As the conflict between the U.S. and Israel, and Iran intensifies, trade in the Middle East is facing major disruptions.

These disruptions have already begun to impact global supply chains, especially for industries reliant on Middle Eastern oil and liquid natural gas for production. Many U.S. manufacturers are bracing for supply chain disruptions while planning for potential short-term and long-term economic impacts of war with Iran.

Currently, the most significant impact on global supply chains stems from disruption to the Strait of Hormuz, a crucial shipping channel in the Middle East connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. Approximately 20 percent of the world’s oil and gas is shipped via the Strait of Hormuz. Following the joint strike against Iran by the U.S. and Israel on February 28, access to this vital trade channel has effectively been cut off, with Iran threatening to attack any ships attempting to pass through. The closure poses serious operational challenges for ships in the area, including oil and liquid natural gas tankers. Many ships are rerouting via the Cape of Good Hope, which will result in significant delays for deliveries. The closure of multiple airports and large portions of airspace in the Middle East due to high security risk has also stalled the movement of air cargo in the region.

The extent of the impact on global manufacturing depends largely on how long the conflict lasts. Logistics Viewpoints compares the potential fallout resulting from a short-term versus a prolonged conflict, predicting that even a short-lived conflict of seven days or less will result in a surge in crude oil prices, higher raw material costs, shipping delays, and raw material shortages. A prolonged conflict, on the other hand, would have a much more significant impact on global supply chains. According to Logistics Viewpoints’ analysis, if the war extends beyond four weeks, manufacturing companies will face even greater pressures related to energy prices, logistics costs, raw material availability, and consumer demand.

As of right now, the duration of the war against Iran remains unknown. Manufacturing companies are encouraged to prepare for possible economic impacts by assessing supply chain exposure, diversifying supply chains, and planning for various potential scenarios. RBT CPAs’ manufacturing accounting team will continue to monitor the impact of the conflict on manufacturing companies and we are ready to assist you in planning strategically in the face of potential supply chain disruptions. And as always, RBT is here to support all of your business’s accounting, tax, audit, and advisory needs while you focus on risk management and mitigation strategies. Give us a call today and find out how we can be Remarkably Better Together.

The One Big Beautiful Bill Act—or the OBBBA for short—was signed into law in early July, implementing several significant tax law changes. The act’s provisions will have impacts on businesses across a wide range of industries. Here is a list of tax law changes and updates under the OBBBA that manufacturers should be aware of.

100% Bonus Depreciation Restored

The OBBBA permanently restores 100% bonus depreciation for qualified property placed in service as of January 19, 2025, reversing the planned phase-down of this provision. This change will benefit manufacturing firms investing in new equipment or machinery, allowing these purchases to be written off immediately.

Depreciation for Qualified Production Property

The OBBBA also introduces an elective first-year 100% depreciation deduction for “qualified production property,” that is, nonresidential real property used in manufacturing or production activities.

Increased Section 179 Deduction

The Section 179 deduction allows businesses to deduct the full cost of qualifying equipment in the year it is placed into service. The OBBBA increases the Section 179 expensing limit to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million (new phasedown threshold).

Immediate R&D Deductions Restored

U.S. research and development expenditures, previously required to be amortized over five years, can now be deducted in the year paid. Small businesses averaging $31 million or less in annual gross receipts may elect to apply the change retroactively for tax years beginning after December 31, 2021. All businesses that made domestic R&D expenditures between 2022 and 2024 may elect to accelerate the remaining deductions for those expenditures over one or two years. Unlike domestic expenditures, foreign R&D costs continue to require a 15‑year amortization under Section 174.

Manufacturing firms planning to innovate their processes, explore new technologies, and develop new products stand to benefit from this provision.

Limitation on Business Interest

The OBBBA reinstates the EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) limitation under Sec. 163(j), effective for tax years beginning after December 31, 2024. Adjusted taxable income (ATI) will be computed without regard to the deduction for depreciation, amortization, or depletion.

QBI Deduction Extended

The OBBBA permanently extends the Qualified Business Income (QBI) deduction, which allows eligible taxpayers to deduct up to 20% of their qualified business income. The permanent extension includes additional modifications that expand the phase-in range of the wage and investment limitation and introduce a minimum deduction for businesses in which the taxpayer materially participates.

