Reshoring Strategies for Manufacturers: How CPAs Can Maximize Tax Savings Through Incentives

With the 2024 election in the rear-view mirror, business owners are experiencing the first few months of a new administration. Policy discussions, theories and speculation are plentiful, but one thing is certain: conversations about future planning are happening.

Manufacturing clients are strategizing about how the ongoing tariffs will impact their businesses.  Many are already anticipating higher import implications and starting to wonder, “should we bring our offshore production in house?” Proactive CPAs are helping navigate this conversation and ›bringing additional planning tools to the table now for growth in 2025 and beyond.

Economic credits and incentives are key to the reshoring conversation. Manufacturers looking to reshore operations are asking a number of questions that are key implications for incentives:

• Investment: Should we expand our building or consider another location for our reshored operations? Do we bring overseas equipment to the U.S. or purchase new? Should we automate processes? Do we need to integrate new technologies that we haven’t considered in the past?
• New Jobs: What skill sets are needed to bring overseas operations back to the U.S.? What are the costs of an increased workforce in the U.S. vs. overseas? How do we find or trains talent to meet our needs?

CPAs ask these questions with their clients and consider the tax savings that could be realized through incentives. Job creation incentives can typically see between $5,000-$8,000 in value per new job created. Investment incentives could see as much as 15% of the investment value realized as tax savings. These can be substantial difference makers for reshoring projects.

Incentives are often discretionary, so it is critical to have these discussions prior to the project taking place: before shovels go in the ground; before permits are pulled; before jobs are hired; and before public announcements go out. The earlier, the better! Incentives can also help mitigate the risk associated with an expansion or relocation project by supporting cash flow and tax planning.  Then, once a project is established in the U.S., other tax planning strategies, such as Cost Segregation Studies, energy efficiency studies, R&D tax credit considerations, and transaction pricing conversations can lead to further tax savings for a client.

Strategy-minded CPAs engage in regular planning conversations with clients. It is not good enough to just review what happened with a client since the last end-of-year conversation. CPAs looking to growth their firms and expertise should consider integrating a prospective conversation with clients about future investments and jobs to maximize tax savings through incentives.