Key Finding #1: Tariffs and Customs Duty Management Are Now a Strategic Tax Consideration
Manufacturing Tax Departments at a Glance
Tariff volatility has become a material operational risk, not only because policies are shifting rapidly, but because court decisions, refund pathways, and compliance obligations are simultaneously in flux. While companies are taking action, their responses skew heavily defensive. The most common steps — finding new suppliers (44%), reviewing tariff classifications (42%), and raising prices (36%) — are short-term measures aimed at relieving immediate cost pressures rather than building a durable, proactive strategy.
This near-term focus suggests companies may be underutilizing more powerful strategic levers. Adoption of foreign-trade zones (FTZs) (34%), customs valuation strategies (34%), and duty drawback (18%) remains comparatively low — even though duty-drawback alone can allow manufacturers to recover import duties, including tariffs already paid.
Capturing the full value of these strategies typically requires cross-functional coordination between tax, operations, procurement, and supply chain coordination that many manufacturers have not yet formalized. To unlock available tax-saving opportunities, manufacturers need clear governance structures and a defined tax strategy that converts visibility into action.
Internal alignment has been further strained by the numerous and frequently shifting tariffs imposed by the Trump administration under the “America First” policy. The administration relied on multiple statutory authorities to levy the tariffs, including Sections 122 and 301 of the Trade Act of 1974 and the International Emergency Economic Powers Act (IEEPA). These tariffs shortened planning horizons and made it difficult to justify the upfront investment required for drawback programs and FTZs.
Importantly, survey responses were collected before the U.S. Supreme Court's February 2026 decision holding the IEEPA-based tariffs unlawful — a ruling that has since created a pathway for potential refunds of previously paid duties though the pathway now faces uncertainty following a shift in U.S. Customs and Border Patrol position. The Section 122 10% global tariffs have likewise been declared unlawful, though the relevant Court of International Trade decision is on hold pending a government appeal. At the same time, recently released determinations of Section 301 investigations into 60 economies’ enforcement of prohibitions on the importation of goods produced with forced labor have resulted in recommendations for additional tariffs of 10% or 12.5%. And the administration’s ongoing review of Section 232 national security tariffs on steel and aluminum adds yet another layer of unpredictability for manufacturers that rely on metal-intensive products or components.
Key Finding #2: OBBBA: The Baseline Reset
Percentage of manufacturing respondents that said the following OBBBA tax provisions will have a significant/moderate impact on their business
Manufacturing tax leaders anticipate that new provisions in the One Big Beautiful Bill Act (OBBBA) will have significant, wide-ranging impacts on their business — but they have yet to change their tax reporting behavior in response. The three provisions most commonly cited as having "significant” or “moderate” impact on tax planning are Section 174A (domestic R&E expensing) (86%), bonus depreciation under Section 168(k) (84%), and energy credits (84%). These responses are not surprising, as manufacturers were watching these areas closely in the run-up to the bill’s passage. When OBBBA restored these provisions, manufacturers treated them as a restoration of the status quo, not as new opportunities to build around.
In practice, these provisions function as cash flow tools, governing how manufacturers manage taxable income rather than driving new investment decisions. The expected tax relief, however, is being partially offset by a drag on taxable income for 2025-2026. Previously capitalized R&E costs from 2022-2024 are now hitting income statements all at once under the new rules, making it difficult to isolate the true benefit of the new provisions.
Eighty-four percent of manufacturing tax executives say energy credits will have significant or moderate impact, a figure largely driven by exposure to electric vehicle (EV) markets and concern over upcoming credit phaseouts. On the other side of the market, manufacturers producing qualifying clean energy components can generate credits of their own and sell them to third-party buyers through the transferable credit market. For manufacturers, energy credits represent both a risk management consideration and a potential revenue opportunity.
Section 168(n) is another standout variable. The provision offers near-100% expensing of new U.S. facility costs, which could unlock substantial tax savings for manufacturers planning domestic expansion. Since most expansion plans predate OBBBA and were funded before this provision existed, many companies had not accounted for any potential savings. For plans being made today, the 168(n) benefit is only part of the equation — workforce availability and other operational constraints are still exerting their own pressures. Notably, inbound foreign manufacturers investing in new U.S. production facilities stand to benefit from 168(n) as much as domestic operators, given that they may be making greenfield investments rather than expanding existing footprints.
Key Finding #3: SALT Complexity is Growing and Manufacturers Are Not Adjusting Fast Enough
Excluding federal income taxes, which one of the following types of taxes account for the largest overall portion of your organization’s tax liabilities?
State and local income and franchise tax obligations are the largest non-federal tax burden for nearly half of manufacturers (46%), and the compliance environment is only becoming more aggressive. Two issues are driving today’s heightened SALT complexity: OBBBA decoupling and evolving nexus interpretations under Public Law 86-272. Many states are no longer conforming to the federal treatment under Sections 168(k) and 168(n). As a result, this creates challenges in determining how much income is taxable in each state. The second issue — Public Law 86-272 — sets the threshold for when out-of-state sellers of tangible goods are subject to state income tax. As states implement more aggressive filing requirements based on sales and distribution activity, sales and use tax determinations have become more difficult on both the buy- and sell-sides. The added difficulty is driving some manufacturers to consider restructuring to limit profit exposure in those states.