Changes to Clean Energy Incentives

The OBBBA terminates, phases out, or curtails many clean energy tax incentives, including the Section 179D energy-efficient commercial buildings deduction, the Section 48E clean electricity investment credit, the Section 45Y clean electricity production credit, and certain credits for wind and solar projects. On the other hand, the bill extends the Section 45Z clean fuel production credit through 2029.

Advanced Manufacturing Investment Credit (AMIC) Increased

The Advanced Manufacturing Investment Credit is a tax credit available to manufacturers of semiconductors and semiconductor manufacturing equipment for eligible investments. The OBBBA increases the AMIC rate from 25% to 35%.

International Tax Provisions

Significant adjustments have been made to international tax provisions, including the following changes. The deduction rates for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) have been updated starting after 2025. The OBBBA also renames the FDII to FDDEI (foreign-derived deduction eligible income) and the GILTI to NCTI (net CFC tested income). The FDII (now FDDEI) deduction rate is reduced to 33.34% and the GILTI (now NCTI) deduction rate is lowered to 40%. Additionally, the Base Erosion and Anti-abuse Tax (BEAT) minimum tax rate will be permanently set at 10.5% (previously scheduled to rise to 12.5% after 2025).

Outlook for Manufacturers

In general, the changes under the One Big Beautiful Bill Act are favorable for many manufacturing companies, extending many key tax incentives and supporting domestic growth. RBT CPAs will continue to provide clients with updated information as IRS guidance on the OBBBA is released. Meanwhile, if you have any questions about how the recent tax law changes may affect your business strategy, please don’t hesitate to reach out to our manufacturing accounting professionals at RBT CPAs. Our team is here to support all of your tax, audit, accounting, and advisory needs. Give us a call today to find out how we can be Remarkably Better Together.

While we have become accustomed to hearing about ransomware attacks where systems are shut down and/or data is held for ransom, there’s another risk to account for in your business continuity/crisis management plan, especially in today’s connected environment: when a software solutions provider is attacked and its system is shut down.

Imagine going to work and turning on your computer only to find the software you subscribe to for sales, customer service, inventory, and accounts receivables and payables is not available. You receive word that your software solutions provider is the victim of a cyberattack and working to get systems up and running, but it may take days or weeks. This is when you convene your crisis management team and execute your business continuity plan.

Here are a few special considerations specifically related to a situation where a software solutions provider has been attacked and systems that you subscribe to are temporarily unavailable:

• Immediately contact cyber and business continuity insurance providers for guidance and resources, as well as an understanding of whether an event is covered and what would be needed to file a claim. (Some policies only provide coverage if there’s a data breach and personally identified information is compromised.)
• Be prepared to temporarily return to manual, paper processes for critical activities like orders, inventory, bookkeeping, accounts receivables and payables, and more.
• Be prepared to train staff on manual paper processes and interim solutions.
• Know which staffing agency you can call should you require additional resources.
• Keep customer contact information easily accessible as you’ll want to alert them to how they may be affected and when resolution is expected.
• Review software provider contracts and understand their parameters for business continuity and claims.
• Be prepared to meticulously document the financial impact, including lost revenue, increased expenses incurred to manage losses, and payroll increases for overtime or temporary staff.
• Have a list of resources you can use to help keep critical business processes (like accounting) running.

With manufacturing businesses being the second most popular target of ransomware attacks in 2023 (healthcare was number 1), it’s good practice to review and update your business continuity and crisis management plans at least annually – be sure to account for new threats like when a software solutions provider goes down.

As always, you should be up to date on New York laws governing your responsibilities. Also, if you’re looking for ways to bolster your response plans, CISA offers a free resource, called Business Continuity in a Box, to help businesses swiftly get critical functions back up during or following a cyber incident.

As you focus on developing or updating your business continuity and crisis management plan, remember that RBT CPAs is always here to support your accounting, advisory, audit, and tax needs. Contact us any time to learn how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial information.

The FTC’s Noncompete Ban Is NOT Moving Forward September 4

***** UPDATE TO THIS ARTICLE:  Earlier this week, a Texas federal court set aside the Federal Trade Commission’s (FTC’s) proposed ban on noncompete agreements, scheduled to take effect nationwide in just over two weeks. Thanks to the court’s actions, the ban will NOT take effect on September 4. Employers nationwide can maintain noncompete agreements as per state laws.

In 2023, the FTC proposed the ban and this past April a Final Rule was issued enforcing the ban effective September 4. A number of legal challenges were filed and one in particular – Ryan LLC v. Federal Trade Commission in the Northern District of Texas – left room for a nationwide injunction on the ban. 

