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Innovation is getting more expensive—and that should worry all of us.

Until recently, businesses could deduct 100% of their R&D expenses in the same year they incurred those costs. But a tax law that took effect at the beginning of 2022 requires businesses to spread their deductions out over five years instead, driving up the cost of the innovations that keep our economy strong.

At International Paper—an American supplier of renewable fiber-based recyclable packaging and pulp products—that change is causing serious challenges. We spoke to Vice President of Finance and Corporate Controller Holly Goughnour and Senior Director for Government Affairs Kaitlin Sighinolfi to learn more.

Why it matters: “Our company invests in R&D for two main reasons: making better products for our customers and creating safer, more efficient and sustainable manufacturing processes,” said Goughnour.

• “We spend a lot of time and money working to make a better performing, more sustainable and more durable product, but innovation is about more than the product—it’s also about improving the safety and efficiency, and reducing the environmental impact, of our operations.”

The scale: International Paper devotes a significant portion of its resources to innovation, and as a result, the change in tax law has an outsized impact.

• “Much of our free cash flow goes to R&D activities,” said Goughnour. “The change in tax law has resulted in a significant amount of additional cash taxes in this first year, reducing the amount of capital available to invest back into our business, including additional R&D.”

The competition: Goughnour and Sighinolfi also emphasized the need for a tax system that helps manufacturers in the U.S. to compete with companies abroad. According to Goughnour, the new tax change does the opposite.

• “The new tax law enables European and Chinese competitors to accelerate their R&D faster than us,” said Goughnour. “We’re in a global marketplace, and the new tax law puts U.S. manufacturers at a competitive disadvantage.”
• “Almost nobody else in the world has this policy,” said Goughnour. “R&D is an absolute growth engine for the U.S. economy. Why would we have a tax policy that discourages investment in R&D? It makes no sense.”

The last word: “Ours is a supply chain story,” said Sighinolfi. “Innovation should be part of the overall manufacturing value chain, but the new law reduces the value of innovation, slowing investment in innovation and ultimately hurts American businesses, employees and consumers.”

51�Թ��� President and CEO Jay Timmons joined CBS Mornings today to discuss manufacturing’s number one challenge: finding enough skilled workers to fill available jobs.

With 200,000 people transitioning out of the military annually, in addition to veterans, reservists and military spouses, the military population represents a highly skilled talent pool that manufacturers are eager to tap. But how should they go about doing so?

At a recent , the Manufacturing Institute—the 51�Թ���’s 501(c)3 workforce development and education partner—brought together veterans who have transitioned successfully out of the military into manufacturing careers, as well as manufacturers who have prioritized attracting and retaining military talent. The panelists discussed how companies can leverage this talent, and here’s some of what they had to say.

A great fit: “If you look at manufacturing, a large part of the job is doing things well, day after day after day—and that’s essentially what happens in the military. It’s that military discipline. It’s one of the most compelling reasons why we should be aggressively hiring military veterans,” said Dow Global Business Director Greg Bunker.

• “We’ve got three principles in our organization that we call ROI: responsibility, operational excellence and innovation. We know that veterans bring each of these to the table,” said UnitedHealth Group Director of People Analytics Troy Vandenberg (formerly director of people analytics at Smithfield Foods).

Networking matters: Transitioning from the military to the civilian workforce can be difficult, but veterans who make direct connections with manufacturers often land excellent job offers. The MI’s Heroes MAKE America program facilitates those connections, offering veterans opportunities to meet manufacturers as well as support in the job search process.

• Nicole Rena, an Army veteran and now a shift operations manager at Smithfield Foods, applied to five jobs at Smithfield and didn’t hear back on any of them. But then the program manager at HMA contacted Smithfield’s talent acquisition department to ask if they could speak with Rena about why she wasn’t chosen, so she could be more successful moving forward.
• As Rena put it, “The first 15 minutes of the call was about what I could do better on my resume, but after talking about my background and what I was looking for, the talent acquisition lead said he was going to count this as my first interview.”
• She landed the job! In her 18 months at Smithfield, Rena has been promoted twice.

Language can be a barrier: Rena’s experience speaks to one of the disconnects identified by veterans and manufacturers alike—the language used in job descriptions and resumes. Veterans often do not know how to best describe their skills and experiences in a way that civilian employers can understand.

• To avoid missing out on great talent, the panelists advised, manufacturers should ensure that a leader with a military background is involved in the hiring process, to translate military lingo and skills into more familiar manufacturing terms.
• Manufacturers should also specify in their job descriptions whether they will accept military experience as equivalent to an associate’s or bachelor’s degree, Bunker advised.

