short term, but also plan ahead and make
    investments that will pay off for decades to come.

        Congress enacting progrowth and permanent tax policies allows us to
    do all of this and so much more.
            a. the tax code must promote certainty for manufacturers
        It is imperative that this committee recognizes the fact that all
    domestic businesses rely on predictability and stability within the tax
    code. Ketchie's experience with the benefits of tax reform was not an
    outlier. Following TCJA passage, the manufacturing sector experienced
    the best year for manufacturing job creation in the previous 21 years
    and the best year for manufacturing wage growth in the previous 15
    years.\1\ Manufacturing capital spending grew 4.5 percent and 5.7
    percent in 2018 and 2019, respectively.\2\
    ---------------------------------------------------------------------------
        \1\ National Association of Manufacturers, ``Competing to Win''
    (September 2022), available at https://documents.nam.org/ctw22/
    competing%20to%20win%202022%20-%20tax.pdf.
        \2\ Id.

        Yet today, due to the uncertainty that Congress will address the
    expiration of Federal tax incentives related to R&D, interest
    deductibility and expensing for capital investments, 40 percent of
    manufacturers said they have already been forced to pull back on hiring
    and investing.\3\ In the same survey, 94 percent of manufacturers said
    that it is important for the Federal tax code to help reduce
    manufacturers' costs for conducting R&D, accessing capital via business
    loans and investing in capital equipment purchases.
    ---------------------------------------------------------------------------
        \3\ NAM Manufacturers' Outlook Survey, First Quarter 2024 (March 5,
    2024), available at https://nam.org/wp-content/uploads/2024/03/Outlook-
    Survey-March-2024-Q1.pdf.

        Ketchie, like most manufacturers, is a capital-intensive business.
    In the years following the TCJA, I was able to make a higher level of
    investment because I knew our tax code was going to have a baseline of
    certainty. Today, however, I am unable to make these investments
    because of the uncertainty that Congress will address the expired TCJA
    provisions. This is not unique to Ketchie; I see my customers and
    fellow local manufacturers being forced to pull back on expansions or
    ---------------------------------------------------------------------------
    hiring opportunities due to the uncertainty.

        I receive a daily reminder of this when I walk on my shop floor. I
    have a very large space on my floor reserved for my next significant
    machinery investment. This investment will allow Ketchie to operate in
    new industry markets, and to inspire and attract the next generation of
    top talent who want to work with the most
    cutting-edge technology possible.

        This investment is on hold due to the phasing out of the
    accelerated depreciation levels from 100 percent in 2022 to 60 percent
    in 2024. Because I am unable to realize the full deduction of my
    investment within the year I purchase it, the investment seems too
    risky and irresponsible. Permanent full expensing allows me to invest,
    grow, compete and create highly skilled and high-paying jobs. These
    positions give people dignity and purpose and change their lives in our
    community. If accelerated depreciation is allowed to expire fully in
    2027, I truly don't know how we will be able to purchase the equipment
    we need to continue to expand our business.

        According to the Joint Committee on Taxation,\4\ the manufacturing
    sector, and specifically small manufacturers, overwhelmingly utilize
    accelerated depreciation more than any other sector. I would like to
    thank Senator James Lankford and many members on this committee that
    joined him for introducing the Accelerate Long-Term Investment Growth
    Now Act, which would make 100-percent accelerated depreciation
    permanent. Legislation like this is what allows manufacturers to have
    tax-planning certainty for the future.
    ---------------------------------------------------------------------------
        \4\ Joint Committee on Taxation, ``Tax Incentives for Domestic
    Manufacturing,'' JCX-15-21 (March 2021), available at https://
    www.jct.gov/publications/2021/jcx-15-21/.

        Additionally, at the beginning of 2022, the deduction for interest
    on business loans was reduced in a manner that disproportionately
    affects manufacturers. The maximum deduction allowed under section
    163(j) of the tax code was narrowed from 30 percent of earnings before
    interest, tax, depreciation, and amortization (EBITDA) to 30 percent of
    earnings before interest and tax (EBIT). Excluding depreciation and
    amortization would reduce the amount of interest businesses can deduct,
    making it more expensive for manufacturers to finance capital equipment
    ---------------------------------------------------------------------------
    purchases.

        Because we do not carry as much debt typically, Ketchie may not
    experience a direct impact of this tax policy change. However, our
    customers up the supply chain certainly do, which means the impact of
    this tax policy change makes its way downstream to us. The majority of
    my customers buy and sell large pieces of capital equipment that
    require debt financing, and their inability to deduct interest makes
    borrowing more expensive, threatening Ketchie's economic health and
    ability to grow.

        Allowing this stricter limitation to continue greatly affects
    manufacturers' ability to compete globally. Among the 35 countries that
    have a rule that restricts tax deductibility based on a ratio of
    interest expense to some measure of earnings, the United States is the
    only country that has an EBIT-based rule. Generally, China does not
    limit any third-party interest deduction. According to a recent study,
    keeping the EBIT standard could cost the U.S. economy 467,000 jobs and
    reduce the U.S. GDP by $43.8 billion if Congress does not act.\5\
    ---------------------------------------------------------------------------
        \5\ ``Economic impact of a stricter 163(j) interest expense
    limitation,'' EY (September 2022), available at https://
    documents.nam.org/tax/nam_interest_deductibility_study.pdf.

        I would like to thank Senators Shelley Moore Capito and Kyrsten
    Sinema for introducing the American Investment in Manufacturing Act,
    which would reverse this harmful policy that disproportionately impacts
    ---------------------------------------------------------------------------
    manufacturers.

        Ketchie delivers machining solutions to government and commercial
    customers in a wide range of industries, including rail, agriculture,
    textile, heavy machinery, industrial equipment, and many specialized
    original equipment manufacturers. Our ability to innovate is what keeps
    us in the game, and a large part of that for the manufacturing sector
    as a whole has been the ability to deduct R&D expenses.

        For decades, taxpayers have been allowed to immediately deduct 100
    percent of their R&D expenses in the year they incurred. In 2022,
    however, the tax code began requiring so-called ``amortization'' of
    these expenses, forcing manufacturers to recover only a small portion
    of their costs over several years.

        Taxing manufacturers' investments in critical R&D expenditures
    means that we will have less funds to invest in workers and our future
    growth. The private sector accounts for more than 75 percent of total
    R&D spending,\6\ with small businesses accounting for approximately $90
    billion of all private-sector R&D investments.\7\ This is not a new
    issue--the tax code has recognized the importance of R&D spending for
    more than 70 years, but with this recent change, Congress has now made
    the U.S. one of the two developed countries in the world who require
    the amortization of R&D expenses.
    ---------------------------------------------------------------------------
        \6\ National Center for Science and Engineering Statistics,
    National Science Foundation, National Patterns of R&D Resources: 2020-
    21 Data Update, NSF 23-321 (January 4, 2023), available at https://
    ncses.nsf.gov/pubs/nsf23321.
        \7\ National Center for Science and Engineering Statistics,
    National Science Foundation, InfoBrief, NSF 22-343 (October 4, 2022),
    available at https://ncses.nsf.gov/pubs/nsf22343 and InfoBrief, NSF 23-
    305 (December 14, 2022), available at https://ncses.nsf.gov/pubs/
    nsf23305.

        A new report from the European Union found that both the EU and
    China gained a significant advantage after the expiration of the TCJA
    R&D tax policies.\8\ In 2022, the first full year after immediate
    expensing for R&D expired in the United States, EU R&D growth surpassed
    the U.S. for the first time in nearly a decade. Even more worrisome,
    China's R&D growth tripled that of the United States in 2022. Chinese
    companies enjoy a super-deduction on research spending, while American
    firms must now compete with weights strapped to their ankles following
    the expiration at home. China is not the only country offering better
    R&D incentives--17 countries now provide a deduction that is more than
    100 percent of eligible R&D expenses, further making the United States
    a less attractive place to conduct R&D.
    ---------------------------------------------------------------------------
        \8\ ``EU Industrial R&D Investment Scoreboard'' (2023), available
    at https://op.europa.eu/en/publication-detail/-/publication/1e5c204f-
    9da6-11ee-b164-01aa75ed71a1/language-en.

        At Ketchie, we challenge ourselves to provide our customers with a
    good reason to spend their dollars here. At a time of increasingly
    fierce global competition for research dollars, Congress must act to
    ensure the next R&D dollar is spent in the United States to secure our
    global leadership in innovation and strengthen our Nation's economic
    and national security. I want to thank Senators Maggie Hassan and Todd
    Young for introducing the American Innovation and Jobs Act this
    ---------------------------------------------------------------------------
    Congress to support R&D investments by manufacturers.

        Finally, our tax code should be simple. As a small manufacturer,
    hiring outside accountants and lawyers to understand and navigate every
    piece of the tax code is costly and time-consuming for me. Our tax
    system should not be so complicated that small manufacturers don't even
    have a chance because we are crushed by red tape and unnecessary
    bureaucracy. Congress should craft our tax code so that it enhances
    competitiveness and encourages industrial investment here in the United
    States.

        At the time of this hearing, the Senate has the opportunity to
    address these three expired tax provisions. On January 31, 2024, the
    House of Representatives passed the Tax Relief for American Families
    and Workers Act, which would allow for the TCJA R&D, interest standard
    and full expensing provisions to be extended from their expiration
    until 2025. If the Senate fails to renew these business provisions,
    manufacturers will be playing with one hand tied behind their back for
    the foreseeable future. I urge every member of this committee to show
    their support for these business provisions so that Ketchie and
    manufacturers like us are able to continue the progress we made after
    2017.
                b. congress must preserve progrowth tax policies
        As members of this committee are well aware, a number of other
    important tax policies enacted by the TCJA are set to expire at the end
    of 2025. These changes represent damaging tax increases for companies,
    like Ketchie, which will take effect if Congress does not act.

        Ketchie is organized as an S corporation, and therefore is eligible
    for a 20-percent deduction on our business income thanks to the section
    199A provision created by the TCJA. Pass-through owners see their
    business income reflected on their personal tax returns, and this
    deduction reduces the amount of pass-through income subject to tax,
    allowing us to reinvest. This provision, along with the income tax
    rates for individuals, is set to expire at the end of 2025,
    dramatically increasing the tax burden on small manufacturers like
    Ketchie. This means we will have fewer resources to: create new jobs;
    create shadowing programs for our local high school; invest in capital
    equipment; improve our security systems and safety measures for our
    employees; provide increased health benefits and 401(k) plans; donate
    to local Boys and Girls Clubs; increase bonus and pay scales for our
    employees; and take chances on new innovations and technology to grow
    our business.

        If Congress fails to preserve the 20-percent deduction, Ketchie
    will be unable to conduct these activities because funds will flow to
    the Federal Government instead of back to manufacturers so they can
    reinvest. I would like to thank Senator Steve Daines for introducing
    the Main Street Tax Certainty Act, which would make the 20-percent
    deduction permanent for small manufacturers like Ketchie.

        Moreover, if not for the Federal estate tax exemption being
    increased in 2017, Ketchie might not be here today. I know firsthand
    the struggle that family-owned businesses face when a loved one passes
    away. When I lost my husband in 2014 to brain cancer, not only did I
    have to worry about keeping the business afloat, but I was so worried
    about a looming tax bill that might have forced us to halt production
    altogether.

        We are a third-generation family-owned company, and we want to
    remain a linchpin in Concord for many generations to come. The estate
    tax has a significant impact on family-owned manufacturers' ability to
    continue to operate after the death of a loved one. The tax has a
    disproportionate impact on family-owned manufacturers because their
    companies consist largely of illiquid assets that would need to be sold
    or leveraged to satisfy the tax burden.

        In 2017, the TCJA increased the exemption threshold for the estate
    tax, allowing more of a family-owned business's assets to be passed on
    to the next generation without incurring a tax burden. The increased
    exemption is set to expire in 2026, which will expose more of a family-
    owned business's assets to taxation, making it increasingly difficult
    for them to continue operating and supporting local jobs following the
    death of a loved one. Preserving the TCJA estate tax or outright repeal
    would instill the confidence in small manufacturers like Ketchie that
    we will be able to continue operating in the event of losing a loved
    one.

        Additionally, I encourage members of the committee to fully
    preserve stepped-up basis, which prevents a business owner's heirs from
    being forced to pay a capital gains tax on the asset appreciation that
    occurred during the owner's lifetime. A recent study found that taxing
    these unrealized gains would cost the U.S. economy 80,000 jobs per year
    over the course of a decade and 100,000 jobs per year thereafter.\9\
    ---------------------------------------------------------------------------
        \9\ ``Repealing step-up of basis on inherited assets: Macroeconomic
    impacts and effects on illustrative family businesses,'' EY (April
    2021), available at https://documents.nam.org/tax/ey-fbetc-
    stepupreport.pdf.

        Manufacturers fully realize the task ahead for Congress is
    monumental. As they say though, the proof is in the pudding. The
    business tax policies implemented by the TCJA were rocket fuel for the
    manufacturing industry, and policymakers must act to ensure the U.S.
    manufacturing sector remains a global leader. Members of this committee
    must address the expired business tax provisions and reinstitute them
    as quickly as possible. Manufacturers appreciate the focus of this
    hearing today, and I hope that members of this committee and every
    member of Congress will institute tax policies that support
    ---------------------------------------------------------------------------
    manufacturers and provide tax certainty in 2025.

        I want to thank Chairman Wyden and Ranking Member Crapo for giving
    me the chance to testify today. Manufacturing truly is the backbone of
    our Nation, and I appreciate all members of the committee continuing to
    give our industry the attention it deserves. Through sound tax policy,
    we will continue to create jobs, innovate, compete globally, and
    provide a better future for young Americans.

        Manufacturing truly is a team sport, and you are all on that team.
    Small companies like mine are counting on you to play with us rather
    than against us, and to ensure that our tax code does the same.

                                     ______

             Questions Submitted for the Record to Courtney Silver
                     Questions Submitted by Hon. Mike Crapo
        Question. Can you discuss which provisions of the Tax Cuts and Jobs
    Act (TCJA) you benefitted from the most, and what investments--both in
    your employees and your business in general--you were able to make as a
    result of those tax savings?

        Answer. The 2017 Tax Cuts and Jobs Act was revolutionary for my
    business and the manufacturing sector as a whole. Following TCJA's
    passage, the manufacturing sector experienced the best year for
    manufacturing job creation in the previous 21 years and the best year
    for manufacturing wage growth in the previous 15 years.\1\
    Manufacturing capital spending grew 4.5 percent and 5.7 percent in 2018
    and 2019, respectively.\2\ After the legislation was signed into law,
    Ketchie experienced the best year in our 7-decade history.
    ---------------------------------------------------------------------------
        \1\ National Association of Manufacturers, ``Competing to Win''
    (September 2022), available at https://documents.nam.org/ctw22/
    competing%20to%20win%202022%20-%20tax.pdf.
        \2\ Id.

        Ketchie is organized as an S corporation, and therefore is eligible
    for a 20-percent deduction on our business income thanks to section
    199A, which was created by the TCJA. Pass-through owners see their
    business income reflected on their personal tax returns, and this
    deduction reduces the amount of pass-through income subject to tax,
    allowing us to reinvest. This deduction gives smaller manufacturers the
    chance to take funds and put them right back to our employees and
    ---------------------------------------------------------------------------
    company.

        Ketchie, like most manufacturers, is a capital-intensive business.
    In the years following the TCJA, I was able to make a higher level of
    investment in capital equipment thanks to the ability to deduct 100
    percent of my capital investments in the year acquired (full
    expensing). We were able to invest more than $1 million into capital
    equipment, which helped us meet the surge of demand as our customers
    ramped up production as they utilized the TCJA provisions as well.

        All of the TCJA provisions working in concert with each other
    allowed other customers and manufacturers in my supply chain to boom.
    The ability to immediately deduct R&D expenses, enhanced interest
    deductibility on business loans and full expensing, along with many
    other provisions in the TCJA like the pass-through deduction and the
    globally competitive corporate rate, allowed our industry to experience
    unprecedented growth. We expanded our shop floor workforce by 20
    percent, developing our team at Ketchie to keep pace with the ever-
    evolving manufacturing industry. We created an internship program
    focused on manufacturing for our local high school, provided increased
    health benefits and 401(k) plans to our team, donated to the local Boys
    and Girls Clubs, increased bonus and pay scales for our employees, and
    increased security and safety measures in our facilities. None of these
    investments would have been possible without the TCJA.

        Question. I expect tax legislation to be top of mind in 2025 as a
    number of important tax provisions expire. A top priority of mine is
    making TCJA's progrowth tax policies--such as full expensing and the
    pass-through deduction--permanent, as well as reinstating R&D
    expensing.

        Can you describe how important certainty in the tax code is to your
    business and investment decisions? Would making these progrowth
    provisions permanent be helpful for business planning purposes?

        Answer. It is imperative that Congress recognize the fact that
    domestic businesses rely on predictability and stability within the tax
    code. Even when Congress discusses tax changes, it forces small
    manufacturers to spend time trying to read the crystal ball on how to
    tax-plan for the next several years. Our tax code needs to be simple,
    consistent, and progrowth so that it supports manufacturing and gives
    us all a chance to compete to our fullest potential.

        Due to the uncertainty over whether Congress will address the
    expiration of tax incentives related to R&D, interest deductibility and
    expensing for capital investments, 40 percent of manufacturers said
    they have already been forced to pull back on hiring and investing.\3\
    In the same survey, 94 percent of manufacturers said that it is
    important for the Federal tax code to help reduce manufacturers' costs
    for conducting R&D, accessing capital via business loans and investing
    in capital equipment purchases.
    ---------------------------------------------------------------------------
        \3\ NAM Manufacturers' Outlook Survey, First Quarter 2024 (March 5,
    2024), available at https://nam.org/wp-content/uploads/2024/03/Outlook-
    Survey-March-2024-Q1.pdf.

        I receive a daily reminder of this when I walk on my shop floor. I
    have a very large space on my floor reserved for my next significant
    machinery investment. This investment will allow Ketchie to operate in
    new industry markets, and to inspire and attract the next generation of
    top talent who want to work with the most
    ---------------------------------------------------------------------------
    cutting-edge technology possible.

        This investment is on hold due to the phasing out of the
    accelerated depreciation levels from 100 percent in 2022 to 60 percent
    in 2024. Because I am unable to realize a deduction for the full cost
    of my investment within the year I purchase it, the investment seems
    too risky and irresponsible. Permanent full expensing, on the other
    hand, would allow me to invest, grow, compete, and create highly
    skilled and high-paying jobs. These positions give people dignity and
    purpose and change their lives in our community. If accelerated
    depreciation is allowed to expire fully in 2027, I truly don't know how
    we will be able to purchase the equipment we need to continue to expand
    our business.

        The pass-through deduction also needs to be a high priority for
    Congress next year. The pass-through deduction is set to expire at the
    end of 2025 at the same time that the income tax rates for individuals
    will increase, dramatically increasing the tax burden on small
    manufacturers like Ketchie. Preserving the pass-through deduction and
    preventing individual tax rates from increasing must be a priority for
    Congress to encouraging domestic manufacturing growth, as should
    preserving the TCJA's increased estate tax exemption threshold and
    reduced corporate rate.