Tuesday, Judge Ada Brown struck down the nationwide ban for two reasons: the ban exceeds the FTC’s statutory authority and violates the Administrative Procedure Act.

While there may be appeals in the future, employers can continue to protect key relationships and confidential information with noncompete agreements. Just be sure they comply with applicable state laws and focus on critical employees, as the FTC has indicated it may pursue targeted investigations.

If you have any questions about noncompete agreements or any other aspect of employment, professionals at RBT CPAs’ affiliate – Visions Human Resource Services – are available to help. Email Jgiannetta@VisionsHR.com or call 845-567-3978.

Please note: Visions Human Resource Services is an advisory firm, not a law firm, and the information above should not be construed as legal advice. Should you need legal advice, it is always in your best interest to consult with your legal counsel.

On April 23, the FTC issued a final rule banning noncompete agreements nationwide.

The final rule is effective September 4, 2024. While a number of lawsuits are underway challenging the rule (including one brought forward by the U.S. Chamber of Commerce), businesses – especially manufacturers – may want to consider the implications and what to do next.

Generally, noncompetes prohibit, penalize, or prevent workers from seeking or accepting work with another employer or opening their own business. The FTC’s final rule will make noncompetes unenforceable for the majority of workers, which include employees, independent contractors, interns, volunteers, apprentices, and sole proprietors.

Under the final rule, existing noncompete agreements for senior executives – defined as those in policy-making positions earning more than $151,164 – can remain in force, but no new ones are allowed after September 4. For all others, employers will need to notify workers covered by a noncompete agreement that the agreement will not be enforced. Notification must be in writing and delivered via email, text, or mail at the worker’s last known address (delivery by hand is also allowed). There’s sample language for the notice on the FTC noncompete rule webpage (scroll down to “Model Notices”).

There appear to be different schools of thought regarding how much effort employers should put into compliance right now, as we don’t know what may happen as a result of the many lawsuits challenging the rule. In light of the intellectual property, business strategy, industrial processes, and sales information that are fundamental to a manufacturing business’ competitive advantage and success, business leaders may want to consult legal counsel and engage Human Resources to begin defining a path forward sooner rather than later.

Key considerations include:

• Do your contracts for employees and contractors include a noncompete clause? What about other provisions that help protect proprietary information? How will contracts need to change?
• Do you currently have non-disclosure agreements (NDAs), non-solicitation agreements, intellectual property agreements, and confidentiality policies? Do you need to enhance or strengthen them?
• Do you need to add, delete, or update employment policies and communicate changes to employees? Will new employee orientations and onboarding need to change as well?
• Do you need a proactive retention strategy for key employees who may be enticed by competitors to jump ship? Can updated professional development, career planning, and rewards programs help keep potential poachers at bay?
• Should you consider changing work processes and IT protocols to limit the number of people with access to strategy, intellectual property, sales, and other proprietary information?
• Is there a need to make IT changes to help keep important data and files from leaving with employees?

As you navigate the potential implications of the final rule and what you must do to both comply and protect your business, you can count on RBT CPAs for all of your business advisory, accounting, audit, and tax needs. What’s more, our Visions Human Resource Services affiliate professionals are available to help you with employee handbook revisions, HR policies, total rewards analysis, and more. We hope to have the opportunity to show you how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Please note: RBT CPAs is an accounting, audit, tax, and business advisory firm – not a law firm. The content in this article is for informational purposes only and should not be construed as advice. Should you need legal advice, we strongly encourage you to contact your legal counsel.

This is not another article on how artificial intelligence (AI) and machine learning (ML) are transforming manufacturing. Day after day, your inbox and media feed are probably full of them. As is the case with many trending stories, it’s hard to tell what’s actually happening versus what’s expected to happen. I’m hoping this article provides a little perspective so Small and Medium Businesses (SMBs) in the manufacturing space can stop feeling like they’re the only kids on the block without the latest I-phone.

Don’t get me wrong. The transformative capabilities and potential uses of AI and ML in the manufacturing space can’t be over-stated. AI/ML should absolutely be an ongoing strategic consideration for all manufacturing business leaders.

In January, the World Economic Forum’s article “6 ways to unleash the power of AI in manufacturing”  acknowledged: “The global AI in manufacturing market is valued at $3.2 billion in 2023 and is poised to grow to $20.8 billion by 2028. Yet, despite these possibilities and significant investments, manufacturers are not harnessing the full potential of AI.”

