How Pending U.S. Legislation Could Impact the Plastics Industry
Compliance standards, taxes and labor laws have a significant impact on a company’s finances and operations. Recent findings from the Competitive Enterprise Institute show that businesses spend roughly $1.9 trillion annually in order to comply with federal regulations.
In the highly regulated plastics industry, maintaining compliance with existing domestic and global standards presents an ongoing challenge, requiring plastics producers to adapt to meet changing sustainability and safety expectations. With the power to impede growth or expedite innovation, legislation must be closely monitored, anticipated and adhered to by businesses.
“What happens on Capitol Hill has wide-ranging implications for our industry,” Joe Maglich, Wire & Cable Account Manager at M. Holland, said. “It’s important for experts in the field to be active participants in the legislative process. We can provide insights to lawmakers on how issues like recycling investment, innovation and standards development affect the future of plastics.”
There are several pieces of proposed or resurfacing legislation up for discussion in the 118th U.S. Congress that, if passed, will impact business throughout the plastics industry. Read on to learn more about the legislation and its potential impacts.
Research and Development Taxation
- American Innovation and Jobs Act, S. 866
- American Innovation and R&D Competitiveness Act of 2023, H.R.2673
Research and development (R&D) in the plastics industry improves products, ensures consumer safety and accelerates sustainability. But the time and technical expertise required is a heavy financial lift.
In 2020, U.S. industry spent over $466 billion on R&D. Historically, these costs were tax-deductible, meaning businesses could subtract any money put toward R&D (e.g., materials, equipment, labor and patents) from their federal taxable income in the same year. This changed in 2022 with the passage of Section 174 of the Internal Revenue Code. The tax law now requires businesses to amortize R&D expenses over a period of five years, leading to higher taxes on R&D investments.
The American Innovation and Jobs Act and the American Innovation and R&D Competitiveness Act of 2023 would repeal the R&D amortization requirement retroactively to Jan. 1, 2022. By nullifying Section 174, the taxes and interest charged would remain available to businesses to fund additional R&D. If passed, U.S. plastics manufacturers could better scale employment and market opportunities while remaining competitive in the global marketplace. If the two bills are not passed, businesses would continue to operate under the 2022 amortization requirements.
Expansion of Recycling Accessibility and Accountability Practices
- Recycling Infrastructure and Accessibility Act, S. 3742
- The Recycling and Composting Accountability Act, S. 3743
Manufacturers across markets must adapt their operations and products to meet changing sustainability requirements. The first step many businesses take to increase the sustainability of their existing operations is diverting waste from landfills by developing recycling and reuse strategies. Two bills proposed in the previous congressional session focused on waste diversion are likely to resurface in the current session.
The Recycling Infrastructure and Accessibility Act aims to create a program within the Environmental Protection Agency (EPA) that will award grants to organizations that improve access to recycling in their communities, largely benefiting underserved areas with poor access to curbside recycling. Meanwhile, the Recycling and Composting Accountability Act is attempting to provide more accurate data on recycling and composting, which the EPA can then use to create more targeted guidance for waste disposal across the country.
If these bills are resurfaced and adopted, plastics manufacturers will have the opportunity to further prioritize recycling in their environmental, social and governance (ESG) strategies. Still, there is no need to wait for this legislation to begin creating more effective plastic waste diversion systems. Working toward a circular economy and improving overall environmental impact is a necessary shift to ensure longevity of the plastics industry. Manufacturers can get ahead of legislation by auditing their sustainability practices and taking action to decrease environmental impact.
Material Sustainability
- Draft National Strategy to Prevent Plastic Pollution, EPA
- Protecting Communities from Plastics Act, S. 5163, and other similar proposals
The EPA’s Draft National Strategy to Prevent Plastic Pollution was developed to reduce production and consumption of single-use plastics. The strategy would create a list of harmful materials and acceptable alternatives to inform future production and consumption. Similarly, the Protecting Communities from Plastics Act, originally proposed in the 117th congressional session, calls for reducing expansion of plastics manufacturing in the U.S. The act would create “temporary pause periods,” during which new permits could not be issued under the Clean Air and Clean Water Acts for plastics and petrochemical facilities.
Regulatory efforts to improve plastic sustainability are unlikely to wane. Plastics producers will need to take a proactive approach and invest in innovative new materials to stay ahead of new requirements. By testing and implementing sustainable solutions now, businesses can create new opportunities to succeed in the event the new regulations are imposed.
Collaboration across the industry can help further sustainable material adoption. Distributors commonly partner with their customers during the innovation phase to offer material suggestions and testing support, creating collectively beneficial solutions that strengthen the industry as a whole.
Anticipating Regulatory Changes
Although less than 10% of proposed U.S. legislation becomes law, it is important to keep a pulse on upcoming regulatory proposals. As regulation is passed at state, federal and global levels, manufacturers need to work alongside partners with regulatory expertise to anticipate and adapt to changing business practices. Legislative knowledge can make innovation more efficient and ensure compliance from a product’s inception. Additionally, working with manufacturers that adhere to strict sustainability standards and goals can ensure the longevity of your product, moving our industry closer to a sustainable, circular economy.
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