                                     ______

                     Question Submitted by Hon. John Thune
        Question. As you know, the Tax Cuts and Jobs Act doubled the estate
    tax exemption level, and your testimony spoke to the importance of
    either retaining the TCJA exemption level or repealing the estate tax
    in its entirety. I have long been an advocate for the permanent repeal
    of the estate tax, more commonly known as the death tax. Last year, I
    led 40 of my Senate Republican colleagues in reintroducing the Death
    Tax Repeal Act, which would put an end to this punitive tax that not
    only burdens and punishes family-run businesses when a death in the
    family occurs, but also through costly estate planning.

        Could you please expand on the detrimental impact the death tax has
    on businesses like yours when a death in the family does unfortunately
    occur and its impact on the ongoing operation and longevity of the
    business itself?

        Answer. Ketchie was established in 1947 to fill the gap of the
    local textile industry after World War II. Today, we are a third-
    generation family-owned company that has been a pillar in Concord, NC
    for nearly 80 years, providing strong manufacturing jobs and giving
    back to our community.

        Following my husband's passing, I was honored to take over Ketchie
    and continue the family legacy. I know firsthand the struggle that
    family-owned businesses face when a loved one passes away. When I lost
    my husband, not only did I have to worry about keeping the business
    afloat, but I was so worried about a looming tax bill that might have
    forced us to halt production altogether.

        In 2017, the TCJA increased the exemption threshold for the estate
    tax, allowing more of a family-owned business's assets to be passed on
    to the next generation without incurring a tax burden. The increased
    exemption is set to expire in 2026, which will expose more of a family-
    owned business's assets to taxation, making it increasingly difficult
    for them to continue operating and supporting local jobs following the
    death of a loved one. Small businesses should not be forced to spend
    countless hours and resources with outside tax planners and accountants
    just so we do not have to worry about losing our businesses due to a
    tragedy.

        Preserving the TCJA estate tax exemption or outright estate tax
    repeal would instill the confidence in small manufacturers like Ketchie
    that we will be able to continue operating in the event of losing a
    loved one.

                                     ______

                     Questions Submitted by Hon. Todd Young
        Question. During the hearing, I emphasized the importance of
    restoring full and immediate expensing under section 174 of the
    Internal Revenue Code and the critical role this provision plays in
    maintaining American competitiveness. In particular, amortization of
    research and development (R&D) expenses has had a serious impact on
    smaller manufacturers such as Ketchie.

        How important is full and immediate expensing to companies like
    Ketchie?

        Can you speak to the urgency of the need for Congress to fix
    section 174?

        Answer. Ketchie delivers machining solutions to government and
    commercial customers in a wide range of industries, including rail,
    agriculture, textile, heavy machinery, industrial equipment, and many
    specialized original equipment manufacturers. Our ability to innovate
    is what keeps us in the game, and a large part of that for the
    manufacturing sector has been the ability to deduct R&D expenses.

        For decades, taxpayers have been allowed to immediately deduct 100
    percent of their R&D expenses in the year they are incurred. In 2022,
    however, the tax code began requiring so-called ``amortization'' of
    these expenses, forcing manufacturers to recover only a small portion
    of their costs over several years.

        Taxing manufacturers' investments in critical R&D expenditures
    means that we will have less capital to invest in workers and our
    future growth. The private sector accounts for more than 75 percent of
    total R&D spending,\4\ with small businesses accounting for
    approximately $90 billion of all private-sector R&D investments.\5\
    This is not a new issue--the tax code has recognized the importance of
    R&D spending for more than 70 years, but with this recent change,
    Congress has now made the U.S. one of the two developed countries in
    the world who require the amortization of R&D expenses.
    ---------------------------------------------------------------------------
        \4\ National Center for Science and Engineering Statistics,
    National Science Foundation, National Patterns of R&D Resources: 2020-
    21 Data Update, NSF 23-321 (Jan. 4, 2023), available at https://
    ncses.nsf.gov/pubs/nsf23321.
        \5\ National Center for Science and Engineering Statistics,
    National Science Foundation, InfoBrief, NSF 22-343 (Oct. 4, 2022),
    available at https://ncses.nsf.gov/pubs/nsf22343 and InfoBrief, NSF 23-
    305 (Dec. 14, 2022), available at https://ncses.nsf.gov/pubs/nsf23305.

        Congress not only needs to reinstate immediate expensing under
    section 174, but manufacturers also need the provision to be
    retroactive to its TCJA expiration at the beginning of 2022. We need
    permanent and consistent tax policies so that manufacturers do not have
    to guess every other year what the tax code might look like. Every day
    that goes by and immediate expensing for R&D is not reinstated, we are
    losing dollars we could reinvest here in America and losing ground to
    ---------------------------------------------------------------------------
    our global competitors.

        Question. The decrease in U.S. R&D incentives comes at a time when
    countries across the globe are increasing the generosity of their R&D
    incentives. As an example, while companies conducting R&D in the United
    States are forced to amortize their R&D expenses over 5 years,
    companies conducting those same activities in China are receiving a
    200-percent super-deduction.

        Since full and immediate expensing of R&D under the Internal
    Revenue Code expired at the end of 2021, can you speak to what has
    happened to R&D growth in places like the European Union and China
    compared to the United States?

        Answer. At a time of increasingly fierce global competition for
    research dollars, Congress must act to ensure the next R&D dollar is
    spent in the United States and not overseas.

        A new report from the European Union found that both the EU and
    China gained a significant advantage after the expiration of immediate
    R&D expensing.\6\ In 2022, the first full year after immediate
    expensing for R&D expired in the United States, EU R&D growth surpassed
    the U.S. for the first time in nearly a decade. Even more worrisome,
    China's R&D growth tripled that of the United States in 2022. Chinese
    companies enjoy a super-deduction on research spending, while
    manufacturers in America must now compete with weights strapped to our
    ankles following the expiration at home. China is not the only country
    offering better R&D incentives--17 countries now provide a deduction
    that is more than 100 percent of eligible R&D expenses, further making
    the United States a less attractive place to conduct R&D.
    ---------------------------------------------------------------------------
        \6\ ``EU Industrial R&D Investment Scoreboard'' (2023), available
    at https://op.europa.eu/en/publication-detail/-/publication/1e5c204f-
    9da6-11ee-b164-01aa75ed71a1/language-en.

        Manufacturers are facing stiff competition around the globe from
    countries enticing companies to bring their business out of the United
    States. A strong domestic manufacturing sector directly correlates to
    ---------------------------------------------------------------------------
    increased national security and economic prosperity for all Americans.

                                     ______

                     Prepared Statement of Mark R. Widmar,
                   Chief Executive Officer, First Solar, Inc.
        Good morning, Chair Wyden, Ranking Member Crapo, and distinguished
    members of the committee. My name is Mark Widmar, and I am the chief
    executive officer of First Solar, the largest solar manufacturer in the
    Western Hemisphere. I have been with First Solar for 13 years, serving
    as the CEO since 2016 and as the chief financial officer before that.

        Founded 25 years ago outside Toledo, OH, we operate the largest
    solar manufacturing footprint in the Western Hemisphere, with three
    existing factories in Ohio that produce thin film solar wafers, cells,
    and modules in a single process under one roof. We have two new
    manufacturing facilities under construction in Alabama and Louisiana
    that are expected to come online in 2024 and 2025, respectively. In
    addition, we are expanding our existing Ohio footprint and constructing
    a Research and Development (R&D) center as well as a technology
    development line intended to produce the next generation of thin film
    photovoltaic technology at our Ohio campus. Together, this represents
    over $4 billion in investment capital.

        First Solar is proud to be America's solar company: we are the only
    company out of the world's largest solar module manufacturers to be
    headquartered in the United States, and we are on track to have 14
    gigawatts (GW) of vertically integrated capacity to produce American-
    made solar panels with the support of a uniquely domestic supply chain.

        I am honored to represent First Solar today and thank the committee
    for convening this hearing on how tax policy impacts domestic
    manufacturing in the United States. We believe the Inflation Reduction
    Act (IRA) represents America's first durable solar industrial strategy
    and, if implemented with a whole-of-
    government commitment to onshoring, together with strong and consistent
    enforcement of trade laws, it also has the potential to dismantle
    China's stranglehold of solar manufacturing value chains. Quite simply,
    the IRA paves a viable pathway for the U.S. to secure supply of
    critical clean energy technologies, enabling America's energy
    independence while capturing value for our economy and creating well-
    paying, enduring jobs.

        It is difficult to overstate the economic potential that the IRA
    can deliver through job creation, labor income, and overall economic
    output. As First Solar continues to scale domestic production, we are
    proud to share the tangible benefits of onshoring U.S. solar under the
    IRA. We believe that the data that follows defines, in real terms, the
    value that domestic solar manufacturing delivers to the U.S. economy
    and should provide a basis for bipartisan support to establish and
    maintain the policies and trade measures necessary to enable a domestic
    solar supply chain and a level playing field.

              American solar manufacturing creates steady, good-paying
            jobs. By 2026, we expect to have more than 4,100 direct
            employees in the U.S., making us one of the largest employers
            in the sector. Each of our new factories is expected to employ
            upwards of 700 people, with an average manufacturing salary of
            $80,000 annually. We are transforming the role of the American
            solar factory worker--upleveling skills and focusing the scopes
            on systems and processes, with less focus on rote, routine
            steps.
              American solar manufacturing delivers high-value economic
            impact. We recently commissioned an analysis conducted by the
            University of Louisiana at Lafayette that measured the real
            economic impact of First Solar's domestic manufacturing.
                  The construction activity across our three
            expansions in Alabama, Louisiana, and Ohio supported an
            estimated 5,765 direct, indirect, and induced jobs in 2023;
            represented over $600 million in labor income; and is estimated
            to have added over $900 million in economic value to the
            country.
                  In 2026, when we expect to have 14 GW of
            annual U.S. capacity, the study projects that:
                    t First Solar's direct employment of 4,100 people would
            support an estimated 30,060 direct, indirect, and induced jobs
            across the country.
                    t Every First Solar job would support 7.3 jobs across
            the U.S., together representing an estimated annual labor
            income of $2.78 billion, including direct, indirect, and
            induced effects.
                    t First Solar is estimated to add nearly $5 billion in
            value and $10.18 billion in economic output to the U.S. economy
            in 2026, based on its 14 GW of U.S. operations and the direct,
            indirect, and induced effects.

        My testimony today will primarily focus on describing how the IRA
    is catalyzing First Solar's efforts to scale high-value American solar
    manufacturing, which, in turn, creates a vast economic impact from
    coast to coast. However, it is imperative that we establish that the
    U.S. solar industry cannot be a one-horse race.

        While we were not the only American solar manufacturer to come into
    existence at the end of the last century, the grim reality is that we
    are the only one of scale to remain today. For the IRA to spur U.S.
    manufacturing to the scale our country requires to support its energy
    independence we must ensure that more companies that are aligned with
    U.S. ambitions and are committed to fair competition and innovation can
    scale, compete, and prosper. There should be no doubt: we invite
    competition, and we invite free trade; all we ask is that this
    competition and trade are practiced on a level playing field.

        Solar is already the lowest cost form of new electricity generation
    capacity. However, less than a third of the 35 GW of new solar panels
    installed in 2023 in the U.S. were produced in America. Moreover, not
    even one of the crystalline silicon panels installed was assembled with
    American-made solar cells. There is no question, the U.S. solar
    manufacturing industry remains in a precarious position, despite the
    passage of the IRA.

        For context, the U.S. exited 2023 with an estimated 30 to 40 GW of
    imported oversupply, the vast majority of which came into the country
    free of safeguard and Antidumping and Countervailing Duty tariffs.
    Nearly all this capacity was produced by China-headquartered companies.

        Market conditions show no sign of slowing imports to the U.S.
    unless policy and trade law enforcement changes. The relentlessness of
    the Chinese subsidization and dumping strategy has caused a significant
    collapse in cell and module pricing and threatens the viability of many
    manufacturers who may never be able to get off the ground or have the
    ability to finance the start-up or growth of their operations.

        This is true for those manufacturers serving the domestic utility-
    scale sector, as well as those exposed to the residential solar sector,
    which operates on a shorter sales cycle. At the same time, questions
    remain on how and when the IRA's regulations, particularly those
    related to the domestic content bonus, will be finalized. These factors
    contribute to painting a challenging investment thesis for new U.S.
    manufacturing capacity.

        China's dominance of solar energy is well-known and intentional.
    The country's strategy to dominate solar supply chains dates to 1985,
    when photovoltaic (PV) solar was first mentioned in a Chinese Five-Year
    Plan, the recurring outline of its industrial strategy. Unchallenged,
    Chinese control of the solar supply chain arms an adversarial nation
    with significant geopolitical leverage. We need urgency, tax policy
    clarity, and strong and consistent trade enforcement to ensure the U.S.
    solar manufacturing sector can scale as Congress intended when drafting
    the IRA.

        First Solar stands apart from most of the industry in a few
    important ways. Our proprietary--and uniquely American--thin film solar
    technology was invented and developed in the U.S. and has since evolved
    in labs across the country. This technology is a significant enabler of
    the operational U.S. utility-scale solar fleet. We manufacture our
    panels from start to finish in their entirety within our factory's
    walls. Each panel is produced in approximately 4 hours: from
    semiconductor to wafer to cell to completed, deployable module--fully
    vertically integrated and ready for installation in the field.

        Crucially, our U.S. manufacturing capacity has no dependencies on
    Chinese crystalline silicon supply chains and is instead enabled by an
    American value chain. Our U.S. panels are produced with American-made
    glass and steel. The steel value chain that serves our 7 GW of Ohio
    production is located within a 100-mile radius of our factories; our
    glass is made from Michigan silica and Wyoming-mined soda ash.

        By 2026, we expect to have 14 GW of fully vertically integrated
    U.S. solar manufacturing capacity capable of serving more than 40
    percent of the country's projected utility-scale solar demand with
    American made solar, and a total of 25 GW globally.

        We began investing in an American supply chain long before the
    IRA--our onshoring began shortly after we announced our second Ohio
    factory in 2018 in the wake of the solar safeguard measures introduced
    by the Trump administration. The safeguard measures, though weakened
    substantially over time, gave a brief vision of what a level playing
    field can look like, and created a window for growth investment.

        But trade tools alone are not enough to deliver clean energy
    independence: it is the anticipated durability and scale of the IRA
    that has the potential to truly deliver the reshoring of a resilient
    U.S. solar supply chain and the creation of an enduring American solar
    manufacturing job base. More simply stated: the U.S. tax code has the
    power to incentivize domestic investment in significantly growing this
    industry, but the ability of those investments to endure is enabled by
    a corresponding trade policy.

        I would like to draw your attention to two specific sections within
    the IRA that set the legislation apart from all previous energy-focused
    efforts in a manner that, together, drive the policy punch that has the
    power to reshore manufacturing, create well-paying, lasting American
    jobs, and build the independent energy infrastructure we seek.
              1. the section 45x advanced manufacturing tax credit
        As a tax tool, manufacturing incentives have often focused on the
    capital expenditure side of setting up manufacturing, not the
    operational side of running manufacturing resiliently. This is the case
    with the 2009 American Recovery and Reinvestment Act, which invested $2
    billion in clean energy manufacturing in the form of capital
    expenditure-based tax credits and loans, via the original section 48C
    and Department of Energy (DOE) loan program, respectively.
    Manufacturing is a capital-intensive sector, and CapEx-based tax
    credits certainly play a role in lowering the cost of entry for
    starting up a new facility.

        Not only did the IRA resurrect section 48C with a larger $10
    billion fund, but it took on the more complex challenge of
    incentivizing the operational side of manufacturing in strategic clean
    energy sectors like solar, wind, and battery storage. By focusing on
    the ongoing production, 45X creates a scaffolding of support that
    provides manufacturers the momentum needed to scale, to drive down
    costs, and to push innovation. For solar manufacturing, the more watts
    produced, the greater the overall tax credit. As designed, the law
    encourages competitiveness at scale.

        Section 45X is equally innovative in its approach across the full
    value chain of each strategic sector, looking upstream of the final
    product. Thus, the tax policy incentivizes the onshoring of each
    critical stage of the solar manufacturing process: critical minerals,
    polysilicon, wafer, cell, and module assembly. As designed, 45X
    recognizes the criticality of onshoring upstream and downstream
    components, benefiting suppliers and OEMs alike.
                2. the sections 45 and 48 domestic content bonus
        While 45X represents a critical supply-side driver, the IRA also
    created a crucial parallel demand-side driver by introducing a bonus to
    the investment or production tax credit accessed by solar generation
    asset owners if projects procure domestically made content, including
    solar panels. While regulations to implement this aspect of the IRA
    remain pending, the expectations are great that the domestic content
    bonus will create a durable market pull for solar produced via high-
    value domestic manufacturing.

        I firmly believe the best form of American manufacturing is one in
    which the maximum value is captured and retained in the U.S.,
    reinvested to spur cycles of innovation to maintain American
    technological leadership, and used to attract and retain a durable
    workforce.

        It must be noted, however, that without a fix, there is great risk
    that the largest beneficiary of the IRA's solar energy tax credits may
    be China. While well-intended to incentivize every step of the solar
    panel value chain, there are no restrictions in place preventing
    companies controlled by, owned by, or subject to the jurisdiction of
    the Chinese Government from benefitting from, and receiving,
    significant amounts of American taxpayer dollars.

        Moreover, Chinese solar companies already have come to dominate the
    solar supply chain in part through an opaque system of subsidies that
    is believed to include low-cost financing, highly subsidized coal
    electricity, free land and buildings, and, horrifyingly, access to
    forced labor in provinces like Xinjiang, an abomination Congress sought
    to address with its passage of the Uyghur Forced Labor Prevention Act
    (UFLPA). We must ensure that the IRA's 45X Advanced Manufacturing Tax
    Credits are not added to the list of benefits that enable China's
    mission to fully eviscerate American solar manufacturing. Put simply:
    we cannot line China's pockets with U.S. taxpayer dollars.

        When the tax code is structured to address such an unintended
    potential outcome and paired with proper trade enforcement, they can
    serve as a powerfully effective set of tools to achieve the twin aims
    of rebuilding American manufacturing able to compete on its own merits,
    and counter China's unfair dominance of critical supply chains.

        First Solar is enabled by thousands of hardworking people across
    the country: soda ash miners in Wyoming; silica miners in Michigan;
    copper miners in Utah; steelworkers in Alabama, Louisiana, and Ohio;
    glassworkers in Illinois, Ohio, and Pennsylvania; woodworkers in
    Indiana; and a nationwide network of truckers, railroad workers, and
    many more. These are jobs that, in turn, are enabled by the tax
    incentives I noted earlier. We believe this demonstrates that the tax
    code can and is growing U.S. manufacturing, which in turn benefits
    American workers and helps catalyze our country's prosperity.

