IBIE - 2019 Special Edition & Show Preview - 119

TAX CUTS AND JOBS ACT

CATCHING A

BREAK

Tax cuts provide bakeries the opportunity to invest in operations.
by Anna Wiber, Baking & Snack
It's the largest tax overhaul the US has seen in more
than 30 years. The 2017 Tax Cuts and Jobs Act offers
American businesses lower tax rates and temporary relief for capital expenditures, and since its passage, bakeries have been taking advantage of these benefits and
updating their operations.
"From our discussions with the industry, most bakers are feeling more flexibility and maneuvering room
than before," said Robb MacKie, president and CEO of
the American Bakers Association. "For instance, there
is more confidence to move forward with new product
rollouts and plant expansions."
Going from 35% to 21%, the lowered corporate tax
rate has opened doors for business owners who may
have been reluctant to make hefty operational or R&D
investments. According to Mr. MacKie, bakers can now
attain a much faster and greater ROI for their own capital. "They are achieving this enhanced ROI by purchasing new equipment to replace equipment that is less
energy efficient, more labor intensive, more difficult to
clean and more challenging to maintain."
For example, in addition to making investments
in workforce and product development, Baker Boy,
Dickinson, ND, will use the tax cuts to update equipment and reinvest savings into the company. "This summer, we are making a multimillion-dollar investment
to improve and modernize our entire donut line," said

Guy Moos, president, Baker Boy. "This includes increasing our donut capacity from 5,000 donuts per hour to
roughly 22,000 donuts per hour and adding automation to ice, glaze and top donuts." This addition will allow some bakery employees to be reassigned to areas
that need more staffing or to be retrained to operate the
new line.
Aside from lowered tax rates, one of the biggest benefits the act offers to bakeries is its capital spending provision on equipment. While the change will begin to phase
out in 2022, it allows businesses to immediately deduct
the cost of short-lived capital investments. Mr. MacKie
noted that this small timeframe could lead to historic
levels of purchasing at this year's International Baking
Industry Exposition. However, steel, aluminum and possible retaliatory tariffs, as well as upcoming elections,
could impact bakeries' potential savings.
"There are any number of presidential candidates
who have pledged to repeal or scale back tax reforms
enacted in 2017," Mr. MacKie stated. "In addition,
the capital expenditure depreciation could be at risk
of an early termination if the leadership of Congress
changes in 2020. My advice for any baker or supplier
would be to not procrastinate. The benefits of added
investment in people and facilities will pay big dividends in the long run, regardless of how the political
winds shift."

The 2017 Tax Cuts and Jobs
Act lowered the corporate
tax rate from 35% to 21%.
stock.adobe.com

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