Support is crucial: Once veterans have been hired, the company must ensure they are set up for success. “Transitioning is a really scary process for veterans. It’s very stressful. The support that a company can provide is huge,” said Meg Zehringer, a Coast Guard veteran and a corporate environmental engineer at National Gypsum.

• Employee resource groups are a great way to provide support to veterans while also serving as a platform to advocate for population-specific needs, the panelists agreed.
• To be most effective, ERGs should be run by employees, not human resources departments, noted Vandenberg. Bunker added that establishing connections between the ERG and company leaders is also key.

The last word: “Equally as important as the wording of your job descriptions and preferred skills is creating a culture that invites a diverse group of people. That’s going to play a huge factor in attracting veterans,” said Zehringer.

Get involved: If you are interested in learning more about HMA, its next will be a networking opportunity with Johnson & Johnson on Wednesday, Jan. 25.

• You can also tune in to (or share with interested veterans) this on how to use LinkedIn effectively, coming up on Thursday, Jan. 26.
• And last, HMA will be hosting a virtual hiring fair in late February. Keep an eye on the MI for updates!

AI is changing the way manufacturers do business—from the production line to the back office and across the supply chain. At the Manufacturing Leadership Council’s event last month in Nashville, Tennessee, panelists discussed how those sweeping changes would alter, and enhance, the manufacturing workforce.

A collaboration between the MLC (the 51�Թ���’s digital transformation arm) and the MI (the 51�Թ���’s 501(c)3 workforce development and education partner), the event provided key insights for manufacturers into how technology and workforce trends interact with each other. Here are a few key takeaways.��

Net positive: “The history of technology adoption is about improving the job quality of individuals on the shop floor. AI helps them to do the job better, provide them with better tools, gives them greater authority and ultimately increases the value-add of their jobs. All of that is a net positive for those individuals,” said MI Vice President of Workforce Solutions Gardner Carrick.

• By leveraging data and enabling greater efficiency, AI will improve communication, increase collaboration across disciplines and stimulate innovation, according to the panel.
• In addition, “AI can even inform the workforce’s creativity by working with it to design a new product or system,” said Jacey Heuer, lead, data science and advanced analytics, Pella Corporation.

Skills needed: While you might expect that implementing AI requires workers skilled in programming, data science and machine learning, manufacturers will also need to expand their bench of critical thinkers and problem-solvers. The panelists had a few tips to help companies along.

• Invest in upskilling programs to make the AI integration process at your company smoother and develop the talent you already have.
• Update job descriptions to reflect the skill sets the company will need in the next five to seven years.
• Consider recruiting for and teaching —skills that enable individuals to adapt easily to changing demands and environments—which can increase the flexibility of your workforce.
• Build partnerships with local schools, community colleges and technical and vocational schools to develop talent pipelines that will meet your needs.

The human-AI collaboration: While AI will take over monotonous, repetitive tasks, the panelists predicted that the industry will continue to center around human labor.

• “You can teach AI to do X. You can teach AI to do Y. [However,] combining the two may be really difficult for AI, while a human can do it better. You’re going to continue to see humans in roles that center on making decisions and telling stories,” said Asi Klein, managing director, industrial products and organization transformation, Deloitte Consulting.
• Meanwhile, AI adoption will likely lead to an increase in available jobs, as more skilled workers will be needed to guide and inform these new processes.

The last word: “Over the last 12 years, we’ve seen a lot of technology adoption, but we have not seen a lot of job loss. In fact, we’ve seen job gains,” said Carrick. “There is a lot of opportunity to reimagine jobs to add value that AI will help to illuminate.”

It’s time to think way outside the proverbial box, according to the Manufacturing Leadership Council, the 51�Թ���’s digital transformation arm. In fact, as we get closer to 2030, manufacturers are creating entirely new boxes—including new digital business models, products and services, revenue streams, ways to serve customers and opportunities to increase competitiveness.

Collaborative innovation: By 2030, metaverse technologies will provide rich virtual environments for the collaborative development of new ideas. These shared virtual spaces will enable contributors from multiple remote locations to collaborate in real time.

• These collaborations may include manufacturers, partners, academic institutions and research institutes.
• New concepts can be tested in a virtual world before moving to physical prototyping or production.