        However, industrial-sized scaling of the solar industry in America
    remains at risk without guardrails applied to the tax code. As a recent
    article in The New York Times titled ``How China Came to Dominate the
    World in Solar Energy'' noted, ``Chinese companies increasingly do the
    initial, high-value stages of solar panel manufacturing in China, and
    then ship the components to overseas factories for final assembly.''

        In recent years, these overseas factories have been located in
    ``Belt and Road'' member countries, primarily in Southeast Asia, some
    of which have recently been determined to be circumventing U.S. trade
    laws. As things stand, we are at risk of adding Ohio, Texas, Arizona,
    and other U.S. States to the list of locations that host China's
    overseas final assembly facilities, in many cases set to use imported
    components to assemble into modules in potentially temporary, leased
    facilities. It's not unrealistic that these facilities, and their
    associated jobs, will disappear once the 45X tax credits expire and
    American taxpayer dollars are extracted.

        Congress must ensure that the U.S. does not become a de facto
    extension of China's Belt and Road initiative, serving as a mere
    assembly outpost for China's state-subsidized solar manufacturing
    industry, while paying for the privilege with U.S. taxpayer dollars.

        We must respond to the challenge China poses with legislative
    solutions and final regulations aligned with our values and designed to
    shore up the commitment to creating a robust, resilient American solar
    manufacturing base across the supply chain. These solutions must
    account for the fact that China is a nimble rival that is quick to
    exploit opportunities, loopholes, and vulnerabilities.

        With the right guard rails, the IRA can help ensure that our
    manufacturing sectors grow in a resilient and durable manner while
    allowing the United States to capture the economic value and expand
    American manufacturing jobs in the process.

        I, on behalf of First Solar, am pleased to be here today to
    participate in these important discussions. We are proud of our
    American manufacturing capabilities and our past, current, and future
    contributions to the U.S. economy. We believe that the IRA will
    significantly advance efforts to grow our country's economy, create
    enduring jobs, and contribute to our Nation's energy security.

        Thank you, and I would be happy to answer any questions you may
    have.

                                     ______

              Questions Submitted for the Record to Mark R. Widmar
                     Question Submitted by Hon. Mike Crapo
        Question. I understand that your company has made several comments
    with respect to Inflation Reduction Act (IRA) implementation guidance,
    including some that express concerns with potential rules allowing
    foreign interests to benefit from the incentives.

        Your comments also note the need to ``address the inequalities
    associated with Chinese competition.'' My colleagues and I are likewise
    concerned that IRA incentives will further entrench anticompetitive
    foreign interests.

        If the administration does not adopt robust rules to level the
    playing field with foreign competition, what will the impact be to the
    U.S. solar industry and your company?

        Answer. As it relates to the IRA, and as I noted in my comments,
    the best form of American manufacturing is one in which the maximum
    value is captured and retained in the U.S., reinvested to spur cycles
    of innovation to maintain American technological leadership and used to
    attract and retain a durable workforce.

        It is common knowledge that Chinese solar companies have come to
    dominate the solar supply chain, in part through an opaque system of
    subsidies that is believed to include low-cost financing, highly
    subsidized coal electricity, free land and buildings, superdeductions
    for research and development expenses, and, horrifyingly, access to
    forced labor in provinces like Xinjiang.

        It would be a strategic misstep to add the IRA to the list of
    benefits and subsidies that Chinese companies already have access to.
    Not only would this allow them to unfairly benefit from American
    taxpayer dollars simply by establishing assembly outposts here, but it
    would defeat the fundamental thesis of reinvesting in American
    innovation and technological leadership and retaining value in the U.S.
    This is as much about the impact on the industry as it is on our
    country's ability to challenge China's dominance and lead the world in
    clean energy technology innovation and manufacturing.

        There is no doubt in my mind that the IRA will significantly
    advance efforts to grow our country's economy, create enduring jobs,
    and contribute to our Nation's energy security. However, we need the
    proper guardrails to ensure that our manufacturing sectors grow in a
    resilient and durable manner while allowing the U.S. to capture long
    term economic value and expand American manufacturing jobs in the
    process.

        More broadly speaking, we must think of government policy in the
    context of clean energy manufacturing in terms of a three-legged stool:
    the first leg is industrial policy, such as the 45X Advanced
    Manufacturing Tax Credit, which incentivizes investments in American
    manufacturing. The second leg is demand and
    demand-side drivers, such as the IRA's domestic content bonus, which
    incentivizes the procurement of domestically made content, including
    solar panels when made with domestically made components.

        The third leg is a level playing field that addresses
    anticompetitive, market-
    distorting behavior such as dumping and circumvention. While industrial
    policy such as the IRA has the power to incentivize domestic investment
    in significantly growing this industry, the ability of those
    investments to endure is enabled by a corresponding trade policy. This
    level playing field ensures that domestic manufacturing investments,
    incentivized by American taxpayer dollars, are incubated as they scale.

        Take away any one of the legs, and you render the whole apparatus
    unusable, undermining America's potential to lead the world in clean
    energy technology innovation and manufacturing.

                                     ______

                   Questions Submitted by Hon. Maria Cantwell
        Question. You have been an advocate for solar manufacturers to
    onshore every step of the supply chain, from polysilicon through
    modules. This would allow U.S. solar manufacturers to bring down costs
    and enable domestic innovation and supply chain control.

        As you have said, a major part of your company's success is its
    independence from risky international supply chains. Congress passed
    the IRA's 45X Advanced Manufacturing Production Credit to address
    exactly this critical supply chain exposure.

        Do you think the 45X credit has already begun to reinvigorate the
    domestic production of clean energy components, including REC Silicon
    and other companies in my state?

        Do you agree that 45X and its ``domestic content bonus'' provision
    should be implemented to incentivize all levels of the domestic supply
    chain, including all components of solar panels, like polysilicon and
    wafers?

        Answer. We have seen firsthand the benefits of operating an
    American supply chain. Every mile a raw material or component must
    travel from source to factory represents risk. The further away your
    suppliers--and this is especially true in the case of international
    supply chains--the greater a manufacturer's exposure to the risk of
    disruption. Our focus on domestic supply chains has allowed us to offer
    our customers the certainty they value, while supporting tens of
    thousands of direct, indirect, and induced jobs across the country, and
    the creation of billions of dollars in economic value.

        As it relates to your first question, there's no doubt in my mind
    that the 45X has been a much-needed catalyst for our industry to invest
    in growth. REC Silicon's decision to restart its Moses Lake facility
    was a tremendous achievement and an essential first step in breaking
    China's stranglehold over polysilicon supply chains.

        That being said, China is already responding and allegedly dumping
    unprecedented volumes of solar panels in the U.S. at prices that are
    believed to be below the cost of production. Unfortunately, we are not
    yet in a position to proclaim success, and there is still work to be
    done to safeguard domestic manufacturing investments from China's use
    of anticompetitive, market-distorting behavior.

        We must think of government policy in the context of clean energy
    manufacturing as a three-legged stool: the first leg is industrial
    policy, such as the 45X Advanced Manufacturing Tax Credit, which
    incentivizes investments in American manufacturing. The second leg is
    demand and demand-side drivers, such as the IRA's domestic content
    bonus, which incentivizes the procurement of domestically made content,
    including solar panels when made with domestically made components. The
    third leg is a level playing field that addresses the anti-competitive,
    market-
    distorting behavior I referenced earlier.

        While industrial policy such as the IRA has the power to
    incentivize domestic investment in significantly growing this industry,
    a corresponding trade policy enables those investments to endure. This
    level playing field ensures that domestic manufacturing investments,
    incentivized by American taxpayer dollars, are incubated as they scale.

        With regard to your second question, in an ideal scenario, we would
    see the entire crystalline silicon value chain reshored in the U.S. The
    reality, however, is different. As even lower-value investments, such
    as those in module assembly, falter in the face of China's use of
    economic warfare against the IRA, the more urgent need is to safeguard
    the non-Chinese investments catalyzed by 45X while maintaining the
    demand-side drivers for at least PV solar cells and modules in the form
    of the domestic content bonus without adding additional complexity.

                                     ______

                    Question Submitted by Hon. Bill Cassidy
        Question. Last year, First Solar broke ground on a new solar
    manufacturing plant in Iberia Parish in Louisiana that will become one
    of the largest solar factories in the U.S., with over 700 jobs. I have
    been a proud supporter of bringing high-quality manufacturing jobs to
    Louisiana.

        Can you tell me about what led to your solar manufacturing
    expansion, and what role the tax code played in your expansion?

        You call for consistent trade enforcement to ensure that the U.S.
    solar manufacturing sector can scale and compete internationally on a
    level playing field. Can you elaborate on how sound trade policies can
    complement the tax code to advance U.S. manufacturing internationally?

        Answer. First Solar is proud to be investing in the State of
    Louisiana. The new $1.1-billion Louisiana facility, like its sister
    facilities in Ohio and Alabama, represents First Solar's investment in
    our country's future. Furthermore, solar manufacturing solidifies the
    Gulf Coast's position as America's energy production hub. It
    exemplifies the ``all-of-the-above'' approach to energy security while
    creating good-paying jobs and driving economic growth.

        Our investments in expanding our domestic manufacturing footprint
    were driven by unprecedented customer demand for American-made products
    and catalyzed by the Inflation Reduction Act.

        We think of government policy in the context of clean energy
    manufacturing in terms of a three-legged stool: the first leg is
    industrial policy, such as the 45X Advanced Manufacturing Tax Credit,
    which incentivizes investments in American manufacturing. The second
    leg is demand and demand-side drivers, such as the IRA's domestic
    content bonus, which incentivizes the procurement of domestically made
    content, including solar panels when made with domestically made
    components. The third leg is a level playing field that addresses
    anticompetitive, market-distorting behavior such as dumping and
    circumvention. While industrial policy such as the IRA has the power to
    incentivize domestic investment in significantly growing this industry,
    the ability of those investments to endure is enabled by a
    corresponding trade policy. This level playing field ensures that
    domestic manufacturing investments, incentivized by American taxpayer
    dollars, are incubated as they scale.

        Take away any one of the legs, and you render the whole apparatus
    is at risk of becoming unusable, undermining America's potential to
    lead the world in clean energy technology innovation and manufacturing.

                                     ______

                     Prepared Statement of Hon. Ron Wyden,
                           a U.S. Senator From Oregon
        There's a lot for the Finance Committee to discuss on the topic of
    manufacturing this morning. I want to start off with a bit of recent
    history on key manufacturing priorities.

        On infrastructure, it became a running joke during the Trump
    administration that every week was infrastructure week. The big
    infrastructure bill was always a few days away. But it never came. It
    was the Biden administration that finally got a major infrastructure
    bill passed. And now there are shovels in the ground all over the
    country working on rebuilding our roads and bridges, highways, ports,
    and airports.

        On energy, Trump talked a big game on energy independence. If he
    wanted, he could have pushed for big investments in wind and solar and
    batteries and electric vehicles. He did not. Democrats got that done in
    the Inflation Reduction Act.

        The United States is now producing more energy than ever before.
    We've reached a greater level of energy independence than we've had
    since the days when millions of Americans had big piles of coal
    shoveled into their basements. Consumers are saving money. Putin and
    OPEC have a whole lot less influence over our energy prices than they
    did when Donald Trump was in the White House.

        On semiconductors--the chips that Americans interact with from the
    time they wake up in the morning and check their cell phones to the
    time they go to bed at night setting an alarm--once again, Donald Trump
    sat on the sidelines. He could have pushed for more chips investment to
    bring a vital high-tech manufacturing industry back home, giving us a
    greater competitive edge with China. He didn't get it done. The CHIPS
    and Science Act, passed on a bipartisan basis under this
    administration, is getting it done.

        Nobody would blame Americans for having grown tired and frustrated
    after decades of empty political promises about bringing manufacturing
    jobs back to this country. Every shuttered factory, every job shipped
    overseas, was a wound to those who were left behind in communities that
    took pride and found identity in the things they made with their labor.

        Donald Trump talked an awful lot about bringing back manufacturing
    jobs. He failed to deliver. In fact, the manufacturing sector went into
    a recession in 2019, after his tax law went into effect and before the
    pandemic clobbered our economy.

        Well, the cycle of empty promises has ended. The U.S. is in a
    manufacturing boom, thanks in large part to this landmark legislation
    passed under the Biden administration, much of which came from this
    very committee.

        Manufacturing investment in clean energy in 2023 was triple the
    level from before Congress passed the IRA. The running total of clean
    energy and chips investments announced in the last few years is now
    more than $350 billion. That's more than a quarter-million jobs
    created.

        The CHIPS Act and the IRA also go farther than any laws in recent
    memory to buy American and cut our dependence on China. That's a big
    reason why so many foreign governments were upset after Democrats
    passed the IRA. With one single piece of legislation, the U.S. lapped
    the pack in terms of investment in clean energy and clean
    transportation.

        So that's all great news about the state of manufacturing in
    America. Here's the big concern: Donald Trump wants the IRA repealed.
    House Republicans voted to gut nearly the entire IRA energy package.
    It's not because they've got a better idea for energy or manufacturing
    in America. It's just because they want to score a political win, no
    matter the cost. And in this case, the cost would be hundreds of
    thousands of jobs in America. It would be higher costs for consumers,
    greater dependence on foreign oil, and surrendering to China and other
    countries when it comes to clean energy innovation and jobs.

        That must not happen. For the first time in a long time, the future
    of manufacturing in America--and manufacturing jobs--looks bright.
    Congress absolutely must do everything it can to build on this
    progress.

        On that topic, the Senate is in the middle of a debate on a bill
    that pairs tax cuts for businesses, including for R&D expenses, with an
    expansion of the Child Tax Credit. I introduced the bill with Chairman
    Smith of the House Ways and Means Committee 2 months ago. The House
    passed it 6 weeks ago with 357 votes in favor, and I don't think you
    can get 357 members of the House to agree that 1 plus 1 equals 2.

        The Senate needs to get this done. As I've said for weeks and
    weeks, I will talk to anybody who wants to work in good faith to move
    this forward quickly, because 16 million low-income kids who stand to
    benefit shouldn't be forced to wait. And I've heard from small business
    owners that there will be real damage done if the Senate sits on this
    until 2025. A lot of innovative small businesses will fail if this bill
    doesn't pass.

        Some of my colleagues understand the urgency here. And let's
    understand that this set of policies isn't going to be on the table in
    2025 if this bill stalls out. So I hope the Senate is able to move
    soon.

                                     ______

                      MACROECONOMIC ANALYSIS OF H.R. 7024,

                   THE ``TAX RELIEF FOR AMERICAN FAMILIES AND

                   WORKERS ACT OF 2024'' AS ORDERED REPORTED

                      BY THE COMMITTEE ON WAYS AND MEANS,

                              ON JANUARY 19, 2024

                             Prepared by the Staff

                                     of the

                          Joint Committee on Taxation

                                January 23, 2024

                                    JCX-6-24

                                  INTRODUCTION

        Pursuant to House Rule XIII(8)(b), this document,\1\ prepared by
    the staff of the Joint Committee on Taxation (``Joint Committee
    staff''), provides an analysis of the macroeconomic effects of H.R.
    7024, the ``Tax Relief for American Families and Workers Act of 2024,''
    as ordered reported by the Committee on Ways and Means on January 19,
    2024. The basis for this analysis is the projected change in tax
    revenues as estimated by the Joint Committee staff.\2\
    ---------------------------------------------------------------------------
        \1\ This document may be cited as follows: Joint Committee on
    Taxation, Macroeconomic Analysis of H.R. 7024, the ``Tax Relief for
    American Families and Workers Act of 2024'' as ordered reported by the
    Committee on Ways and Means, on June 19, 2024 (JCX-6-24), January 23,
    2024. This document can also be found on the Joint Committee on
    Taxation website at www.jct.gov.
        \2\ For projected changes in revenue by provision, see Joint
    Committee on Taxation, Estimated Revenue Effects of the Chairman's
    Amendment in the Nature of a Substitute to H.R. 7024, the ``Tax Relief
    for American Families and Workers Act of 2024,'' Scheduled for Markup
    by the Committee on Ways and Means on January 29, 2024 (JCX-5-24),
    January 18, 2024 at www.jct.gov.
    ---------------------------------------------------------------------------

                      MACROECONOMIC ANALYSIS OF H.R. 7024

        This report provides an analysis of the macroeconomic effects of a
    proposal to reform the Internal Revenue Code (``Code''). Specifically,
    the proposal analyzed here is summarized in JCX-2-24, Description of
    H.R. 7024, The ``Tax Relief for American Families and Workers Act of
    2024,'' as ordered reported by the Committee on Ways and Means on
    January 19, 2024.\3\ The Joint Committee staff finds that it is
    impracticable to report changes to Gross Domestic Product (``GDP'')
    from this proposal because they are estimated to be so small relative
    to the size of the economy and the degree of uncertainty associated
    with the estimate as to be negligible over the 10-year budget window.
    As a result, the revenue feedback resulting from this proposal is also
    estimated to be negligible.
    ---------------------------------------------------------------------------
        \3\ Joint Committee on Taxation, Description of H.R. 7024, the
    ``Tax Relief for American Families and Workers Act of 2024'' Scheduled
    for Markup by The Committee on Ways and Means (JCX-2-24), January 19,
    2024; and Joint Committee on Taxation, Description of The Chairman's
    Amendment in the Nature of a Substitute to H.R. 7024, the ``Tax Relief
    for American Families and Workers Act of 2024'' (JCX-4-24), January 18,
    2024. These documents can also be found on the Joint Committee on
    Taxation website at www.jct.gov.

        The following discussion describes the proposal and explains why
    the macroeconomic effects and revenue feedback that would result are
    estimated to be negligible. The Joint Committee Staff used three
    macroeconomic simulation models to analyze the effects of the proposal:
    (1) the Joint Committee staff's Macroeconomic Equilibrium Growth Model
    (``MEG'');\4\ (2) The Joint Committee staff's Overlapping Generations
    Model (``OLG'');\5\ and (3) the Joint Committee staff's Dynamic
    Stochastic General Equilibrium Model (``DSGE'').\6\ A brief description
    of the models appears in the Appendix to this document.
    ---------------------------------------------------------------------------
        \4\ A detailed description of the MEG model may be found in Joint
    Committee on Taxation, Macroeconomic Analysis of Various Proposals to
    Provide $500 Billion in Tax Relief (JCX-4-05), March 1, 2005, and Joint
    Committee on Taxation, Overview of the Work of the Staff of the Joint
    Committee on Taxation to Model the Macroeconomic Effects of Proposes
    Tax Legislation to Comply with House Rule X.III.3(h)(2) (JCX-105-03),
    December 22, 2003.
        \5\ A detailed description of the OLG model may be found in
    ``Macroeconomic Implications of Modeling the Internal Revenue Code in a
    Heterogeneous-Agent Framework,'' Economic Modelling, vol. 87, April
    2020, pp. 72-91, in Rachel Moore and Brandon Pecoraro, ``A Tale of Two
    Bases: Progressive Income Taxation of Capital and Labor Income,''
    Public Finance Review, vol. 49, no. 3, May 2021, pp. 335-391, and in
    Joint Committee on Taxation, An Overview of a New Overlapping
    Generations Model with an Example Application in Policy Analysis (JCX-
    22R-20), October 22, 2020.
        \6\ A description of an earlier version of the DSGE model may be
    found in: Joint Committee on Taxation, Background Information about the
    Dynamic Stochastic General Equilibrium Model Used by the staff of the
    Joint Committee on Taxation in the Macroeconomic Analysis of Tax
    Policy, JCX-52-d06, December 14, 2006. There is no description
    available for the current version of the DSGE model.

