July 23, The Honorable Debbie Stabenow United States Senate Washington, DC Dear Senator Stabenow,

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1 July 23, 2013 The Honorable Debbie Stabenow United States Senate Washington, DC Dear Senator Stabenow, The Motor & Equipment Manufacturers Association (MEMA) represents more than 1,000 companies that manufacture motor vehicle parts for use in the light- and heavy-duty vehicle original equipment and aftermarket industries. MEMA represents its members through four affiliate associations: Automotive Aftermarket Suppliers Association (AASA); Heavy Duty Manufacturers Association (HDMA); Motor & Equipment Remanufacturers Association (MERA); and, Original Equipment Suppliers Association (OESA). Our members provide more than 734,000 direct jobs in the motor vehicle parts manufacturing industry, making this industry the largest creator of jobs nationwide. Furthermore, motor vehicle parts manufacturers generate an additional 1.27 million indirect jobs in the supply chain. The motor vehicle parts manufacturing industry provides more than $220 billion in annual wages and income and $355 billion in economic contribution to the U.S. Gross Domestic Product. On behalf of these manufacturers and their 102,624 employees in Michigan, MEMA urges you to work with Senate Finance Committee Chairman Baucus and Ranking Member Hatch to advance the goal of reforming the nation s tax system. However, the outcome of these debates must encompass tax priorities that strengthen our manufacturing base. I urge you to consider MEMA s attached tax reform priorities and use these as the basis for any ongoing dialogue on comprehensive tax reform. The motor vehicle parts manufacturing industry is part of the critical innovation economy, which must succeed to ensure America remains competitive. MEMA welcomes the opportunity to work with your office on these priorities to promote manufacturing and innovation. Collaborating on technologies specific to the motor vehicle industry would be particularly welcomed as suppliers take on a greater role in developing technologies to meet the nation s energy, environmental and safety goals. For example, incentives for advanced fuel efficient vehicles, such as the expired hybrid truck credit, and incentives for commercial vehicle safety systems would promote the adoption of innovative vehicle technologies that support important policy objectives. However, incentives that seek to promote vehicle energy efficiency must be technology neutral to allow for greater innovation in meeting policy goals, such as increased fuel efficiency and reduced emissions, as well as to allow for the market to help determine which technologies are truly effective in

2 7/23/13 Page 2 of 2 meeting the demands placed on today s motor vehicles. At the same time, incentives for advanced safety technologies must rely on performance based standards and focus on mitigating motor vehicle crashes. In addition to these industry specific priorities, MEMA joins the wider business community in supporting the continuation of important tax programs such as the research and development tax credit and depreciation provisions. MEMA applauds Chairman Baucus and Ranking Member Hatch for their bipartisan approach to tax reform. As a Finance Committee member, it is crucial you join this bipartisan effort to reform a tax system that inhibits American economic growth and competitiveness in an ever competitive global economy. Thank you for your attention to these priorities. If you have questions or need more information, please contact Dan Houton ( or dhouton@mema.org) or me ( ). Sincerely, Ann Wilson Senior Vice President Motor & Equipment Manufacturers Association Enclosure

3 MEMA Tax Reform Priorities July 23, 2013 The Motor & Equipment Manufacturers Association (MEMA) represents more than 1,000 companies that manufacture and remanufacture motor vehicle parts for use in the light vehicle and heavy-duty original equipment and aftermarket industries and directly employ more than 734,000 people across the country. Suppliers are the nation s largest creator of manufacturing jobs nationwide, and motor vehicle parts manufacturing generates another 1.27 million indirect jobs in the supply chain, providing more than $220 billion in annual wages and income and contributes $355 billion to the U.S. Gross Domestic Product. Simplified, Fairer, and Competitive Tax System MEMA supports reforming the U.S. tax code to make it simpler for manufacturers to conduct and grow their businesses and allow them to better compete in an increasingly competitive global market. A lower corporate rate through tax base broadening and a more competitive U.S. international tax system will generate greater growth in the U.S. and abroad. This potential international growth is important because 95 percent of the world s consumers reside outside the U.S. In addition, tax parity should be provided for businesses organized as S Corps or pass through companies. Maintaining the status quo reduces the potential for greater economic growth. Given the cyclical nature of the motor vehicle parts manufacturing industry, improving the ability of suppliers to access sufficient capital during economic downturns is critical for longterm growth. Tax reform should recognize this important need with the goal of reducing the tax burden on manufacturers to improve global competitiveness. MEMA s 2013 Priority Issues Survey of member companies indicated tax reform among the most important legislative issues.

4 MEMA Senate Finance Members Submission 7/23/13 Page 2 of 3 Research & Development Tax Credit MEMA supports a permanent, simplified, and enhanced Research and Development (R&D) tax credit. For motor vehicle parts manufacturers, the R&D tax credit remains an integral element to maintaining innovation and investment in the U.S. and enables key industries, such as motor vehicle suppliers, to invest in new ideas and inventions. Short-term extensions limit the innovative and job growth potential of the tax credit. Innovative manufacturers of all sizes should be able to utilize the credit for long-term business planning that promotes economic growth and jobs. This is particularly important for suppliers who have a growing role in developing advanced technologies needed to meet federal vehicle efficiency, emissions and safety requirements. A permanent and strengthened credit should be established regardless of future tax reform efforts. Capital Cost Recovery Given the capital-intensive nature of manufacturing, modernizing the cost recovery (i.e. depreciation) rules can do much to improve investment and job growth in critical manufacturing sectors such as the motor vehicle parts industry, where the creation of direct jobs has a significant multiplier effect on indirect jobs. The domestic production deduction (Sec. 199) is utilized by many suppliers to help sustain and grow their businesses. Allowing flexibility with current tax rules can also strengthen manufacturing, such as the use of Alternative Minimum Tax (AMT) credits for offsetting investments in machinery and equipment. International Taxes According to the National Association of Manufacturers (NAM), the U.S. imposes a greater tax burden on repatriated foreign earnings than that of its major trading partners. The current system has not evolved over recent decades, leaving U.S. multinationals at a disadvantage to many advanced industrialized competitors who tax foreign earnings at a significantly lower rate. In addition, the current system discourages foreign profits from coming back to the U.S. to be reinvested. The current international tax system needs modernizing in order to recognize the realities of a global economy.

5 MEMA Senate Finance Members Submission 7/23/13 Page 3 of 3 Many large motor vehicle parts manufacturers conduct business around the world due to their customer base. In order to compete in a global market while promoting domestic growth, taxation of foreign earnings should be lowered so as not to disadvantage U.S.-based companies. Energy Efficiency and Renewable Energy Incentives Appropriate incentives to promote the adoption of efficient and clean technologies of the future are critical to sustaining the innovation of motor vehicle suppliers and the larger motor vehicle industry. Whether harnessing hybrid technology for commercial vehicles or improving efficiency of the internal combustion engine, incentives must be part of a holistic approach to advancing promising technologies. Transportation Technology Incentives Federal government requirements and consumer and commercial preferences for advanced safety technologies, such as stability control, active forward collision, brake stroke monitoring and lane departure warning systems for commercial vehicle applications, are critical to the growth of the motor vehicle parts industry. Appropriate incentives should be made available to advance these technologies to the market. Also important are incentives for vehicle connectivity/intelligent transportation systems that can both detect dangers on the road and manage real-time data to help improve both safety and efficiency of transportation systems. For more information please contact Dan Houton, dhouton@mema.org or (202)