Outcome-based products and services: As digital platforms mature and products become increasingly smart and connected, the decade ahead may see a boom in more outcome-based services. This is where the customer doesn’t buy a physical product, but instead signs up to pay for the guaranteed outcomes that product or system delivers.

• This shift will require manufacturers to establish new infrastructure rich in predictive analytics, remote communications and consumption monitoring.
• It also requires a mindset change for traditional manufacturing, from a focus on units and costs to product lifecycles, performance levels and usage.

Blockchain networks: By 2030, blockchain could be leveraged for most world trade, helping to provide the secure traceability and provenance needed to prevent physical product counterfeiting, grey markets in medicines and even the adulteration of the global food supply chain.

• A blockchain is an electronically distributed ledger accessible to multiple users. Blockchains record, process and verify every transaction, making them safe, trusted, permanent and transparent.

• Blockchain technologies promise to be a viable solution to manufacturers’ need to automate, secure and accelerate the processing of key transactions across industrial ecosystems.

E-manufacturing marketplaces: Digitally empowered production-line adaptability, such as the kind that emerged during the pandemic, will provide a foundation for companies to offer spare production capacity to other companies in different sectors.

• This maximizes the return on a company’s production-line investments and can generate new revenue streams for the future.
• Combined with e-commerce, e-manufacturing will enable designers, engineers and/or smaller companies to more easily connect with a large pool of qualified producers to deliver and scale a final product.

Manufacturing in 2030 Project: New Boxes is just one of the industry trends and themes identified by the , a future-focused initiative of the MLC. For more details on megatrends, industry trends and key themes for Manufacturing in 2030, download the MLC’s new white paper “.”

Manufacturers are pursuing sustainability like never before.

That’s according to recent polling conducted by the Manufacturing Leadership Council, the 51�Թ���’s digital transformation division. The annual research survey seeks to determine the progress made in sustainable manufacturing.

Competitiveness: There has been a surge in the number of manufacturing executives who view sustainability as critical to the future of their businesses.

• 58% of respondents in 2022 believe sustainability is essential to future competitiveness compared to 38% in 2021.
• 68% of executives say they are implementing extensive, corporate-wide sustainability strategies. That’s up from just 39% in 2019.

What’s driving change: The motivations go beyond regulatory compliance and cost savings.

• 78% say sustainability is about better alignment with corporate values.
• 68% believe in creating a cleaner, healthier environment.
• 66% seek to improve company reputation with customers and investors.

Top corporate goals: More than half of survey respondents reported having specific sustainability goals and metrics across almost all key functions in the company.

• Goals were most apparent in manufacturing and production (79%), supply chain (69%) and product design and development (67%).
• Additional goals were cited in transportation and logistics (56%) and partner compliance (51%).

Energy efficiency is No. 1: The primary sustainability focus of manufacturers, according to survey results, is energy efficiency and reduction, combined with the transition to renewable energy sources. These efforts are linked intrinsically to meeting net-zero emissions goals.

• 45% of respondents report having announced formal net-zero goals.
• 30% aim to hit net zero by 2030.

Digital tech, employee training play a role: Also on the rise is the number of companies that recognize the importance of digital solutions in their sustainability efforts.

• These tools are being used to manage and monitor materials and energy consumption, optimize operations to improve efficiency and report sustainability progress.
• Respondents also say meeting sustainability targets must include engaging employees through education and training, as well as greening their supply chain.

The last word: An overwhelming 90% of all respondents agree that manufacturing has a special responsibility to society to become more sustainable and accelerate the transition to a future circular industrial economy.

Interested in putting some renewable energy solutions into action, including solar power, battery storage and LED lighting? Programs from utility companies and other entities enable efficiency upgrades with little or no upfront capital. Connect with to explore your options!

What does the U.S. military do when an expensive asset like a plane or a weapons system begins to break down?

Often, it turns to companies like Parts Life, Inc.—an innovative manufacturer that can reverse-engineer obsolete parts and help find solutions for hard-to-replicate products. But after a tax law change went into effect in 2022, the New Jersey–based manufacturer is facing increased costs for research and development, creating a barrier to the kind of innovation that is the focus of its business.

The change: Until the beginning of 2022, businesses could deduct 100% of their R&D expenses in the same year they incurred the expenses. Starting this year, however, a tax law change requires businesses to spread their deductions out over a period of five years, making it more expensive to invest in growth and innovation.

A focus on innovation: For Parts Life, coming up with new ideas is an essential, daily activity.