        The Joint Committee staff estimates that H.R. 7024 will reduce
    Federal revenues by about $399 million over the budget window on a
    conventional basis, and that macroeconomic effects do not additionally
    increase or decrease this estimate.

    Proposal

        H.R. 7024 (``the bill'') includes 13 provisions organized under six
    subtitles, which are briefly described in this section.

        The first subtitle includes one provision that modifies the child
    tax credit in several ways, each of which expire at the end of calendar
    year 2025. First, the per-child calculation of the additional child tax
    credit phase-in is adjusted while the maximum amount of the additional
    child tax credit per qualifying child is increased to $1,800 and $1,900
    in calendar years 2023 and 2024, and increased to the full amount of
    the child tax credit for 2025. Second, the $2,000 per-child amount of
    the child tax credit is temporarily indexed for inflation in 2024 and
    2025. Lastly, taxpayers are temporarily allowed to elect to use earned
    income of the preceding year for purposes of calculating the credit,
    and there is a special rule for early-filed 2023 tax returns that may
    entitle the taxpayer to an additional credit or refund amount. Overall,
    these modifications have the effect of temporarily increasing the
    generosity of the child tax credit and the additional child tax credit.
    The Joint Committee staff estimates this provision will result in a
    $33.5 billion revenue loss over the budget window.

        The second subtitle includes three provisions that temporarily
    increase business deductions through the end of calendar year 2025. The
    deduction for research and experimental expenditures for taxable years
    beginning after December 31, 2021 is temporarily modified by allowing
    taxpayers to immediately deduct amounts paid or incurred during the
    taxable year instead of capitalizing and amortizing such expenditures
    over a 5-year period.\7\ A second provision temporarily extends the
    ability of taxpayers to compute adjusted taxable income for purposes of
    the section 163(j) interest limitation without regard to deductions
    allowable for depreciation, amortization, or depletion in taxable years
    beginning after December 31, 2022. This modification has the effect of
    increasing the deductible amount of business interest expense during
    the taxable year. A third provision temporarily extends the allowance
    of a 100-percent bonus depreciation deduction for qualified property
    placed into service after December 31, 2022. Subtitle III also includes
    a fourth provision that permanently increases the limitation on
    expensing of depreciable assets. The Joint Committee staff estimates
    that these provisions will result in a $32.8 billion revenue loss over
    the budget window.
    ---------------------------------------------------------------------------
        \7\ For expenditures outside of the United States, the current law
    allows for a 15-year amortization period.

        The third subtitle entitles qualified residents of Taiwan to
    receive certain benefits with respect to U.S. source income. The Joint
    ---------------------------------------------------------------------------
    Committee staff estimates this provision to have no revenue effect.

        The fourth subtitle includes three provisions that provide
    assistance for disaster-impacted communities. First, certain disaster-
    related personal casualty losses attributable to major disasters
    beginning any time after the date of enactment of Division EE of Public
    Law 116-260, the Taxpayer Certainty and Disaster Tax Relief Act of 2020
    (the ``2020 Disaster Act'') and through the date of enactment of the
    provision are provided the same treatment as qualified disaster-related
    personal casualty losses under the 2020 Disaster Act. The second
    provision provides an exclusion from gross income for amounts received
    as qualified wildfire relief payments, and is effective for payments
    received during taxable years beginning after December 31, 2019, and
    before January 1, 2026. The third provision treats East Palestine, OH
    train derailment payments as qualified disaster relief payments for
    purposes of section 139(b). As a consequence, the payments are excluded
    from gross income. The Joint Committee staff estimates the fourth
    subtitle to result in a $4.9 billion revenue loss over the budget
    window.

        The fifth subtitle includes two provisions related to the low-
    income housing tax credit. The first increases the State housing credit
    ceiling for calendar years 2023 through 2025. The second temporarily
    lowers the 50-percent bond-financing threshold requirement for certain
    buildings placed in service after 2023. These two provisions are
    estimated to result in a $6.3 billion revenue loss over the budget
    window.

        The last subtitle includes two provisions related to tax
    administration. The first increases the threshold for requiring
    information reporting, and results in an estimated revenue loss of $1.5
    billion over the budget window. The second provision is related to the
    enforcement of rules applicable to the employee retention tax credit
    (``ERTC''), and allows penalties for certain misleading behavior
    related to ERTC claims. This provision also provides that no credit or
    refund of the ERTC shall be allowed or made after January 31, 2024,
    unless such claim for such refund or credit is filed on or before that
    date. This provision is estimated to result in a $78.6 billion revenue
    gain over the budget window.

        As a result of the relative magnitude of revenue effects across
    subtitles, the macroeconomic effects resulting from the bill are
    primarily due to the provisions in the first two subtitles. Under the
    first subtitle, the increase in the rate at which the refundable
    additional child tax credit phases in with earned income decreases the
    effective marginal tax rate on labor income, particularly for low-
    income taxpayers, but increases the effective marginal rate for some
    others because of the shortened phase-in region. This causes competing
    labor supply incentives for different taxpayers. For all taxpayers
    affected by the overall increase in generosity of the credit, there
    will be a positive income effect that decreases desired labor supply.

        The increase in the business deductions included in the second
    subtitle temporarily decreases the after-tax cost of capital investment
    for both corporations and pass-through businesses, resulting in a
    temporary increase in the after-tax rate of return on business
    investment. Because these provisions expire after calendar year 2025,
    there is an incentive for businesses to increase investment and shift
    the timing of already planned investment forward. In addition, while
    the retroactivity created by effective dates prior to the date of
    enactment increases businesses' current cash flow, it implies that some
    of the revenue loss has limited effect on incentives for new investment
    because the after-tax rate of return is not directly affected.

                   EFFECTS ON ECONOMIC ACTIVITY AND REVENUES

        The estimates of the effects of this proposal on economic activity
    and revenues were produced using an average of those effects generated
    by the OLG, MEG, and DSGE models, each with equal weights. This
    weighting scheme was chosen because no model has a clear advantage over
    the other in terms of modeling the provisions included in the bill.

        The estimated macroeconomic effects of the bill on GDP are so small
    relative to the size of the economy and the degree of uncertainty
    associated with the estimate as to be insignificant within the context
    of a model of the aggregate economy. While the temporary business
    provisions in the second subtitle decrease the cost of capital and
    encourage investment in the first 3 years after enactment, some of this
    increased investment reflects a forward timing shift of planned
    investment rather than additional investment that would only occur upon
    enactment of the bill. In addition, the retroactive component of these
    provisions only has an inframarginal effect on business activity. After
    these provisions sunset at the end of calendar year 2025, the after-tax
    rate of return to investment returns to its present-law value. The
    Joint Committee staff estimates that while the bill would increase the
    aggregate stock of capital relative to the baseline forecast over the
    first half of the budget window, the size of the effect is too small to
    be significant over that period as well as on average over the budget
    window.

        While the increase in productive capital increases labor demand
    over the first half of the budget window under the bill, and the
    proposed expansion of the Child Tax Credit on net increases labor
    supply, the increase in after-tax household income has a small,
    offsetting income effect that reduces labor supply. Therefore, the
    Joint Committee staff estimates that the increase in aggregate
    effective labor supply \8\ relative to the baseline forecast is too
    small to be significant. Similarly, while household income is estimated
    to increase slightly and temporarily because of an increase in after-
    tax wages and returns on investment during the first half of the budget
    window, the Joint Committee staff estimates no significant effect on
    consumption in any part of the budget window.
    ---------------------------------------------------------------------------
        \8\ Effective labor supply is aggregate productivity-weighted
    equilibrium labor employed, and does not directly correspond to a
    standard measure of labor hours.

        The estimated macroeconomic revenue feedback is related to the
    degree of productive capital response in each model. However, because
    the estimated changes in aggregate variables are impracticably small to
    report, the overall estimated revenue feedback effect is estimated to
    be so small as to be negligible over the 10-year budget window.

    Second and third decade effects

        Because the major provisions of the bill expire at the end of
    calendar year 2025, any macroeconomic and revenue effects projected
    beyond the first decade are too small to estimate with a reasonable
    degree of certainty.

                    APPENDIX: DATA, MODELS, AND ASSUMPTIONS

                              USED IN THE ANALYSIS

        The Joint Committee staff analyzed the proposal using the Joint
    Committee staff MEG, DSGE, and OLG models. While the models are based
    on economic data from the National Income and Product Accounts, taxable
    income in the models is adjusted to reflect taxable income as measured
    and reported on tax returns. All three models start with the standard,
    neoclassical production framework in which the amount of output is
    determined by the quantity of labor and capital used by firms, and the
    productivity of those factors of production. Both individuals and firms
    are assumed to make decisions based on observed characteristics of the
    economy, including wages, prices, interest rates, tax rates, and
    government spending levels. In particular, labor supply is determined
    by individuals' preferences and expectations, as well as current and
    future after-tax income and wealth. Similarly, the capital stock is
    determined by investors' expectations (or knowledge if perfect
    foresight) of after-tax returns to capital, which depend on anticipated
    gross receipts, costs of factor inputs, and tax rates that affect those
    factors. The underlying structure of the MEG model relies more on
    reduced-form behavioral response equations, while the OLG and DSGE
    models are built on theoretical microeconomic foundations.

        The degree to which the Joint Committee staff relies more heavily
    on the results of one model versus the others depends on the specifics
    of the proposal being analyzed. The MEG model aggregates four separate
    types of labor, using separate marginal and average tax rates for all
    major individual and business income tax sources. The availability of
    investment capital to firms is determined by individuals' savings
    decisions, which depend on the after-tax rate of return on investment
    as well as on foreign capital flows. Monetary policy conducted by the
    Federal Reserve Board is explicitly modeled, with delayed price
    adjustments to changes in economic conditions allowing for the economy
    to be temporarily out of equilibrium in response to fiscal and monetary
    policy. The myopic expectation framework in the MEG model represents
    the extreme case of the degree of foresight individuals have about
    future economic conditions, in which individuals assume in each period
    that current economic conditions will persist permanently.

        At the other end of the foresight spectrum, in the OLG model,
    individuals are assumed to make consumption, labor supply, and
    residential decisions to maximize their expected lifetime well-being
    given the resources they can foresee will be available to them. They
    are assumed to have complete information, or ``perfect foresight,''
    about economic conditions, such as wages, prices, interest rates, tax
    policy, and government spending, while they have uncertainty over their
    length of life. The OLG model represents a class of models with
    ``micro-foundations'' and life-cycle effects modeled separately for 76
    ``generations,'' each with two household types (married or single),
    eight labor productivity types, and 10 wealth endowment types.
    Individuals in each household optimally choose their labor supply from
    a discrete set of options--unemployed, part time, or full time. For
    married households, that labor supply decision is made jointly by
    primary and secondary earners. This indivisible labor assumption
    implies that the aggregate labor supply elasticity is endogenous and
    depends on the distribution of reservation wages \9\ across households.
    Tax liability on household income is determined by an internal tax
    calculator that incorporates key aspects of income tax law. The OLG
    model includes a business sector with distinct corporate and non-
    corporate entities that produce output at profit maximizing levels
    under perfect foresight by choosing the optimal amount of labor and
    private capital to be used in production. The OLG model is a large
    open-economy model where foreign entities purchase a portion of new
    debt issued by the Federal Government, thereby reducing the crowding-
    out effect relative to that of a closed-economy model. Although debt
    may be held abroad, there is no additional income or investment
    shifting beyond what is estimated conventionally.
    ---------------------------------------------------------------------------
        \9\ A ``reservation wage'' is the lowest after-tax wage at which an
    individual is willing to work.

        The DSGE model has a stochastic feature that captures some of the
    effects of uncertainty about future fiscal policy on the modeling
    outcome, representing a less extreme foresight assumption than either
    of the other models. In any given period agents within the model are
    assumed to know policy variables 4 years into the future, and believe
    policy variables will slowly return to their steady state values
    thereafter. In the DSGE model, there are two types of households who
    make decisions about labor supply, ``savers'' and ``non-savers,'' where
    only the former has the ability to make investment decisions. As in the
    OLG model, these two types of households make consumption and labor
    supply decisions to maximize their discounted present value of lifetime
    well-being. Labor supplied by each household type differs in
    productivity, but is substitutable in the production process. As with
    the MEG model, the DSGE model incorporates a monetary policy reaction
    function, which responds to deviations in output and inflation from
    their long-run values. It also features nominal rigidities in goods
    prices, allowing for the equilibrium quantity of goods purchased to be
    relatively more demand-determined in the short run than in a flexible
    ---------------------------------------------------------------------------
    price model.

        In the OLG and DSGE models, the ability of agents to foresee
    changes in fiscal conditions means that the agents in the models will
    be unable to make optimal economic decisions if they can foresee a
    permanently unstable economic future, thus preventing the models from
    ``solving''--or completing their simulations. This problem arises in a
    situation where deficits or surpluses are expected to indefinitely
    increase faster than the rate of growth of GDP, which is a
    characteristic under present law as well as the bill. Thus, it is
    necessary to make counter-factual ``fiscal balance'' assumptions about
    the expected path of debt for these models. In the MEG model, however,
    agents are assumed not to foresee that eventually the growing
    government debt-to-GDP ratio under present law will become so large
    that it becomes unsustainable, and the model can generate forecasts up
    until that point.

        For models that require a fiscal balance assumption, imposing the
    fiscal balance assumption outside the budget window can have effects
    inside the window, because agents can foresee that it will occur. This
    ``anticipation effect'' is stronger the closer in time it is to agents'
    decision-making. In recent years, developmental work on the OLG model
    has allowed the fiscal balance assumption to be made decades after the
    budget window, thus reducing the effect of this assumption on behavior
    inside the budget window.\10\ For purposes of the simulations in this
    report, fiscal balance is achieved in the OLG model by allowing
    government consumption to adjust in 2057 as necessary to stabilize the
    debt-to-GDP ratio. Fiscal balance is achieved in the DSGE model by
    allowing government consumption to slowly begin adjusting in 2043 to
    eventually stabilize the debt-to-GDP ratio in the long run.
    ---------------------------------------------------------------------------
        \10\ See Rachel Moore and Brandon Pecoraro, ``Dynamic Scoring: An
    Assessment of Fiscal Closing Assumptions,'' Public Finance Review, vol.
    48, no. 3, April 2020, pp. 340-353.

        The estimate of the impact of the growth effects from this proposal
    on its budget effects was produced using an average of those effects
    generated by the MEG, OLG, and DSGE models with equal weights. As
    described above, each model provides a somewhat different perspective
    on savings/investment and labor responses. The MEG model allows
    simulation of the proposal as drafted, with no offsetting fiscal
    balance assumption, and it models cross-border capital flows that can
    partially offset the effects of a growing deficit on interest rates.
    The OLG model provides detailed focus on household heterogeneity and
    allows for the purchase of domestic government debt by foreign
    entities. The DSGE model, which does not model cross-
    border capital flows, captures the variation in behavioral responses by
    savers and non-savers. It also adds imperfect foresight to the
    analysis, an assumption sitting between the perfect foresight
    ---------------------------------------------------------------------------
    assumption of the OLG model and the myopic foresight in the MEG model.

        Each major tax bill potentially presents a unique combination of
    changes in the definition of the taxable base for different sources of
    income, as well as changes in tax rates on different sources of income.
    Because the Joint Committee staff uses these models to facilitate
    analysis of tax policy, and to estimate the revenue consequences of the
    macroeconomic effects of tax policy, the Joint Committee staff has
    devoted a considerable amount of time and attention to modeling the
    specific types of income flows affected by proposals, to the extent
    allowed by other sets of assumptions within each macroeconomic model.
    Information about the effects of the proposal on average tax rates and
    effective marginal tax rates on each source of income, and on after-tax
    returns to capital and labor, is obtained from various Joint Committee
    staff tax models \11\ (used in the production of conventional revenue
    estimates) to characterize the effects of the bill within the each of
    the models.
    ---------------------------------------------------------------------------
        \11\ Descriptions of the Joint Committee staff's conventional
    estimating models may be found in JCX-46-11, Testimony of the Staff of
    the Joint Committee on Taxation before the House Committee on Ways and
    Means Regarding Economic Modeling, September 21, 2011, JCX-75-15,
    Estimating Changes in the Federal Individual Income Tax: Description of
    the Individual Tax Model, April 24, 2015, and other documents at
    www.jct.gov under ``Estimating Methodology.''

                    Table 1. Key Parameters in the MEG Model
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Household                                         Income    Substitution
        Labor Supply Elasticities
            Low income primary                          -0.1             0.2
            Other primary                               -0.1             0.1
            Low income secondary                        -0.3             0.8
            Other secondary                             -0.2             0.6
            Wage-weighted population                    -0.1             0.2
             average
        Annual rate of time preference        0.015
        Intertemporal elasticity of           0.350
         substitution

    Production
        Business Capital share                0.412
    ------------------------------------------------------------------------

                    Table 2. Key Parameters in the OLG Model
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Household
        Annual rate of time preference                                 0.060
        Aggregate leisure share of time endowment                      0.309
        Intratemporal elasticity of substitution (consumption and      0.487
         housing)

    Production
        Private Capital share                                          0.355
        Public Capital share                                           0.078
    ------------------------------------------------------------------------

                    Table 3. Key Parameters in the DSGE Model
    ------------------------------------------------------------------------

    ------------------------------------------------------------------------
    Household
        Annual rate of time preference                                 0.030
        Intertemporal elasticity of substitution                       0.500
        Frisch elasticity of labor supply                              0.400
        Fraction of non-Ricardians                                     0.233

    Production
        Capital share                                                  0.360
        Intermediate firm markup                                       0.111
    ------------------------------------------------------------------------

                                     ______

                                 Communications

                                  ----------

                             Acena Consulting, LLC

                         340 N Westlake Blvd, Suite 100

                            Thousand Oaks, CA 91362

         American Made: Growing U.S. Manufacturing Through the Tax Code

    Honorable Senator Wyden:

    I am writing to express my strong appreciation for the hearing
    conducted to highlight the importance of U.S. manufacturing and the
    ability to impact its growth through the tax code. While many
    provisions of the tax code were discussed, including the new tax
    credits under Section 45, comments made by the witnesses highlighted
    the critical importance of returning full expensing of Section 174
    costs and providing support to families in need through the Child Tax
    Credit (CTC).

    Throughout the hearing, it was noted that the witnesses had a broad and
    deep view of the impact of tax incentives for their respective
    industries and the disruption caused by temporary incentives that
    expire. In particular, the difficulty presented when making long-term
    investment decisions and needing a clearer picture of how investments
    will be impacted positively or negatively by tax law changes.