This sentiment was echoed in a recent blog article published by the American Society of Mechanical Engineers. While discussing AI as the industry’s key to future growth and profitability, the article acknowledges, “The uptick in usage has continued to be slow as well as uneven.” (Cecere, Cathy. March 6, 2024. “Manufacturing in 2024 Means Embracing AI.” ASME.org.)

After doing some research, I found this undercurrent of discussion about actual AI/ML use is starting to make its way into the media mainstream. It appears that while the biggest businesses and companies developing AI solutions are making the most progress and largest investments in AI/ML applications, SMBs in manufacturing should not just consider closing shop because they don’t have the knowledge, finances, or ability to make big leaps into the AI/ML arena right now.

It’s hard to tell what percentage of manufacturing companies – especially SMBs – are actually deploying AI/ML solutions today. Survey results from different sources run the gamut, indicating less than 4% of businesses are using AI/ML to produce goods and services to stating more than half of SMBs are playing in the AI/ML arena. One survey shows about 30% of large companies are using AI/ML and another shows less than 20% of global manufacturing companies use AI/ML on the plant floor.

Rather than trying to keep up with the Joneses, it feels like a good time to level set what manufacturing SMBs can actually do with AI/ML today and how to plan for the future. At this point, staying knowledgeable about what’s available, what’s coming, and use cases is vital.

Consider how AI/ML can address pain points in your business. Begin seeing how free AI apps can help you with a variety of everyday tasks, from marketing to scheduling, tracking receipts for expense reporting, and more. And, if you can, take advantage of AI enhancements to your current systems, equipment, and operations, explore where it makes the most sense.

The U.S. Chamber of Commerce has some information about small business use of AI. The U.S. National Institute of Standards and Technology (NIST) points out that, among other things, the Manufacturing Extension Partnership offers resources to “help you understand what technologies exist and if they are a good fit for your business,” with experts available to help you “establish an adoption strategy, scope the project, align suppliers with vetted resources and manage implementation to ensure your business goals and customer needs are met.” To learn about the NY MEP, click here.

As you’re considering how AI/ML will impact your business in the future, please remember RBT CPAs is  available to meet all of your accounting, tax, audit, and advisory needs. We’ve been proudly serving municipalities, businesses, non-profits, and individuals in the Hudson Valley for over 50 years. Please don’t hesitate to give us a call and find out how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

The RBT CPAs Advisory Services team receives a lot of inquiries about internal financial controls, especially as a growing number of our manufacturing clients explore and implement Enterprise Resource Planning (ERP) systems. So, we figured we’d do an article on the topic. Take a look as financial controls can help any business – whether it’s adopting an ERP or not – protect its assets, promote transparency, provide data to make business decisions, and instill stakeholder and investor trust.

Starting with the basics…The Sarbanes-Oxley Act (SOX), enacted in 2002, was a regulatory response to major corporate and accounting scandals. SOX Section 404 mandates publicly traded companies in the U.S. establish, document, test, and maintain internal controls and procedures for financial reporting. Among other things, these companies must produce an annual report where management asserts the effectiveness of internal controls.

Private companies looking to go public must be SOX-compliant before an initial public offering. Although not mandatory, many nonprofits voluntarily adopt SOX provisions as best practices. New York State law requires state agencies and public authorities to maintain a system of internal controls to help safeguard public assets and promote accountability in government.

Internal financial controls are processes designed to help prevent fraud, enhance reliability of financial statements, reduce the risk of unexpected financial losses, and ensure compliance with laws and regulations. They include procedures for authorization, record keeping, reconciliations, and auditing. They also contribute to effective management by providing reliable data for decision-making.

Although a business can consider adopting financial controls at any time, they are particularly important as part of ERP implementations. ERP systems eliminate data silos, reducing the risk of errors and fraud while promoting financial integrity and transparency. ERPs enable real-time tracking of financial transactions. So, instead of waiting for end-of-period financial reports, managers can proactively monitor financial processes, promptly detecting and addressing any anomalies. What’s more, by automating routine tasks, ERP systems minimize manual intervention, reducing the risk of errors and freeing up time for more strategic activities. Based on our advisory services teams’ experiences with ERP implementations, the one non-negotiable recommendation we would make is to define internal financial controls as part of the up-front planning process. Trying to develop these controls concurrent with ERP implementation or after the fact can lead to higher implementation costs, longer project timelines, and extended business disruption.