• “Parts Life is built around being a solutions provider,” said Parts Life President and CEO Sam Thevanayagam. “We are providing solutions for very expensive and mission-critical assets that are extremely strategic for the defense of the nation, but are also older—so their parts are not necessarily being supported.”
• “That’s where we come in to do reverse engineering. So, we’re looking at an old problem, but using innovation to solve it going forward.”

A benefit for savings: By helping the military extend the life of its assets, Parts Life also helps taxpayers.

• “We’re taking care of the warfighter and the taxpayer,” as Thevanayagam puts it.

A look ahead: As global conflicts shift, the U.S. military needs suppliers like Parts Life to help it develop solutions for future challenges, too.

• “Right now, our military is coming out of conflicts in Afghanistan and Iraq, but future conflicts may involve different terrain with different problem sets,” said Thevanayagam.
• “The work that we are doing today is helping them figure out how to approach those challenges. We’re having them tell us where they need to be, and then we’re helping them with the innovation they need to be successful.”

A tough choice: With the change in tax law, companies like Parts Life will be forced to make difficult decisions about how to spend scarcer resources, harming their ability to do critical, forward-looking work.

• “Currently, we’re leaning forward in resources and talent to lead the future,” said Thevanayagam. “If the government is going to pull the rug out from under us, we’re not going to be able to be aggressive. We’ll have to focus on maintaining our business rather than investing in new innovation.”

Our take: The 51�Թ��� has pushed forcefully for the tax change to be reversed—and in October, policymakers that the R&D amortization provision poses a “serious threat to our national security,” in part because of its impact on manufacturers like Parts Life that supply and support the U.S. military.

The bottom line: “The only way for us to continue to be relevant is to make sure that we’re investing in innovation and seeing what we can do to be a part of designing the future,” said Thevanayagam.

Visit the 51�Թ���’s R&D Action Center for critical R&D policy updates, industry stories and an opportunity to engage directly with your members of Congress.��

This story can also be found within the 51�Թ���’s��R&D action center.

For companies like O-I Glass, Inc.—a glass manufacturing company headquartered in Perrysburg, Ohio—research and development just got a lot more expensive.

Until the beginning of 2022, businesses including manufacturers could deduct 100% of their R&D expenses in the same year they incurred the expenses—but a change in the tax law that took effect this year required businesses to spread deductions over a five-year timeframe. O-I Vice President of Global Tax and Business Services Scott Gedris explained how that impacts the company.

The scale: With 17 plants in 13 states around the country—and 70 plants in 19 countries around the world—O-I has a significant reach, serving both large multinational companies and smaller customers like microbrewers and small batch spirits manufacturers.

• The scale of the operation means that O-I invests significantly in R&D, working to develop innovative processes and specific product designs to meet individual customer needs.
• “If you look at our public financial statements, we spent $82 million in 2021 on R&D—primarily in the U.S.—and that is a significant investment for us,” said Gedris.

Case in point: In the past decade, O-I has invested heavily in developing more effective, efficient and sustainable processes. In 2011, it built a 24,000-square-foot R&D facility on its Perrysburg, Ohio, campus and has announced plans for a new glass manufacturing facility in Bowling Green, Kentucky, using technology developed at the Ohio facility.

• Because the company spends so much of its resources on R&D, a significant increase in the cost of investment would require it to make difficult decisions.
• “Anything that comes out of this in terms of tax dollars … creates a choice within our organization about where we allocate our capital,” said Gedris.

Environmental effects: At a time when O-I is making important investments in sustainability, a significant reduction in available resources could present obstacles to the company’s environmental goals.

• “When we rebuild a glass manufacturing furnace, that is a multimillion-dollar investment. The cost continues to increase with inflation and investment in modern technology that we need in order to meet our corporate sustainability goals,” said Gedris.
• “With the cost of that equipment increasing, if we’ve got $10 million less because of increased taxes, we need to evaluate whether we are going to rebuild a glass furnace in one of our 17 U.S. plants, or are we going to defer that? Alternatively, those dollars could come out of our R&D spend, which will impact what we are able to invest in future technology improvements.”

Human impact: Investments in innovation and R&D don’t just create better products and processes for consumers; they also support local economies across the country.

• “When we invest in a glass manufacturing furnace in these towns, it’s an investment in the community,” said Gedris. “We’ve got multigenerational glass manufacturers in those facilities. It’s a project that people depend on, and they have a lot of pride in the product and the processes at their facility.”

The last word: “When you’re investing in R&D, you’re investing long term—and that means you need certainty in the tax policy,” said Gedris.