    As noted by Ms. Courtney Silver, the impact of the capitalization of
    research expenditures on small businesses has been incredibly
    detrimental to their ability to grow and invest in their business and
    customers. Manufacturing is a team sport, as Ms. Silver pointed out,
    and the impact of capitalizing R&D expenditures not only impacted her
    business negatively but also the company she uses for software to run
    her company. As Ms. Silver pointed out, the change in the accounting
    treatment of R&D expenses reduced the ability of the company to improve
    its software with new functionality and strained its cash flow.

    I would like to add a real-life example of the catastrophic impact of
    capitalizing R&D expenditures on small businesses.

    Example: ABC Company

    Facts: ABC Company is a designer and manufacturer of capital equipment
    based in Arizona. As a small business, ABC Co. generated $1.4 million
    in revenue in 2022 and has a taxable income of $75,000. As with most
    capital equipment manufacturing companies, a substantial portion of the
    company's operating expenses are the materials used to develop and
    build prototypes for testing. In 2022, the qualified R&D expenses for
    the company were $850,000 of the operating costs or 61% of the revenue.

    In addition to these expenses, Section 174 requires that payments
    incurred ``in connection with'' the R&D activities must be included in
    the total expenses of Section 174 to be capitalized. Under current IRS
    guidance, other expenses to be included are payroll taxes, benefits,
    rent, utilities, and other ancillary expenses. For this example, we
    will assume that 15% of the direct expenses for the additional payroll
    taxes, benefits, and other expenses must be included. Section 174
    expenses under this example would total $977,500 ($850,000 x 115%).

    Capitalizing the R&D Expenditures

    Under the capitalization requirements, the taxpayer must capitalize the
    Section 174 expenses and amortize them over 60 months. In the initial
    year, the amortization is determined using a half-year convention,
    meaning only half of a full year's amortization is allowed (10% rather
    than a full-year 20% of the total expenses capitalized).

    Returning to our example, our taxpayer, ABC Company, had gross receipts
    of $1,400,000 and taxable income of $75,000 before the requirement to
    capitalize R&D expenditures under Section 174. The result of this
    accounting change is to increase taxable income by $879,750 ($977,500-
    $97,750 year-one amortization).

    ABC Company's taxable income is now $954,750.

    From a cash flow perspective, ABC Company has already paid $977,500 for
    these expenses and will now pay the tax on $954,750. The amount of tax
    due will now vary depending on whether ABC Company is organized as a
    pass-through entity or C-Corporation.

    The Small Business Innovation Penalty

    Most small businesses like ABC Company are organized as pass-through
    entities. This means the entity does not pay federal income tax; the
    income or loss from the business (as well as credits and other tax
    items) passes through the entity to the company's owners. The tax is
    paid at the shareholder or partner (individual) level rather than at
    the corporate level. Pass-through entities are typically organized as S
    Corporations, LLCs (Limited Liability Corporations), or partnerships.

    Publicly traded companies cannot be organized as pass-through entities;
    instead, they pay a corporate-level tax as a C corporation.

    The top individual tax rate in 2023 is 37%, while the top corporate tax
    rate for a C Corporation is 21%.

    The tax due from ABC Company as a pass-through entity would be
    significant. With the capitalization of the R&D expenses, taxable
    income would rise to $954,750 (Original Taxable Income of $75,000 +
    $977,500 of capitalized expenses - $97,750 first-year amortization).
    The tax due would be $353,257 ($954,750  37%). As a reminder, ABC
    Company's cash outlay for operating expenses is $1,325,000 ($1,400,000
    revenue less $75,000 taxable income). When adding in the tax due from
    the capitalization of R&D expenses, the total cash required for
    operations and taxes becomes $1,678,257, resulting in a negative cash
    flow of $278,257.

    If ABC Company is a C Corporation, the tax due would be $200,497
    ($954,750  21%). The total cash outlay for operations and taxes for
    ABC Company as a C Corporation would be $1,525,497, resulting in a
    negative cash flow of $125,497.

    In either case, the risk of conducting R&D activities results in an
    unsustainable business model.

    The Credit for Increasing Research and Development Activities

    Under Internal Revenue Code Section 41, qualifying R&D activities
    generate a federal tax credit to reduce the tax due by the company
    conducting the activities. These are typically the same activities that
    result in the capitalized expenses discussed above under Code Section
    174.

    Let's return to our example and see how the R&D tax credit impacts the
    overall tax due and cash flow for ABC Company.

    The direct R&D expenditures totaled $850,000 (wages, supplies, and
    contract research expenses). Please note that under Section 41, only
    direct expenses can be included in the tax credit calculation formula.
    Expenditures ``in connection with'' are not included in the
    calculation. The R&D tax credit would be calculated in our example to
    be $85,000 (the credit is a 20% credit but is limited to 50% of the
    qualified expenses).

    As a pass-through entity, ABC Company's additional tax due to
    capitalization was $353,257. Subtracting the R&D credit of $85,000
    would bring the taxes due down to $268,257. The total cash required
    (after taking into account the R&D tax credit) would be $1,593,257
    ($1,325,000 operating expenses plus $268,257), resulting in a negative
    cash flow of $193,257.

    As a C-corporation, ABC Company's additional tax due to capitalization
    was $200,497. Subtracting the R&D credit of $85,000 would bring the
    taxes due down to $115,497. The total cash required (after taking into
    account the R&D tax credit) would be $1,440,497 ($1,325,000 plus
    $115,497), resulting in a negative cash flow of $40,497.

    The Impact of the federal R&D tax credit does not mitigate the damage.

     The Capitalization of R&D Expenditures Is Not a Timing Difference

    One of the factors proponents lean on when discussing the impact of R&D
    expenditure capitalization is that the taxpayer will recoup the
    expenses over 60 months. As we have discussed, the initial year of
    expenditure results in only 10% of the expenditures being amortized
    into taxable income. This means the negative impact is spread over 6
    years rather than 5 years. Additionally, if the taxpayer continues to
    grow their revenue (which would be expected), the expenses related to
    R&D activities would also grow. While the incremental amount
    capitalized would decrease (each year would include 20% of the prior
    year as amortization, reducing the overall amount capitalized), the
    amount capitalized on the balance sheet would continue to increase
    rather than decrease over time.

    The taxpayer would not ``catch up'' until they halted R&D activities,
    assuming they grew at greater than 10% yearly. This creates a no-win
    scenario for taxpayers to spend capital to improve, innovate, or
    develop new products, software, techniques, formulas, or inventions.

    Congress has made it impossible for U.S. businesses to compete
    globally.

    This real-life example is typical of small manufacturing companies that
    rely on innovation to compete in a global market.

    Full expensing of R&D costs encourages companies to invest in
    innovation, leading to the development of new products, processes, and
    technologies that drive economic growth and enhance our global
    competitiveness. By allowing businesses to deduct these expenses
    immediately, we can stimulate investment in R&D, spur job creation, and
    fuel productivity gains across industries.

    The Inherent Connection

    I also want to underscore the importance of the CTC and its inherent
    link to the business provisions in the Tax Relief for American Families
    and Workers Act. The CTC is a critical component of our tax policy that
    supports families that need assistance. The fewer families that need
    the CTC, the stronger our economy is.

    Our goal as a nation is less reliance on the federal government for
    programs such as the CTC and more accountability on the private sector
    to provide employment.

    As manufacturing, technology, and other industries grow, they provide
    more opportunities for employment and career growth. As more jobs are
    created, fewer families will need the support of the CTC. However,
    handcuffing American innovation with current tax policies that drain
    cash flow will not provide the growth and job creation needed to
    support our economy.

    Therefore, please prioritize the bipartisan discussion and successful
    resolution of the Tax Relief for American Families and Workers Act. By
    doing so, we can unleash the innovative potential of American
    businesses, strengthen our economy, and secure a brighter future for
    generations to come.

    Thank you for your attention to this critical issue. I stand ready to
    support efforts to promote policies that encourage innovation, drive
    economic growth, and create opportunities for all.

    Sincerely,

    Randall M. Eickhoff, C.P.A.
    Founder & Head Coach

                                     ______

                         Acoustic Range Estimates, LLC

                    5235 S Harper Ct., 9th Floor (shipping)

                     5140 S Hyde Park Blvd. #17H (billing)

                               Chicago, IL 60615

                             Phone: (414) 745-6577

                                                         March 13, 2024

    Senator Elizabeth Warren
    309 Hart Senate Office Building
    Washington, DC 20510

    Dear Senator Warren,

    Subject: Section 174--2017 changes disincentivize research, H.R. 7024
    (title II) helps.

    Although you are not my Senator, I've been a fan--until yesterday's
    Finance Committee hearing.

    As a former scientist at GE's R&D facility in Niskayuna, NY, I
    appreciate your concern about retroactively giving R&D tax ``breaks''
    to just a few large corporations.

    However, that scenario misrepresents the situation of small companies,
    particularly those that work at the behest of the Federal Government.
    We cannot claim tax credits for funded research, and now we cannot
    immediately deduct specified research or experimental (SRE) expenses.

    In 2018, I organized a LLC dedicated to developing a specific medical
    device. Acoustic Range Estimates, LLC won SBIR funding. Last year, ARE
    had gross income of $732,000 and incurred over $500,000 of SRE costs.
    Because we can only expense 10% of that $500,000 I'll jump to the
    highest tax bracket and owe approximately $180,000 which is $30,000
    more than my/ARE's net income. Amortizing over 5+ years stinks when
    project duration is only 2-3 years.

    Right now, I see only two ways to cover my 2023 tax bill: accept angel/
    impact investment which will dilute my ownership stake or incur capital
    gains taxes to pay income taxes. Owners who don't have these options
    will be forced out of business, further exacerbating wealth gaps in US
    society. Losing small businesses that develop technology for the
    Department of Defense will weaken national security.

    Please work to stimulate research and development, rather than stifle
    it. If you cannot support HR 7024 as written, please get to work to
    propose an alternative.

    Sincerely,

    Sarah K. Patch, Ph.D.

    Cc: All members of the US Senate Finance Committee

                                     ______

                           American Chemistry Council

                             655 New York Ave., NW

                              Washington, DC 20001

                                 (202) 249-7000

                       https://www.americanchemistry.com/

    March 25, 2024

    The Honorable Ron Wyden
    Chairman
    Committee on Finance
    United States Senate
    219 Dirksen Senate Office Building
    Washington, DC 20510

    The Honorable Mike Crapo
    Ranking Member
    Committee on Finance
    United States Senate
    219 Dirksen Senate Office Building
    Washington, DC 2051

          Re: Comments on Senate Finance Committee Hearing American Made:
                Growing U.S. Manufacturing Through the Tax Code

    Dear Chairman Wyden and Ranking Member Crapo:

    The American Chemistry Council (ACC) represents the leading companies
    engaged in the multibillion-dollar business of chemistry. ACC members
    apply the science of chemistry to make innovative products,
    technologies and services that make people's lives better, healthier
    and safer.

    ACC appreciates the opportunity to submit comments in response to the
    Committee's hearing on March 12, 2024, on growing U.S. manufacturing
    through the tax code. What follows are some of the key tax provisions
    that matter to ACC members given their impact to U.S. manufacturing.

    Tax Relief for American Families and Workers Act

    U.S. economic growth requires sound tax policies that incentivize
    capital investment, job creation and global competitiveness of U.S.
    businesses. Immediate R&D expensing, the pre-2022 Section 163(j)
    interest expense deduction limitation, and full expensing of capital
    equipment purchases are all tax policies that allow U.S. businesses to
    thrive, create jobs, and strengthen the U.S. economy.

    As we have been advocating for years, ACC urges Congress to take action
    now to restore immediate R&D expensing, revert to pre-2022 Section
    163(j) interest deduction limitation based on EBIDTA and extend the
    full expensing provision. Taking such action through passage of the Tax
    Relief for American Families and Workers Act has bipartisan support and
    has the support of U.S. manufacturers including ACC members.

    Similarly, the proposals outlined by the Administration as part of the
    FY 2025 budget have ACC members very concerned. Raising the corporate
    tax rate, increasing the CAMT rate and many other proposals that raise
    taxes indiscriminately (e.g., the repeal of foreign derived intangible
    income and changes to the interest limitation rules) choke U.S.
    manufacturers, diverting dollars for investment and workers.

    Superfund Tax

    The Infrastructure Investment and Jobs Act reinstated the Superfund
    Tax, imposing an excise tax on the sale or use of taxable chemicals and
    taxable substances. The U.S. chemical industry supports a vast supply
    chain, and with $639 billion worth of shipments in 2022, accounts for
    11% of the worlds chemical production.

    The U.S. chemical industry, which is already facing supply chain
    challenges, foreign competition and slim margins, opposed the
    reinstatement of the Superfund Tax given its negative impact. The
    Superfund Tax increases the costs of U.S. chemical manufacturers and
    their customers that will, in turn, lead to a decline in U.S.
    manufacturing activities. For these reasons we urge repeal of this tax.

    Inflation Reduction Act Incentives

    ACC is seeing increased interest in establishing and expanding U.S.
    manufacturing as a result of the tax credits included in the Inflation
    Reduction Act (IRA), in particular manufacturing to support the
    production of clean hydrogen (Section 45V), clean vehicles (Section
    30D), and to domestically produce critical minerals and electrode
    active material (Section 45X). Unfortunately, while the statute was
    designed to onshore U.S. manufacturing and end reliance on foreign
    sourcing, the guidance implementing the IRA has created barriers to
    this goal.

    For example, recently the U.S. Department of the Treasury (Treasury)
    and the Internal Revenue Service (IRS) issued proposed regulations
    under Section 45X, the Advanced Manufacturing Production Tax Credit.
    The statute provides the tax credit shall be ``10 percent of the costs
    incurred by the taxpayer with respect to production.'' Notwithstanding
    this unambiguous statutory language, the proposed regulations excluded
    from the calculation direct and indirect material costs and any costs
    related to the extraction, production, or acquisition of raw materials.
    Such a limited interpretation significantly impacts the value of the
    anticipated tax credit.

    Unfortunately, this narrow reading has already caused some companies to
    change course and pause their investment activities in the U.S. It is
    likely that this ``pause'' will transition to a termination of
    investments if materials costs (including raw materials) remain
    excluded from the calculation of the credit. ACC will continue to work
    with the Treasury and the IRS in an effort to revise the guidance, but
    urges Congress to continue to monitor implementation to ensure
    congressional intent is being met.

    In addition ACC is very concerned over the proposed regulations issued
    under Section 45V, the Clean Production Tax Credit. Similar to the
    Section 45X proposed regulations, and as outlined in our comment letter
    to the U.S. Department Treasury, the Section 45V proposed regulations
    have created impossible barriers for the nascent hydrogen industry.
    Further stifling the hydrogen industry is the narrow proposed guidance
    under Section 48, the Production Tax Credit, under which hydrogen
    storage only qualifies if used as fuel. Like the previous examples,
    such a requirement is not contained in statute. In addition, we have
    provided comments under Section 30D, the Clean Vehicle Tax Credit
    regarding the foreign entity of concern rules and the non-traceability
    proposals. Section 30D, as proposed, would allow for the domestic
    battery supply chain to be vulnerable to foreign producers, especially
    from foreign entities of concern. Unless the loopholes are closed in
    the final rule, U.S. investment in the domestic battery supply chain
    will be at significant risk. Under all of these examples, Congress has
    provided the framework to encourage U.S. manufacturing, but
    implementation has had negative impacts on such manufacturing.

    Finally although part of the CHIPS Act rather than the IRA, ACC waits
    in anticipation of the final regulations under Section 48D, and has
    urged that the final regulations harmonize the tax credit with the U.S.
    Department of Commerce interpretation such that it includes facilities
    whose primary purpose is producing materials integral and essential to
    manufacturing of semiconductors.

    We thank you for conducting a hearing on such an important topic and
    appreciate the opportunity to provide these comments.

    Very truly yours,

    Robert B. Flagg
    Senior Director, Federal Affairs

                                     ______

                        American Clean Power Association

                           1501 M St., NW, Suite 900

                              Washington, DC 20005

                            https://cleanpower.org/

    This statement is respectfully submitted on behalf of the American
    Clean Power Association (ACP). ACP is the leading voice of today's
    multi-tech clean energy industry, representing over 800 energy storage,
    wind, utility-scale solar, clean hydrogen and transmission companies.
    ACP appreciates the opportunity to comment on this hearing, entitled
    ``American Made: Growing U.S. Manufacturing Through the Tax Code.''

    The U.S. generates 16% of its electricity from solar and wind. 33.8
    gigawatts (GW) of the cumulative 262 GW of that clean power came online
    in 2023 and much of this growth was fueled by the clean energy tax
    incentives included in the Inflation Reduction Act (IRA). This
    comprehensive tax package--comprised of investment and production tax
    credits for solar, wind, hydrogen, storage and advanced manufacturing--
    is helping to increase investment in domestic clean energy, keep up
    with the increasing electricity demand, and keep prices affordable for
    American families. Bonus credits for investments in energy communities
    and projects using domestic content help to ensure that we are re-
    investing in our communities.

    These investments are spurring economic development across the country.
    Over the last 18 months alone, we have seen announcements for:

          $455 billion in private investment--equivalent to over 15 years'
    worth of American clean energy investment;
          $4.5 billion in customer savings; and
          42,000 new U.S. manufacturing jobs.

    To achieve the full potential of these federal incentives, ACP
    estimates that the clean energy industry will need to hire 550,000
    Americans by 2030.

    Manufacturing

    The clean energy industry, through the use of the advanced
    manufacturing production tax credit (45X), is revitalizing American
    manufacturing and shifting supply chains. One hundred twenty-eight new
    or expanded domestic manufacturing facilities have been announced, 78
    of which will support the utility-scale solar industry. This translates
    to 42,000 new jobs and $26 billion in new manufacturing investments.

    When these announcements reach operation, ACP estimates a nearly 16-
    fold increase in domestic solar module production and more than 15-fold
    increase in domestic grid-scale battery storage production, along with
    significant increases in production output for solar cells,
    polysilicon, ingots, and wafers, and wind turbine blades, towers, and
    nacelles. These investments are critical for the U.S. to secure its
    energy independence and global leadership in the clean energy future.

    Supply Chain

    Supply chains are shifting, and the change is happening in real-time.
    As we build our domestic supply chain and ``friend-shore'' other
    components, it is essential that we do not impact the ability of the
    existing clean energy industry to operate, build U.S. projects and
    factories, and raise the capital necessary to continue its investment
    trajectory.

    Developers are finding ways to support more manufacturing, for example,
    signing long-term purchase commitments to assist the financing of new
    production capacity. These developers, however, need continued
    certainty on planned projects in order to pay for these new
    manufacturing investments. As domestic production capacity is still
    ramping up, project developers and downstream manufacturers need to
    continue importing components until they can be sourced in America.

    Legislative changes to the implementation of the clean energy tax
    incentives could cancel or delay existing and planned projects,
    severely impacting the industry's ability to deploy more domestic clean
    energy, meet our country's growing electricity demand and continue to
    finance new domestic manufacturing.