If your business is going to take the time and expense to implement an ERP, defining financial controls upfront is critical to maximizing your return on investment. Even if your business isn’t currently considering an ERP, internal financial controls can provide added protection for your business, while increasing trust among stakeholders, including financial institutions, investors, and lenders.

Interested in learning more? For business advice, accounting, audit, and tax services, RBT CPAs professionals are always available. Give us a call.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Within the last few years, registered apprenticeship programs have become a growing part of national, state, and regional workforce planning strategies, making them a strong option for building a talent pipeline with advanced skills to operate new and emerging technologies.

As industries like agriculture, health care, cybersecurity, manufacturing and more evolve thanks to technology, employers are experiencing a skills gap. These industries need employees with higher skillsets, but not necessarily a four-year college degree. Registered apprenticeship programs are helping to fill the gap.

In December of 2022, the Mid-Hudson Regional Economic Development Council’s Workforce Development Strategy identified Advanced Manufacturing as one of three priority sectors for workforce strategies. The report explains, “Advanced Manufacturing differs from traditional manufacturing in that it incorporates innovative technologies, such as computation, sensing, and networking, into the production process. Types of Advanced Manufacturing include additive manufacturing/3D printing, advanced/composite materials, robotics/automation, laser machining/ welding, and certain types of nanotechnology.”

It adds, “Many traditional manufacturers in the Region have also adopted value added manufacturing processes that require similar skill sets and training as those in Advanced Manufacturing.” As a result, there’s a big demand for machinists, welders, electrical and mechanical technicians, and semiconductor technicians, along with computer science skills.

While apprenticeships to develop these skills were once reserved for large employers due to the time, expenses and resources required, registered apprenticeships are now accessible to small and medium manufacturing employers as well, thanks to associations like the Council of Industry (COI) and its Manufacturing Intermediary Apprenticeship Program (MIAP).

COI Vice President of Operations & Workforce Development Johnnieanne Hansen spoke with us about how it works.  “Let’s say you run a small manufacturing business and you have one or two employees who you would like to upskill so they can successfully operate new and emerging technology, now or somewhere down the line. You would give us a call. We evaluate whether an apprenticeship is a good fit for your needs and, if so, we take care of the compliance end of things – helping you identify schools that meet classroom requirements for registered apprenticeships; completing and submitting the necessary paperwork to register with the NYS DOL; onboarding the new apprentice; and then tracking and documenting progress.”

Without the COI’s support, an employer may find it takes six to nine months to meet all the NYS DOL compliance-related responsibilities to build and register an apprentice program. Because the COI is a DOL-approved sponsor for manufacturing related trades, the timeframe to register an apprentice can take less than a week.

Best of all, the COI provides these services to any manufacturer in the Hudson Valley at no cost. While a COI membership does offer numerous advantages and access to additional resources and information about workforce development and funding opportunities, it is not required. Johnnieanne explains, “We want to remove as many barriers as possible to help employers. Their only investment is their time and their commitment to seeing the apprenticeship program through.”

When it comes to paying related schooling costs as part of an apprenticeship program, all SUNY schools in the Hudson Valley offer up to $5,000 in tuition credits. In addition, New York’s Apprenticeship Expansion Grant program provides awards of up to $15,000/apprentice to help cover program costs. (Applications are accepted on an ongoing basis until August 23, 2024.)

There are also tax benefits. Through 2026, apprenticeship program sponsors and participating employers in New York may be eligible for the Empire State Apprenticeship Tax Credit for each apprentice. In general, the tax credit starts at $2,000/year one and increases by $1,000/year until it reaches $6,000/year five. For disadvantaged youth, the credit starts at $5,000/year one and increases to $7,000/year five. If a mentor counsels an apprentice for an entire year, the credit increases by $500.

For more information about an apprenticeship program, refer to the Registered Apprenticeship in New York State booklet or contact the COI. To help you find time to focus on this, please know RBT CPAs is here to support all of your tax, audit, and advisory needs. Give us a call to learn how we can work together to promote your business success.

RBT CPAs is proud to say all our work is prepared in the U.S.A. – we never offshore. As a result, you get peace of mind that your operation’s financial and confidential information is handled by full-time, local staff who have met our high standards for quality, ethics, and professionalism.