Visit��the 51�Թ���’s R&D Action Center for critical R&D policy updates, industry stories and an opportunity to engage directly with your members of Congress.

The manufacturing leaders who met in Washington, D.C., this month agreed wholeheartedly: D&I is integral to building and retaining the workforce of tomorrow.

At the third-annual Diversity+Inclusion Summit convened by the Manufacturing Institute, leaders gathered to share data, insights and lessons gleaned from their own D&I efforts. Hailing from many different industry sectors and companies of all sizes, the panelists and attendees laid out concrete actions that can transform companies’ D&I objectives.

Why it matters: With expected to go unfilled in the industry by 2030, manufacturers need to find new populations of potential employees. Recruiting more women, racial and ethnic minorities and neurodiverse workers can expand companies’ talent pools and strengthen their workforces.

• In fact, increasing the current female workforce from 29% to 35% would fill the industry’s 746,000 open jobs all on its own, according to a recent by the MI and Colonial Life.
• That’s why the MI is working to meet this target through its —i.e., increasing the percentage of women in manufacturing to 35% by 2030.

How to do it: The summit offered important tips to help companies boost their D&I efforts, including:

• Get buy-in from company leaders: Research shows that D&I efforts lead to , and —not to mention the recruitment and retention benefits. Once companies set D&I goals, leaders should incorporate D&I objectives into their annual goals to create opportunities for accountability.

• Use employee resource groups in a structured way: Companies should set up organizational structures for their ERGs that will ensure longevity and encourage fresh thinking, as well as align with companies’ overall D&I goals. These groups should have their own budgets and rotating leadership positions. When possible, the contributions of ERG leaders should be included in their incentive programs or annual goals.

• Educate your first-line supervisors about D&I: By training first-line supervisors on the latest in D&I and company-specific objectives, companies can help them both support their teams better and collect feedback to inform the overall effort.

• Offer child care and flexibility: In the post-pandemic environment, companies are still exploring what works best for them, but one thing is clear: to recruit and retain talent in a tight labor market, companies need to provide employees with options. (Check out our on the same subject.)

Learn more: Interested in joining the conversation? Check out the MI’s D&I , and register for upcoming events, including our upcoming Virtual Diversity+Inclusion Summit on Dec. 16, . The virtual summit will include some recorded sessions from this event as well.

This story can also be found within the 51�Թ���’s��R&D action center.

Corning Incorporated has been turning out innovations for well over a century and a half—since 1851, to be exact. But a recent change in tax policy that makes R&D more expensive could have a significant impact on the company’s ability to build on its impressive history.

• “We have a wonderful track record for innovation,” said Tymon Daniels, vice president of tax at Corning, a material sciences manufacturing company with a focus on glass.
• “In 1897, when Thomas Edison was working on electric lights, he came to us to make the glass bulbs. 110 years later, when Steve Jobs was working on the iPhone, he came to us to make the glass used for the screen. More recently, we figured out a way to make special glass vials that sped up production of the COVID vaccine. … We’ve been able to do this because of R&D.”

The issue: Until the beginning of 2022, businesses could deduct 100% of their R&D expenses in the same year they incurred the expenses. Starting this year, however, a tax law change requires businesses to amortize or spread their R&D expenses out over a period of five years, making it more expensive to invest in growth and innovation.

The impact: According to Daniels, the abrupt change in a policy that has existed for decades poses a serious challenge for the company.��

• “The R&D deduction has been in existence for over 70 years—a very good tax policy. Requiring the amortization of R&D expenses is a dramatic shift to a very bad tax policy,” said Daniels. “It causes a significant spike in cash taxes.”

The trade-offs: At a time when company leaders are trying to make decisions about how to invest finite resources, a significant increase in the tax burden can hinder future growth plans, Daniels emphasized.

• “Our C-suite is trying to make decisions about big issues like capital expenditures and jobs,” said Daniels. “This makes those decisions harder and comes at a time when the economic outlook is highly uncertain.”

The action: Corning is asking Congress to find a solution, and quickly.

• “We need lawmakers to extend the full deductibility of R&D expenses,” said Daniels. “If Congress can’t make a permanent fix, then at least making full deductibility retroactive to 2022 and extending it through 2025 would still be good. Otherwise, the impact to Corning may be extra cash taxes of roughly $150 million in 2022 alone.”

The last word: “Requiring the amortization of R&D is all I’m thinking about right now,” said Daniels.