    The reliance of critical aspects of the U.S. economy on Chinese
    manufacturing is a problem that has been years in the making. It began
    over 20 years ago with the bipartisan passage of permanent
    normalization of trade relations with China. Today that reliance is not
    sustainable and requires a whole of government and private sector
    response across multiple industries. The clean power sector is
    committed to play a leading role in this process and looks to Congress
    for partnership to develop real solutions that will accelerate domestic
    energy and national security imperatives while not crippling the U.S.
    economy.

    Moving supply chains to the U.S. and to jurisdictions which share U.S.
    values does not happen overnight--it is a complex and time-consuming
    process involving thousands of individual suppliers. Many parts of the
    U.S. economy are wrestling with the question of how to lessen our
    dependence on foreign sources of production. This is clearly the case
    for the solar supply chain. While domestic solar cell production is now
    being rebuilt, all domestic solar manufacturers currently import solar
    cells to make their modules in the United States. Solar modules likely
    come first followed by other critical upstream components such as
    cells. If those solar manufacturers cannot source the components they
    need in the near term, they will likely close or never open--and the
    future investments needed to stand up a fully integrated domestic solar
    supply chain won't happen.

    We hope that these comments are useful to the Committee as members
    further consider how to grow U.S. manufacturing capacity by using
    policy levers in the U.S. tax code.

                                     ______

                          American Rental Association

                                 1900 19th St.

                                Moline, IL 61265

                                  309-764-2475

                                  800-334-2177

                             https://ararental.org/

    Recent global events have highlighted the need to stimulate domestic
    manufacturing in the United States. The Inflation Reduction Act of 2022
    (IRA) contains policies that take significant steps to boost domestic
    manufacturing of clean commercial vehicles. Specifically, the IRA
    enacted a new section 45W that provides tax credits that are meant to
    provide incentives for the manufacture and purchase of mobile machinery
    that meets the definition of a clean commercial vehicle.

    This statement is in reference to the Internal Revenue Service's Clean
    Vehicle Team's current position with regard to equipment eligible for
    the Section 45W credits authorized by the IRA. The American Rental
    Association (ARA) represents the equipment and event rental industry.
    ARA members buy equipment that is used in construction and industrial
    applications. ARA members currently have the cleanest fleets of diesel-
    powered equipment in the United States because almost all of that
    equipment has been manufactured under the Environmental Protection
    Agency's Tier 4 requirements.

    One of the clear goals of the IRA is to spur the adoption and
    deployment of electric-powered commercial vehicles and equipment.
    Indeed, Section 45W(c) Qualified Clean Commercial Vehicle states:

    For purposes of this section, the term ``qualified commercial clean
    vehicle'' \1\ means any vehicle which--
    ---------------------------------------------------------------------------
        \1\ https://www.law.cornell.edu/definitions/
    uscode.php?width=840&height=800&iframe=true&
    def_id=26-USC-862960381-
    1197399893&term_occur=999&term_src=title:26:subtitle:A:chapter:1:
    subchapter:A:part:IV:subpart:D:section:45W.

        (1)  meets the requirements of section 30D(d)(1)(C) and is acquired
    ---------------------------------------------------------------------------
    for use or lease by the taxpayer and not for resale,

        (2)  either--

            (A) meets the requirements of subparagraph (D) of section
            30D(d)(1) and is manufactured primarily for use on public
            streets, roads, and highways (not including a vehicle operated
            exclusively on a rail or rails), or

            (B) is mobile machinery, as defined in section 4053(8)
            (including vehicles that are not designed to perform a function
            of transporting a load over the public highways),

        (3) either--

            (A) is propelled to a significant extent by an electric motor
            which draws electricity from a battery which has a capacity of
            not less than 15 kilowatt hours (or, in the case of a vehicle
            which has a gross vehicle weight rating of less than 14,000
            pounds, (7 kilowatt hours) and is capable of being recharged
            from an external source of electricity, or

            (B) is a motor vehicle which satisfies the requirements under
            subparagraphs (A) and (B) of section 30B(b)(3), and

        (4) is of a character subject to the allowance for depreciation.

    Moreover, a colloquy between Senator Van Hollen and Chairman Wyden
    which reads in part: Mobile machinery is a vehicle that is unrelated to
    transportation, such as a forklift or bulldozer. The qualified clean
    vehicle credit utilizes an existing statutory definition of mobile
    machinery, the purpose of which is to provide for an exemption from the
    excise tax on heavy trucks that is deposited into the highway trust
    fund. I ask the chairman of the Finance Committee whether commercial
    lawn mowers can fit the criteria of mobile machinery and, therefore,
    qualify for the qualified commercial clean vehicle credit, provided
    that the vehicle meets the other criteria for the credit (Congressional
    Record S4167, August 6, 2022). Chairman Wyden's affirmative response to
    Senator Van Hollen's question clearly suggests Congressional intent
    that classifies construction and industrial equipment that is
    manufactured in accordance with the provisions set forth in the IRA as
    eligible for the 45W credits.

    In our view, many domestic manufacturers of the equipment ARA members
    purchase annually are meeting the requirements of Section 45W. However,
    the IRS Clean Vehicle Team appears to have a different interpretation
    of Section 45W which has been expressed through denials of these
    manufactures applications to be certified as qualified manufacturers of
    qualified commercial clean vehicles. We know this to be the case
    because several ARA members have been in direct contact with their
    vendors about their applications as qualified manufacturers and been
    told that IRS is denying their applications.

    ARA members are not manufacturers; however, they are some of the
    entities that will be using the credit when they buy qualified
    commercial clean vehicles. From conversations and correspondence by the
    IRS to manufacturers that we have reviewed, it appears that the IRS
    Clean Vehicle Team does not believe that any electric-powered
    construction or industrial equipment should be classified as qualified
    commercial clean vehicles. If this truly represents the position of the
    IRS Clean Vehicle Team, we believe it is in direct conflict with
    Congressional intent.

    ARA members are positioned to be in the vanguard of companies that will
    purchase and deploy electric-powered equipment over the next decade.
    Utilizing the section 45W credits will give these companies the means
    to significantly increase the amount of electric-powered equipment they
    purchase and deploy.

    Respectfully submitted,

    John W. McClelland Ph.D.

                                     ______

                                  Bloom Energy

                              4353 North First St.

                               San Jose, CA 95134

                                  408-543-1500

                          https://www.bloomenergy.com/

    Chairman Wyden, Ranking Member Crapo, and distinguished members of the
    committee, thank you for convening this important hearing and for the
    opportunity to submit a written statement. We also extend our gratitude
    to Senator Carper who, like yourself, believes the U.S. tax code can
    help solidify the United States as the world's leader in clean energy
    technology. The reasons set forth in this statement explain how this
    Committee and Congress can take a giant step in this direction while
    bolstering our national security and energy resilience by passing
    Senator Carper and Senator Graham's legislation to extend the
    Investment Tax Credit for fuel cells.

    Bloom's Origin

    Bloom Energy is honored to represent a clean energy sector that is
    already dominated by the United States--solid oxide fuel cells (SOFCs)
    and solid oxide electrolyzer cells (SOECs). In the 1990s, our Founder,
    Chairman, and CEO, Dr. KR Sridhar, and a NASA team developed a fuel
    cell that could split Martian water into oxygen for breathing and
    hydrogen for use as fuel for vehicles. When NASA's project ended in
    2001, Sridhar's team shifted focus to develop this technology in
    reverse--to create electricity from oxygen and fuel.

    American Innovation--American Jobs

    Bloom's SOFCs generate clean electricity through a non-combustion/
    electrochemical process that produces no Nitrogen Dioxide
    (NO2) or Sulfur Oxide (SOX). The result is clean
    electricity--Bloom's patented SOFCs produce fewer non-baseload
    CO2 emissions than any ``e-grid'' subregion in the United
    States. When storms hit, Bloom's distributed ``always-on'' platform
    provides more ``energy security'' than traditional grid power and more
    reliability than other forms of clean energy, which are often
    susceptible to changing weather patterns. With 1 Gigawatt and over
    1,000 installations deployed worldwide, Bloom is helping drive the
    energy transition.

    Bloom Energy proudly manufactures its SOFCs and SOECs in the United
    States, sourcing from nearly1,000 U.S. suppliers and vendors. The ITC
    for fuel cells has been a key driver in this success. According to the
    National Fuel Cell Research Center, the fuel cell industry supports
    over 10,000 American jobs across the supply chain. By manufacturing
    domestically, Bloom Energy is not only creating jobs and cultivating a
    strong supply chain to counter inferior and cheaper Chinese goods, but
    also reducing the carbon footprint associated with transportation and
    logistics.

    National Security--Energy Security

    SOFCs provide the resiliency and reliability required to answer some of
    our most pressing national security challenges. Unlike traditional,
    centralized power generation, which has long been a primary target of
    military operations, Bloom's distributed energy platforms are more
    difficult for enemy combatants to find and disable. Moreover, fuel
    cells provide on-site power generation that is far more reliable, and
    the ability to ``island'' power generation for in-theater operations
    allows the military to set up bases and rapidly deploy personnel and
    materials in more strategic and remote locations. As the Department of
    Defense noted in their energy report one year ago: ``the Department
    will need to assess the readiness of hydrogen and related fuel cells
    for deployment across different platforms, as well as the logistical
    requirements needed to support widespread use of hydrogen in the
    battlefield.''

    Some of our most advanced research on these technologies is being
    conducted through a close partnership between Bloom and the Idaho
    National Laboratory (INL). The INL is the nation's premier center for
    nuclear energy research and development and is charged with defending
    our resources and infrastructure from physical and cyber threats,
    unauthorized intrusions and disruptions. The Lab is also a leading
    research facility that is developing cutting-edge hydrogen fuel
    technologies. INL's deep relationship with Bloom is leading us toward a
    future where civilians and the military will benefit from hydrogen
    generated from nuclear power.

    As stated by INL Director, John Wagner, ``Pairing the research and
    development capabilities of a national laboratory with innovative and
    forward-thinking organizations like Bloom Energy is how we make rapidly
    reducing the costs of clean hydrogen a reality and a real step toward
    changing the world's energy future.''

    Extending the ITC for fuel cells will help ensure that our country does
    not cede the development and manufacture of this technology to others.
    Relying on foreign countries--some of whom are increasingly taking an
    adversarial position to the United States--would jeopardize the
    critical research being performed by the INL and, by extension, the
    future energy security of the United States.

    Future Yet to Be Defined

    Several market forecasts show a bright future for SOFCs, with some
    sources projecting an annual growth rate of over 20 percent, and others
    even exceeding 30 percent. Along with contributing to the country's
    energy security, this expansion will bring a significant number of
    jobs. According to McKinsey, by 2030, the broader fuel cell and
    hydrogen industry could support 700,000 American jobs.

    However, a future of booming exports, a dominant market position, and
    strong employment is not a given. The ITC for fuel cells--which has
    long been a bipartisan priority--is set to expire at the end of this
    year. As part of the IRA, Congress extended the traditional ITC but at
    the beginning of 2025, the credit transitions to a ``tech-neutral''
    approach, a policy still in need of Treasury implementing guidance.
    Under the new regime, a fuel cell would only qualify if it produces
    electricity in a manner that results in zero greenhouse gas emissions,
    regardless of its fuel source. Today, fuel cells run 24/7, 365 days a
    year and are fueled primarily by natural gas, biogas (which both
    contain hydrogen), or pure hydrogen.

    For fuel cells that rely on hydrogen or are hydrogen-ready to qualify
    for the tech-neutral ITC, a robust hydrogen industry will be needed to
    provide access to the fuel source across the nation. We anticipate that
    that goal will be driven heavily by the final guidance for the section
    45V hydrogen production tax credit (PTC), which, in turn, will inform
    the guidance for the upcoming tech-neutral ITC under section 48E.

    The issues with respect to the section 45V clean hydrogen credit are
    far from settled, with the comment period for the proposed regulations
    having just closed last month. Moreover, significant uncertainty
    persists as to when the Treasury Department will be able to issue final
    regulations, which effectively suspends many hydrogen production
    projects and delays the much needed wide-scale availability of hydrogen
    for zero-emissions fuel cells.

    Furthermore, the lack of implementing guidance for the tech-neutral ITC
    leaves many unanswered questions regarding fuel cell technologies like
    Bloom's, such as how the credit will apply to technology that neither
    combusts or gasifies, but rather uses alternative methods like an on-
    site, non-combustion, electro-chemical process to separate hydrogen
    from feedstocks like natural gas.

    Without clear, final rules for clean hydrogen and absent Treasury
    guidance on the tech-neutral ITC for fuel cells, the expiration of the
    current section 48 ITC will lead fuel cell manufacturers to look
    overseas to locate their factories in order to remain price
    competitive. In effect, failing to extend this fuel-cell tax incentive
    will open the door for the Chinese to take advantage of the IRA and
    bring U.S. manufacturing of U.S. green technologies with U.S. job to
    China.

    China, however, will not be the only example. Without an extension,
    other countries will surely swoop in to lure investment and production
    in an industry that one market analyst has earmarked ``for exponential
    growth.'' Countries like Japan, South Korea, and Germany have already
    implemented strong support mechanisms for fuel cell technology,
    recognizing its potential to drive economic growth and reduce
    emissions. It is in our national interest to ensure that the fuel-cell
    industry, which originated in this country, stays in this country.

    A Crossroads for Maintaining American Leadership

    The Finance Committee and this Congress have an opportunity to fulfill
    the purpose of this hearing by sustaining the incentive for the
    production of a technology that was developed by Americans and
    iscurrently being manufactured by Americans. Solid Oxide Fuel Cells are
    poised to play a major role in answering two of the world's most urgent
    challenges--increasing electricity generation and reducing carbon
    emissions. All of this can be done through the efforts of innovative
    thinkers and hardworking middle-class Americans.

    We urge Congress to pass the Carper-Graham bill that extends the
    section 48 Investment Tax Credit for fuel cells for all of the
    compelling reasons outlined above--providing the long-term certainty
    needed to support domestic manufacturing, driving and keeping American
    innovation at home, creating high-quality domestic jobs, strengthening
    our national security and enhancing energy security for the world. By
    doing so, the United States can maintain its leadership position in
    this critical clean energy technology and secure a more sustainable and
    prosperous future for all Americans.

    Thank you for your consideration.
                        Statement Submitted by John Lee

                   https://www.taxsimplecenter.net/index.html

    Chairman Wyden, Ranking Member Crapo and members of the Committee:

    I appreciate your calling for this hearing. Good tax code policy can
    help U.S. manufacturers and businesses to grow. Business tax rate is
    one of major factors for our domestic manufacturing.

    I am a tax researcher and business owner. We have 15 tax research
    publications of federal and state tax simplification research (A and
    B).

    Federal business tax system had 8 tax brackets such as 15%, 25%. . . ,
    and 35% before reforming to a flat tax rate at 21% in 2018 (C). The 8
    tax brackets were too complex. A flat tax rate (21%) is too simple,
    rough and unreasonable. Small businesses have increased their tax rate
    from such as 15%-18% to 21%. President Biden has proposed to increase
    21% to 28% (D). High tax rates affect many people to reconsider to
    start new businesses or not.

    A good business tax plan is to have a relatively low bottom tax rate,
    which can encourage more people to start businesses. Small businesses
    hire many employees to meet people, social, and economic needs. Then
    middle and large businesses are more stable to pay relatively higher
    tax rates. Two brackets/formulas for federal corporate tax calculation
    system are suggested with 2 tax rate ranges such as 15%-20%-25% or 15%-
    21%-28% (A).

    A flat tax rate can reduce for people to start new businesses, which
    affect our existing and future economic situations. 15% is increased to
    21% to increase tax by 40% (6%/15%) or to 28% to increase tax by 86%
    (13%/15%). Two tax rate ranges such as 15%-20%-25% or 15%-21%-28% are
    suggested. Tax revenue change is very minor. Small businesses have good
    potential for business development. Middle and large businesses have
    strong ability to pay relatively higher tax rates than small
    businesses. When more small businesses survive and develop, more middle
    and large businesses may be produced.

    [GRAPHIC] [TIFF OMITTED] T1224.023

    .epsTax rate and tax are summarized with two simple formulas, which can
    be calculated and repeated by such as Excel or a program after
    inputting related tax information.

                                 Table Federal Corporate Tax Calculation Simplification
    ----------------------------------------------------------------------------------------------------------------
                                                  Option #1 (15%-20%-25%)              Option #2 (15%-21%-28%)
    ----------------------------------------------------------------------------------------------------------------
                                                                       Tax rate                             Tax rate
              Taxable income (TI)               Tax rate and tax        range        Tax rate and tax        range
    ----------------------------------------------------------------------------------------------------------------
    Not over $120,000                        (YTI2,400,000+0.15)TI    15%-20%   (YTI2,000,000+0.15)TI    15%-21%
    Over $120,000                                (0.25-6,000YTI)TI    20%-25%       (0.28-8,400YTI)TI    21%-28%
    ----------------------------------------------------------------------------------------------------------------

    YTI is yearly taxable income, which is equal to TI-F. TI is taxable
    income. F is filing period (1, 2, 4, 12, 24, 26, 52 or 365 on yearly,
    semi-yearly, quarterly, monthly, semi-monthly, bi-weekly, weekly or
    daily basis). When F=1, YTI=TI for yearly withholding taxes and tax
    returns.

    Besides a good business tax system, individual income tax system
    simplification is also important for businesses to reduce costs to do
    withholding taxes for their employees. Existing federal individual
    income tax system has 7 tax brackets, 224 (748) formulas, 21-page
    Withholding Tables, 28 taxable income ranges, and 12-page Tax Table.
    These formulas, tables, and rates are very complex. During the past 150
    years, we have struggled about tax systems with different tax brackets
    (1-56), formulas (up to 224), and tables (A). There are two income tax
    calculation systems. One is for employers to calculate withholding
    taxes (E). Another is for people to do tax returns (F). Taxable income
    ranges, marginal and effective tax rates, and tax numbers in the 21-
    page Withholding Tables, and 12-page Tax Table are often changed. When
    businesses do not need to use existing complex Withholding Tables and
    224 formulas, then businesses (including manufacturers) and Internal
    Revenue Service (IRS) can save related time and costs.

    We have done our federal individual income tax simplification (A and
    B). The 7-56 tax brackets can be matched and reduced to 3. The 21-page
    Withholding Tables and 224 formulas can be eliminated to simplify our
    federal tax system with simple two linear formulas and one existing
    formula by 98% (1-\3/224\) deduction. Detail explanation is available
    by our research paper (A), which may save more than $10 billion per
    year. Tax revenue can have almost no change. If you have any questions
    and comments, let me know. Thank you.

    Website link:

    A. www.academicstar.us/UploadFile/Picture/2023-5/20235518550488.pdf

    B. https://taxsimplecenter.net/publication.html (tax simplification
    research)

    C. https://www.taxsimplecenter.net/businesstaxsimplification.html

    D. https://www.pwc.com/us/en/services/tax/library/president-biden-
    fy2024-budget-renews-call-for-corporate-rate-increase.html

    E. https://www.irs.gov/pub/irs-pdf/p15t.pdf

    F. https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

    G. https://www.taxsimplecenter.net/uploads/8/3/3/9/83395216/
    wf_tax_bill_
    draft11.pdf

                                     ______

                            Off Planet Research, LLC

                      1130 W Marine View Drive, Suite A-2

                               Everett, WA 98201

    March 12, 2024

    United States Senate
    Committee on Finance
    219 Dirksen Senate Office Building
    Washington, DC 20510

    To the Senate Committee on Finance,

    I am writing to express my appreciation for the hearing held on the
    importance of U.S. manufacturing and the impacts of the tax code on its
    growth. As a small business owner, I support the statements made
    regarding returning the full expensing of Section 174 costs. I would
    like to share our experience as a small business and the extremely
    damaging effect Tax Section 174 had on the business in 2022.

    The requirement for small businesses to amortize research and
    development (R&D) expenses over a five-year period instead of deducting
    them in the year they were incurred has forced us to take on unexpected
    and severe personal and business tax burdens that threaten our personal
    welfare as an LLC partnership and the viability of our small business.

    Our small business is working to advance technologies that are part of
    the national space program through NASA and the National Science
    Foundation (NSF)'s SBIR programs as well as providing testing resources
    for a wide array of private space organizations, research institutes,
    government agencies, and universities. We most recently received an NSF
    Phase II SBIR grant to expand our capabilities for recreating the icy
    soils found in extreme locations like the lunar south pole where the
    congressionally supported Artemis missions will be exploring for water
    ice and other volatiles.

    We are providing services to the government and closing strategic
    knowledge or technology gaps that have been identified as priorities by
    NASA and NSF. In return, our small business is being punished with
    unreasonable tax burdens. Most of the R&D funds counted as taxable
    income were used to pay our employees or buy supplies and materials
    from the vital vendors who make our grant work possible.

    Due to these rules, we showed a 10-fold increase in our net income in
    2022 compared to without this amortization rules. This resulted in us
    owing significantly more than anticipated in taxes, which was more than
    double our actual profit. Instead of showing positive cash flow in
    2022, this lead to negative cash flow for our business. As an LLC
    partnership, this extra tax payment fell to us as small business
    owners.

    The snowball effect of these rules creates an added burden beyond just
    the extra taxes owed. Because the business showed an inflated net
    profit, it also inflated our income as the owners. One ramification has
    been tripled student loan payments as a result of being pushed into a
    higher income bracket.

    These amortization rules strain all R&D businesses, but especially
    small businesses and their owners. As a small business, we do not have
    the ability to reallocate resources across departments to offset R&D
    ``income.'' Performing R&D activities is becoming more of a liability
    than a benefit.

    Many space companies playing a vital role in the burgeoning space
    economy are small businesses with an R&D focus. They are taking the
    United States to literal new heights and creating technologies that
    will revolutionize space and terrestrial industries. Policies that
    burden R&D activities will stifle innovation and harm businesses.
    Countries, like companies, that do not innovate will not be
    competitive.

    Please urge congress to immediately correct this harmful tax section
    and allow the full deduction of R&D costs in the year that the costs
    are incurred. It is critical that this correction be made retroactively
    to 2022 when it took effect to reverse as many of the harmful and
    compounding consequences as possible. Please reach out with any
    questions.

    Sincerely,

    Melissa Roth and Vincent Roux
    Co-Founders and Co-Owners

                                     ______

                          One Voice for Manufacturing

                       300 New Jersey Ave., NW, Suite 300

                              Washington, DC 20001

                           https://onevoiceinfo.org/

                                 March 11, 2024

    The Honorable Ron Wyden             The Honorable Mike Crapo
    Chairman                            Ranking Member
    United States Senate                United States Senate
    Committee on Finance                Committee on Finance
    219 Dirksen Senate Office Building  219 Dirksen Senate Office Building
    Washington, DC 20510                Washington, DC 20510

    Dear Chairman Wyden and Ranking Member Crapo:

    On behalf of One Voice, the joint effort between the National Tooling
    and Machining Association (NTMA) and the Precision Metalforming
    Association (PMA), and our nearly 3,000 metalworking member companies,
    thank you for your efforts to help support the growth of American
    manufacturing. The most efficient and effective way to generate growth
    among small businesses manufacturing in America is to pass the
    bipartisan Tax Relief for American Families and Workers Act of 2024,
    H.R. 7024.

    Federal tax policy has a significant impact on our members' businesses.
    When a manufacturer has more resources available to reinvest back into
    the business, they will purchase more equipment, add more customers,
    and hire and train more employees. However, the loss of full expensing
    and the requirement to amortize R&D expenses have caused increased tax
    bills for small and medium-sized manufacturers, which many still
    struggle to cover. This drastic change in the tax treatment of small
    business investments in research and innovation reduces incentives to
    invest in R&D and reduces the cash flow of manufacturers making it
    harder to invest in and grow our businesses.

    A recent NTMA/PMA survey conducted in January 2024, showed that taxes
    are the number one issue for One Voice members. Tax provisions such as
    R&D expensing, Bonus Depreciation, Section 163(j), Section 179, Section
    199a and the estate tax have a significant impact on small and medium-
    sized manufacturers, like our members. The survey showed that due to
    the loss of full expensing of R&D, 33% of One Voice members had to
    reduce their R&D activities while 37% of members reduced their capital
    expenditures due to the drop to 80% expensing for Bonus Depreciation.

    Our member companies rely on these vital tax provisions to help invest
    in their employees and facilities. The Senate should immediately pass
    the bipartisan Tax Relief for American Families and Workers Act of
    2024, H.R. 7024, as the most effective pathway to level the playing
    field for small manufacturers.

    Thank you for your support on this issue and your efforts on behalf of
    the metalworking industry.

    Sincerely,

    David Klotz                         Roger Atkins
    PMA President                       NTMA President

                                     ______

                         Smart Material Solutions, Inc.

                                984 Trinity Road

                               Raleigh, NC 27067

                                 (919) 521-4440

                    https://www.smartmaterialsolutions.com/

    Smart Material Solutions, Inc. is a small nanomanufacturing company
    with four full-time and four part-time employees in Raleigh, North
    Carolina. Our patented process, invented at North Carolina State
    University, enables industrial-scale manufacturing of nanopatterns that
    improve technologies ranging from solar panels to advanced camouflage.
    We have ongoing projects with the U.S. Army, NASA, and industrial
    partners on clean energy, infrared metamaterials, and dust-mitigating
    surfaces for Lunar applications.

    As an early-stage company developing new technologies, we are
    particularly hard hit by the inability to expense research costs.
    Despite posting a $90,000 loss in 2022, our taxable profit was
    approximately $1 million because we could only deduct 10% of our 2022
    research costs. As an S Corp owned by our employees, we had to pass
    this phantom profit through to our employees as personal income. Some
    of our employees were forced to pay more in taxes than their annual
    salaries--clearly a deterrent for working since we pay more in taxes
    than we earn every day we continue our otherwise successful business.
    This is not a great way to treat middle-class STEM entrepreneurs who
    thought starting a company, serving the national interest, and building
    the American manufacturing base might be more fulfilling than, for
    example, a career in big tech.

    We--companies with fewer than 10 employees--spend an average of 43% of
    our revenue on research, making us particularly vulnerable if research
    costs cannot be expensed. We also lack the cash flow and savings of
    larger corporations, so it is much more difficult for us to pay large
    tax bills when we have little to no profit. We know we are not the
    intended target for taxation, and the tax revenue we generate is a tiny
    fraction of the current tax bill, since we constitute only 1% of U.S.
    research spending. However, small manufactures like us will be the
    collateral damage without swift action to pass the Tax Relief for
    American Families and Workers Act (H.R. 7024).

    We hope the Senate Finance Committee understands the dire consequence
    of not retroactively restoring research expensing. From 1954 to 2021,
    American companies could expense research costs, encouraging
    development of new technologies and giving the United States its
    reputation for innovation. Both large corporations and small businesses
    were advised that congress would fix this harmful tax change due to its
    bipartisan support, so we continued doing business as if we could
    expense research costs. Unfortunately, in 2022 the rules changed to
    require amortization of research costs, risking both small businesses
    and American innovation. Restoring research expensing by passing H.R.
    7024 now is vital to the survival of many small businesses, will help
    the United States keep up with countries like China (which allows
    companies to deduct 200% of their research costs), and will save an
    estimated 169,400 American jobs and $14.4 billion in American income
    per year according to a recent Earnst and Young study.
                             Thrive Business Group

                          1325 Lincoln St., Suite 101

                              Bellingham WA 98229

                                 (360) 746-8738

                         https://www.cpabellingham.com/

    March 12, 2024

    Honorable Senator Wyden,

    I want to express my appreciation for the hearing conducted to
    highlight the importance of U.S. manufacturing and how it can be
    impacted through the tax code. I want to highlight the importance of
    returning the full expensing of Section 174 costs (Research &
    Development costs).

    Ms. Courtney Silver pointed out that the change in accounting treatment
    for these costs has strained cash flow. Strained cash flow is just the
    tip of the iceberg. I would like to add a real-life example of the
    truly catastrophic impact that capitalizing R&D expense is currently
    having on small businesses.

    I have one small business client who contracts with NASA and NSF to
    provide research and development services to further their work. In
    2022, they had a net income (i.e., profit) of $17,200.

    However, after their research and development costs were capitalized
    according to the existing tax law, they owed tax on $175,800 of income.
    This increased their tax bill by over $40,000--more than double their
    actual profit in their business.

    These folks are working day in and day out to further the mission of
    the federal government through work for NASA and NSF and they are being
    punished for it through the current tax law.

    This is just one of many similar stories. Crippling tax bills, people
    taking out loans just to pay their taxes--and all on phantom income
    because they cannot deduct their R&D expenses in the year they paid for
    them.

    I am a CPA in Bellingham, WA. I work with local small business owners
    to help them with their tax planning and compliance. I was raised by
    small business owners, am a small business owner, and am passionate
    about serving small business owners. I believe small business is the
    backbone of our economy.

    Unfortunately, we are seeing a very special group of small business
    owners being punished by the current tax law for doing exactly what is
    desired for our economy and country--research & development and
    manufacturing.

    The Tax Cuts and Jobs Act instituted a new tax law that took effect 1/
    1/22. It required that all research and development costs be
    capitalized and deducted over a 5 year amortization period. This means
    that when businesses invest in research and development, they are not
    able to deduct those costs in the year they spend the funds. This is
    true even for normal business expenses like wages, supplies, insurance,
    and more.

    The tax law allows for a federal tax credit for R&D activities. This
    could a valuable incentive to promote R&D activities to further our
    country's competitive positioning in the global economy. However, this
    tax credit is dwarfed by the tax impact of the current R&D cost
    capitalization and amortization rules.

    In other words, the current capitalization rules create a much larger
    tax burden than the credit provides a benefit. It is very quickly
    turning off small businesses from having any motivation to engage in
    R&D activities.

    I am writing to request that you prioritize the bipartisan discussion
    and successful solution of the Tax Relief for American Families and
    Workers Act. By doing so we can end this punishing tax law for
    businesses engaged in R&D and manufacturing activities and once again
    reinstate the support for these activities.

    Sincerely,

    B. Siobhan Q Murphy, CPA

                                     ______

                      U.S. Tire Manufacturers Association

                          1400 K Street, NW, Suite 900

                              Washington, DC 20005

                                  202-682-4800

                            https://www.ustires.org/

    As the Committee on Finance explores the topic of federal tax
    incentives for U.S. manufacturing, the U.S. Tire Manufacturers
    Association (USTMA) respectfully submits for the record of the hearing
    background on the job creation, sustainability, and supply chain
    security benefits of federal incentives for retreading U.S. truck fleet
    tires.

    BACKGROUND

    The retreading of commercial truck tires is a prime example of the
    economic and environmental benefits of effective product recycling.
    Each retreaded tire creates and supports local jobs, reinforces U.S.
    supply chain security, and reduces energy consumption, carbon dioxide
    emissions, raw material use, and tire disposal challenges.

    The U.S. Government has recognized the benefits of retreaded tires
    dating back to 1988, when the Environmental Protection Agency (EPA)
    issued guidelines for purchasing retreaded tires, with the purpose of
    ``using the stimulus of government procurement to increase the use of
    retread tires within both the government and private sectors.''
    Further, in 1991, the EPA recommended federal agencies ``(1) obtain
    retreading services for their used tires and (2) purchase retread
    tires.''

    While this federal directive established a process for tire retreading
    and its benefits, over the last 25 years, commercial truck tire
    retreading has declined in the United States. Which this decline is
    attributed to the availability of cheap alternative tires, often
    sourced from China and elsewhere in Southeast Asia, which are 65% less
    likely to be retreaded because of their design and construction. In the
    last 20 years, the number of retread facilities in the United States
    has declined by 50% due to the rise in disposable truck tires.

    There is an urgent need for the federal government to further
    incentivize the purchase of retreaded truck tires in the United States,
    to mitigate the economic, environmental and supply chain costs
    associated with the escalation of low-quality imports unfit for
    retreading. One viable incentive is a short-term tax credit for U.S.
    purchasers of retreaded truck tires which would reinforce jobs and the
    sustainability benefits of U.S. retreaded truck tires while protecting
    U.S. supply chains.

    BENEFITS OF RETREADING TRUCK FLEET TIRES

          Job Creation: U.S. truck tire retreading operations occur
    principally through localized retreading workshops that replace the
    worn treads from the casings of truck tires with new tire treads.
    Approximately 500 domestic retreading workshops directly support over
    51,000 jobs in the United States.

          Sustainability: Compared to new truck tires, retreaded truck
    tires utilize substantially less fuel and materials, significantly
    reduce emissions of carbon dioxide and other air pollutants, reduce
    water consumption and remove over a billion pounds of material from the
    waste stream each year. Specifically, retreaded truck tires:

                Use 15 gallons less oil and 90 pounds less
            total material per tire.
                Save the U.S. and Canada approximately 217
            million gallons of oil each year.
                Reduce CO2 emissions by 24%
            annually.
                Reduce annual water consumption by 19% and
            overall air pollution by 21%.
                Remove 1.4 billion pounds of material per year
            from the waste stream.

          Supply Chain Security: Increasing demand for truck tires
    retreaded in the United States will reduce U.S. dependency on imported
    ``disposable'' truck tires. These cheaper truck tires, unfit for reuse,
    are often sourced from China and elsewhere in Southeast Asia via supply
    chains that are more volatile and government subsidized. Reversing
    current purchase and use trends will stabilize and protect supply
    chains for U.S. retreaded truck tires.

    NEED FOR FEDERAL INCENTIVES FOR TRUCK TIRE RETREADING

    In recent years, the United States has seen an increase in the use of
    cheaper, imported truck tires that cannot be retreaded and therefore
    must be disposed of after a single use. Between 2011 and 2022, these
    imports increased from 2 million to over 4 million tires, driven by
    falling imported tire prices incentivized by heavy foreign government
    subsidies. As an example, imported tire prices dropped from $128 to
    $102 per tire over the same period.

    Fortunately, some in Congress have recognized the threat these imported
    tires pose to American jobs, sustainability and supply chain objectives
    and are considering federal support to reverse imported truck tire
    purchasing trends. One such proposal, which would fall within Senate
    Finance Committee jurisdiction, would:

          Provide for three years a $30 per tire tax credit for the
    purchase of qualified retreaded truck tires; and

          Direct federal agencies to utilize retreaded tires within
    federal truck fleets when possible.

    USTMA members including Bridgestone Americas, Continental Tire the
    Americas, The Goodyear Tire & Rubber Company, and Michelin North
    America support this initiative, as do leading U.S. commercial truck
    fleet operators. Organized labor unions also support these proposed
    incentives.

    USTMA is the national trade association for tire manufacturers that
    produce tires in the U.S. With an annual economic footprint of $170.6
    billion, U.S. tire manufacturing is a critical part of the American
    economy. USTMA's 12 member companies collectively operate 57 tire-
    related manufacturing facilities in 17 states. The industry directly
    supports more than 291,000 U.S. jobs in manufacturing, distribution and
    retailing across every congressional district in the country. The
    industry also supports more than 510,000 additional U.S. jobs in
    supplier and induced activities, totaling more than 801,000 jobs
    nationwide.

    USTMA advances a sustainable tire manufacturing industry through
    thought leadership and a commitment to science-based public policy
    advocacy. USTMA members are committed to sustainable practices across
    our industry essential to the responsibility we share of helping
    achieve a more sustainable society. From engineering innovations that
    reduce CO2 emissions to enhancing tire safety and
    performance, driving workplace safety progress, and preserving the
    environment through the lifecycle of a tire.

    In recent months we have met with Senators Blackburn, Brown, Scott, and
    Warner of the Senate Finance Committee, and we appreciate their
    interest in this issue and are hopeful they will soon introduce
    legislation.

    Thank you for the opportunity to submit this written statement for the
    record. We would be happy to provide additional information.

                                     ______

                       The State of Retread Tires in the
                             United States & Canada

                        2024 Addendum to the 2018 Report

    Overview

    Led by Professor John Woodrooffe, the 2018 publication of The State of
    Retread Tires in the United States and Canada: An Analysis of the
    Economic & Environmental Benefits for Fleet Operators and the United
    States Government was the result of industry-wide coordination with
    business leaders, experts, and scholars from the Duke Center for
    Sustainability & Commerce, N.C. State Supply Chain Resource
    Cooperative, and the University of Michigan Transportation Research
    Initiative.

    With an eye on economic, environmental, and national security risks and
    opportunities, the following addendum seeks to provide lawmakers with a
    snapshot of the state of the American tire retreading industry in 2024.

    About the Author

    JOHN WOODROOFFE
    Mr. John Woodrooffe is a Research Scientist, Director of the Commercial
    Vehicle Research and Policy Program, and Head of Vehicle Safety
    Analytics at the University of Michigan Transportation Research
    Institute. He has over 30 years of experience in vehicle-related
    research and is an international expert in large vehicle transport
    safety, efficiency, vehicle productivity, and progressive regulatory
    issues.

                          Retread in Focus: The Facts

                           America Depends on Retread

      Retread is the largest remanufacturing sector in
    the U.S., employing over 51,000 workers and supporting more than
    268,000 jobs across the broader $28.4 billion U.S. tire industry
    (Daystar et al, 2018).

      Operating under franchise agreements with large
    tire companies (e.g., Bridge- stone, Continental, Goodyear, Michelin),
    retreads are a nearly 100% domestically produced product (with U.S. and
    foreign content) manufactured by small independent businesses,
    typically employing 10-60 workers.

      Approximately 15 million tires are retreaded
    annually in the U.S. (Modern Tire Dealer, 2023).

      U.S. truck and bus fleets are prolific users of
    retreads, retreading each tire 2-3 times on average.

      Nearly 90% of U.S. fleets with 100+ trucks rely
    on retreaded tires due to their financial, operational, and
    sustainability benefits (Daystar et al, 2018).

      Retreads are a vital economic and national
    security asset, helping keep America's trucks on the road during
    unprecedented supply chain and geopolitical disruptions.

                 Financial & Environmental Benefits of Retread

      Truck tires are commonly covered under a limited
    warranty and designed to be retreaded up to three times, extending a
    tire's life by 300% or more and keeping fleets on the road at a lower
    cost per mile. Bridge-stone, the largest producer and retreader of
    commercial tires in America, estimates that premium tires are retreaded
    an average of 2.1 times.

      Tires are the 3rd highest expenditure for fleets,
    behind people and fuel. Annually, retreading generates nearly $3
    billion in cost savings.

      Retreading reduces energy use by 30%, and
    requires approximately 15 gallons less oil to produce one retread than
    manufacturing a new truck tire (NHTSA, 2008).

      A typical retread commercial tire saves (on
    average) 90-100 lbs. of material. Capable of being retreaded 3 times or
    more, a single premium tire can save upwards of 300 lbs. of materials
    versus non-retreadable tires.

               The Threat of Low-Cost Imports to the U.S. Economy

      For every new premium tire sold in the U.S. and
    Canada, 1.1 retreads are produced, whereas less than 0.4 retreads are
    made for every new ultra-low-cost import (Day-star, 2018). The rise of
    ultra-low-cost tire imports has eroded the market and hastened the
    decline of the U.S. retread industry.

      The number of tire retreading facilities in the
    U.S. has dropped from over 3,000 in 1982 to an estimated 500 in 2023.
    The growth of low-cost import tires is accelerating this trend and
    increasing the likelihood of further plant closures (Modern Tire
    Dealer, 2023).

      Due to differences in quality, low-cost tire
    imports are often deemed unsuitable for retreading and, therefore,
    discarded after a single use. As they are typically not retreaded, low-
    cost imports account for a disproportionate share of the more than 270
    million tires sent to U.S. scrap yards and landfills in 2021 (USTMA,
    2022).

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                   Retread Explained: Safety and Process

    MODERN RETREADING includes a 10-step process * that requires multiple
    inspection points and highly automated advanced manufacturing
    technology.
    ---------------------------------------------------------------------------
        * Source: Bridgestone Bandag, LLC.

    1. INITIAL INSPECTION

    The tire is visually examined using a 7-step rotation to fully analyze
    if the tire is capable of being retreaded and to identify if there are
    any repairs that are required.

    2. ELECTRICAL INSPECTION

    An electrical current is applied to the inner cavity of the tire. A
    sensor is used to detect any voltage that penetrates the tire,
    identifying penetrations that may be invisible to the naked eye.

    3. SHEAROGRAPHY

    In most modern retread facilities, a shearography machine is used to
    scan the tire from side to side. The machine generates detailed images
    that are used to identify any underlying damage.

    4. BUFFING

    The remaining tire tread is physically abraded to remove the rubber and
    to create a uniform surface upon which the retread will be applied.

    5. SKIVING REPAIR

    Repairs are made as needed, including to any damage uncovered during
    the buffing process.

    6. APPLYING CUSHION

    An extruder will apply a thin and uniform layer of specialized uncured
    rubber, called the cushion, over the crown of the casing. Once cured,
    this material is what secures the new tread to the casing.

    7. BUILDING

    During the ``building'' process the new tread is applied--most often by
    a computer-controlled machine--to the casing.

    8. ENVELOPING

    The tire and its new tread are encased in a flexible rubber envelope
    that will ensure uniform pressure across the surface of the tire,
    pressing the tread and casing together during the curing process.

    9. CURING

    The tire tread is cured to the casing using a combination of
    temperature, pressure and time within a pressurized chamber.

    10. FINAL INSPECTION

    As a final check, the operator will examine the final product to ensure
    the quality of the retread. The operator will also verify that the
    customer specifications are met.

                       AS SAFE AND RELIABLE AS A NEW TIRE

    Leading manufacturers maintain the controls, licenses, and
    certifications (e.g., ISO 9001:2000) to help ensure the quality and
    safety of the retreading process and finished products. In addition,
    unlike new tires coming off the line that are subject only to visual
    inspection, retreads undergo rigorous visual and electronic analyses to
    ensure they adhere to strict standards. Studies conducted by the
    National Highway Transportation Safety Administration (NHTSA), the
    American Trucking Associations, and the states of Arizona and Virginia
    concluded that a well-maintained retreaded tireoffers equivalent
    reliability to a well-maintained new tire (Daystar et al, 2018).

    See State of Retread Tires in the United States and Canada 2018 page
    11.

           Stepping Up Quality and Safety: Innovation and Investment

    Retread industry innovations enable fleet managers to follow their
    tires throughout the retreading process and equip them with data and
    insights to make more informed decisions. Most importantly, retread
    solutions ensure that the trucks and drivers who rely on retreaded
    tires operate safely and efficiently.

    ``In addition to advancing retreaded tire quality and safety, the
    retreading industry continues to explore and invest in automation and
    ergonomic manufacturing enhancements to improve worker health, safety,
    and productivity.''

    -- Jason Roanhouse, Vice President of Operations, Bridgestone/Bandag

                   Retread's Value Proposition for America:
                      Improved Security and Sustainability

    The Economy

    Directly employing 51,000+ workers and supporting more than 268,000
    jobs across the broader tire industry, retreading is the largest
    remanufacturing sector in the U.S. In addition to its contribution to
    the American economy, retreading is a key differentiator for the
    premium domestic tire industry and a critical component of good fleet
    management; nearly 90% of fleets with more than 100 trucks across the
    U.S. and Canada run on retreaded tires because of their affordability
    and reliability.

    ``As a manageable and trackable asset, fleets invest in premium tires
    because they plan to extend and optimize via retreading. Lower-cost
    imports are typically used once and then discarded. Therefore, the
    retread and domestic tire industries should be seen as mutually
    reinforcing. When there is no way to get the tire retreaded, the odds
    of fleets investing in premium retreadable tires decrease
    dramatically.''

    -- Executive, Pomp's Tire Service, Inc.

    The Environment

    In 2021, over 270 million tires were sent to U.S. scrap yards and
    landfills, many of which were low-cost, single-use imports (USTMA,
    2022). Taking upwards of 50 to 80 years to decompose, once entering the
    waste stream, tires present a unique challenge with far-reaching
    environmental health and safety consequences.

    As scrap tires break down, they release chemicals and heavy metals into
    the soil, polluting water sources and endangering nearby and downstream
    life. Incinerating tires releases hazardous compounds--gases, heavy
    metals, and oil. Notably, tackling intentional or uncontrolled tire
    fires is challenging, intensifying respiratory and environmental risks
    (U.S. EPA, 2016). Amid these issues, retreads show potential as a
    promising solution.

    By reusing the existing casing and replacing only the worn-out tread
    rubber, retreading significantly reduces the amount of raw materials,
    energy, and emissions required. Commonly covered under a limited
    warranty and designed to be retreaded up to three times, retreading can
    extend a tire's life by 300% or more, helping keep tires out of the
    waste stream. With nearly half of all commercial trucks in the U.S. and
    Canada running on retreads, this translates to an estimated annual
    savings of 217.5 million gallons of oil and 1.4 billion pounds of waste
    (Bridgestone, 2018).

    The retread industry is an excellent example of the circular economy in
    action, with most retreaders using recycled rubber and a growing number
    of facilities operating on solar power. In addition, as the largest
    remanufacturing sector in the US, the retread industry takes its role
    in environmental health and safety seriously, investing in research and
    innovation to eliminate the use of harmful chemicals and improve
    sourcing, manufacturing, use, and end-of-life.

    With approximately 15 million commercial tires retreaded annually
    across the U.S., retreads are making a difference and proving its case
    as a safe, reliable, and more environmentally friendly alternative to
    lower-cost, single-use tire imports.

            Opportunity to Tackle Waste and Improve Sustainability
                             in Last Mile Delivery

    Bridgestone estimates that last-mile delivery vehicles replace tires as
    often as every 3 to 4 months, meaning a single vehicle can use more
    than 30 sets of tires over its lifetime.* With less than 5% of last-
    mile delivery vehicles running on retreaded tires, the rapid
    electrification of LMD fleets, coupled with the burgeoning demand for
    LMD services, presents a tremendous opportunity for retread, a more
    environmentally friendly solution to the tire waste problem.
    ---------------------------------------------------------------------------
        * Class 2-3 delivery vans. Per Bridgestone testing. Actual results
    may vary.

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                       The Reality of Retread in 2023

                     Showing Weakness But Showcasing Value

    Over the last 14 years, low-cost imports have grown at a staggering 7%
    compound annual growth rate (CAGR), surging to 11% between 2012 and
    2022 (Panjiva, 2023). As retread industry strength is highly correlated
    to the volume and velocity of low-cost imports, this unprecedented
    growth has considerably impacted the demand for retreads, leading to a
    significant drop in U.S. retread manufacturing facilities from over
    1,000 in 2002 to an estimated 500 in 2023 (Modern Tire Dealer, 2023).

    Recent retread strength can be attributed to challenges faced by low-
    cost tire importers, namely tariffs imposed on Chinese truck and bus
    tires in 2019 and
    pandemic-induced supply chain disruptions in 2020 and 2021, reducing
    the flow, availability, and affordability of low-cost imports. Yet,
    amid these fluctuations, the proliferation of imported tire brands and
    the emergence of subsidiaries operating out of Thailand and Vietnam has
    created a new set of challenges for the industry in recent years.

    ``It was simple_for several months, a significant portion of the market
    disappeared, and when domestic tire suppliers could not ramp up
    production quickly enough to keep up, retread was the only viable (and
    affordable) option. Were it not for retread shops, many trucks would
    have sat idle. It is time to include U.S. dependence on imported tires
    in the U.S. supply chain security discussion.''

    -- Executive, Resley Tire Co. Inc.

    Citing the rise of subsidiaries and the unprecedented flood of low-cost
    imports in 2021 and 2022 coupled with flat global demand, analysts
    forecast that market oversupply and exceptionally low pricing will
    accelerate retread's decline in 2024 and 2025.

    These developments underscore the U.S. retread industry's challenges
    and the importance of legislation addressing the economic and
    environmental risks posed by low-cost tire imports.

    Driven primarily by operators out of Southeast Asia, the post-COVID
    flood of low-cost tire imports to U.S. markets paved the way for 8 of
    the 10 largest exporting countries to post double-digit yearly
    increases in 2022 (Modern Tire Dealer, 2022; Tire Business, 2023).

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                  In Support of Retread: A Call to Action

         Important for the Economy, Environment, and National Security

    Retreaded tires are a nearly 100% domestically produced product (with
    U.S. and foreign content) made by small businesses, collectively
    employing more than 51,000 workers. In use by almost half of all
    commercial trucks in the U.S. and Canada and credited with generating
    more than $3 billion in fleet cost savings and the avoidance of 1.4
    billion lbs. of landfill waste annually, retreads are designed to be a
    safe, cost-effective, environmentally friendly, and sustainable choice
    to help keep fleets on the road, materials moving, and products
    affordable.

    However, despite the economic and environmental benefits, over the last
    20+ years, low-cost tire imports have eroded the share of retreaded
    tires and forced facilities to shutter, putting thousands of skilled
    laborers out of work.

    Facing the combined pressures of increasing labor and energy costs with
    declining demand, retread business owners urge lawmakers to address the
    economic, environmental, and national security risks associated with
    America's increasing dependence on low-cost imports and ensure U.S.
    retread readiness in future crises.

    Trouble Ahead: What You Need to Know

          Market Realities: Retread strength is highly correlated to the
    volume and velocity of low-cost imports, and their unprecedented growth
    has adversely impacted U.S. retread demand and manufacturing capacity.

          The Time to Act Is Now: Low-cost imports to the U.S. grew at a
    staggering 11% Compound Annual Growth Rate (CAGR) between 2012 and
    2022. This unprecedented growth, coupled with the post-pandemic surge
    beginning in 2021, represents an existential threat that, if
    unaddressed, will have profound consequences for retreading in 2024 and
    beyond.

    With the U.S. retread industry at risk, it is imperative that lawmakers
    support the industry with pro-retread policies, such as tax incentives
    for the purchase of retread tires. This measure will increase retread
    demand and protect American jobs and the environment.

    The passage of this legislation will help secure U.S. supply chains,
    ensure economic stability, and preserve precious non-renewable natural
    resources.

    References

    Costello, B. (2023). Economics and industry data. American Trucking
    Associations. Retrieved June 25, 2023, from https://www.trucking.org/
    economics-and-industry-data.

    Davis, B. (2022, April 11). Will commercial tire market growth peak in
    2022? Tire Business, https://www.tirebusiness.com/news/will-commercial-
    tire-market-growth-peak-2022.

    Davis, B. (2023, April 24). Special report: Commercial tire sector
    facing headwinds. Tire Business, https://www.tirebusiness.com/news/
    commercial-tire-sector-facing-headwinds.

    Daystar, J., Golden, J., Handfield, R., & Woodrooffe, J. (2018). The
    State of Retread Tires in the United States and Canada: An Analysis of
    the Economic & Environmental Benefits for Fleet Operators and the
    United States Government. Bridgestone Bandag, Duke University, East
    Carolina University, North Carolina State University, University of
    Michigan, https://www.bandag.com/content/dam/commercial/bandag/pdf/
    Retread-Tires-In-US-Canada-Report-Web-07-11-2018.pdf.

    Endeavor Business Media. (2023, January 29). MTD Facts Issue. Modern
    Tire Dealer, https://issuu.com/10missionsmedia/docs/
    0123_digital_edition.

    Panjiva. (2023). U.S. Rubber Imports (TBR). U.S. Trade Intelligence.
    Retrieved October 6, 2023, from https://panjiva.com.

    Tire Business. (2022, December 28). Bridgestone Bandag tire retread
    sales up in 2022, https://www.tirebusiness.com/retreading/bridgestone-
    bandag-tire-retread-sales-2022.

    Tire Retread and Repair Information Bureau. (2022). A Look at the US
    Retread Industry and California Retread Contract, https://bipaver.org/
    wp-content/uploads/2022/05/TRIB-A-look-at-the-US-retread-industry-and-
    california-retread-contract.
    pdf.

    Tire Retread and Repair Information Bureau. (n.d.). Featured
    Retreaders. Retrieved July 2, 2023, from https://www.retread.org/
    featured-retreaders.

    U.S. Environmental Protection Agency. (2016, February 22). Wastes--
    Resource Conservation--Common Wastes & Materials--Scrap Tires.
    Archives, https://archive.epa.gov/epawaste/conserve/materials/tires/
    web/html/basic.html.

    U.S. Tire Manufacturers Association. (2022, October 25). 2021 US Scrap
    Tire Management Summary, https://www.ustires.org/sites/default/files/
    2022-10/21%20US
    %20Scrap%20Tire%20Management%20Report%20101722.pdf.

    Woodrooffe, J. F., Page, O., Blower, D., & Green, P. E. (2008).
    Commercial Medium Tire Debris Study (DOT HS 811 060). National Highway
    Traffic Safety Administration.

    HOW TO CITE THIS REPORT

    J. Woodrooffe (2024).
    2024 Addendum to the 2018 The State of Retread Tires in the United
    States & Canada.

    ACKNOWLEDGMENTS

    Input and funding of this report partially provided by Bridgestone
    Bandag, LLC in cooperation with industry experts, academia and Bandag
    franchisees.

                                     ______

                         Vital & FHR North America LLC

                                 1201 Brim Rd.

                            Bowling Green, OH 43402

                                 (408) 217-0375

                           https://www.vitalchem.com/

    On behalf of our 10,000+ employees, Vital & FHR North America LLC
    submits this statement with appreciation to Chairman Wyden, Ranking
    Member Crapo, and the other Members of the Senate Committee on Finance.

    We are honored to present this statement for the hearing: ``American
    Made: Growing U.S. Manufacturing Through the Tax Code.'' As a leading
    manufacturer of advanced materials and vacuum coating systems for a
    diverse range of applications including solar, fuel cells, display
    technologies, automotive, and more, we are deeply invested in the
    future of American manufacturing, particularly in the clean energy
    sector.

    Our facility in Bowling Green, Ohio, is a testament to the power of
    innovation and partnership, supplying critical components to American
    made solid oxide fuel cells, a key technology in the clean energy
    landscape.

     The Role of Tax Incentives in U.S. Clean Energy Leadership

    Tax incentives and credits have been pivotal in establishing the United
    States as a leader in the clean energy sector. By all accounts, low-
    carbon energy sources have accounted for an increase in U.S.
    electricity generation over the past few years, with projections
    indicating significant growth as clean energy technologies become more
    prevalent. The investment tax credit (ITC) and production tax credit
    (PTC), for example, are spurring remarkable growth in fuel cell, solar
    and wind power capacity, largely driven by these policies.

    In fuel cells alone, analyst projections show a tremendous increase in
    demand over the coming years. In one report released less than 2 months
    ago by Market.us, the global solid oxide fuel cell market size is
    expected to grow from $1.4 Billion in 2023 to $21.3 Billion by 2033,
    expanding at a compound annual growth rate (CAGR) of 31.3% during the
    forecast period from 2024 to 2033.

    We believe the tax code is vital for helping position American
    manufacturers to capture most of this global market. Our competitors
    are actively working to lure investment, so the United States should
    respond accordingly.

    Economic Impact and Job Creation

    The clean energy sector is not only crucial for environmental
    sustainability but also for economic vitality and job creation. The
    Department of Energy estimates that clean energy tax incentives will
    create millions of American jobs over the next several years.

    Unfortunately, according to the International Energy Agency, today the
    United States still lags behind other countries in many areas of clean
    energy manufacturing. However, in fuel cells the United States remains
    the world's leader in innovation and manufacturing employment. Our
    company employs hundreds of people who manufacture products for the
    domestic fuel cell industry.

    Encouragingly, a McKinsey study found that by 2030 the broader fuel
    cell and hydrogen industry could support 700,000 American jobs. To
    achieve these numbers, it is critical--for both fuel cell producers and
    their domestic suppliers like Vital & FHR--that S. 3027 be passed and
    the ITC for solid oxide fuel cells be extended.

    The Case for Sustained Support

    To maintain American momentum and leadership, it is critical that we
    sustain and expand clean energy tax credits, including the ITC for fuel
    cells. These policies not only incentivize the adoption and production
    of clean energy but also support the entire supply chain, including
    manufacturers like Vital & FHR. They are essential for ensuring that
    the U.S. remains at the forefront of the global transition to a clean
    energy economy, driving innovation, creating jobs, and promoting
    sustainable growth.

    In conclusion, the extension and expansion of clean energy tax
    incentives represent a strategic investment in America's economic and
    environmental future. By supporting these policies, we can continue to
    lead in the development and manufacturing of clean energy technologies,
    create high-quality American jobs, and compete effectively in the
    global market.

    We appreciate the Committee's consideration of our perspective and
    stand ready to contribute to the development of policies that will
    ensure the continued growth and success of the U.S. manufacturing
    sector and the clean energy industry.

    Thank you for the opportunity to participate in this important
    discussion.

                                [all]