• Tariff-driven business model changes may affect P.L. 86-272 protections and trigger throwback exposure.

• Throwback and throw-out rules can tax income in original states when destination states don’t impose income tax.

• Reshoring strategies tied to tariffs should be reviewed through a tax lens to manage nexus and apportionment exposure.

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Tariff uncertainty continues to challenge manufacturers and distributors. In response, many businesses are making fast, sometimes reactive decisions: shifting fulfillment strategies, diversifying suppliers, and reworking customer contracts. While these steps are often necessary to protect margin, they can have unexpected ripple effects — particularly when it comes to state income tax exposure.

As operations evolve, companies may unknowingly trigger state-level tax rules — including throwback and throw-out provisions — that can increase tax burdens in their home states. These rules are rarely top of mind during operational planning, but, in today’s climate, they should be.

What You Think You Know: Public Law 86-272 Protections

Public Law 86-272 (P.L. 86-272) has long been a helpful shield. It protects companies from state income taxes when their only activity in each state is asking for orders for tangible personal property, and when orders are approved and fulfilled from outside that state.

But P.L. 86-272 isn’t a blanket exemption — and it doesn’t prevent other states from taxing that same income through alternative mechanisms. That’s where throwback and throw-out rules come in.

In response to evolving e-commerce practices and the Multistate Tax Commission (MTC’s) revised Statement of Information on P.L. 86-272, several states have taken steps to limit the scope of this federal protection:

• California: Issued Technical Advice Memorandum 2022-01, aligning closely with the MTC’s guidance. The memorandum specifies that certain internet-based activities, such as post-sale help via electronic chat or email, may exceed the protections of P.L. 86-272.

• New York: Released draft regulations incorporating the MTC’s examples, showing that interactive internet activities could lose P.L. 86-272 immunity. The regulations are currently in draft form and subject to change.

• New Jersey: Announced a policy change to evaluate P.L. 86-272 protection on an entity-by-entity basis within combined groups, potentially altering the tax obligations of group members.

• Minnesota: Circulated a draft revenue notice in April 2023 proposing adoption of the MTC’s revised guidance, signaling a move towards stricter interpretations.

Businesses using these states should closely examine their internet-based activities to assess potential tax implications under the updated interpretations of P.L. 86-272.

Throwback and Throw-Out Rules: Why They Matter

In states that enforce these rules, untaxed sales into other states can be “thrown back” to the state of origin. Here’s how:

• Throwback rules require that if you’re not taxed on a sale in the destination state (for example, due to P.L. 86-272), the income from that sale must be reported in the state where the goods were shipped from.

• Throw-out rules remove untaxed sales from the apportionment formula, which can artificially inflate your tax burden in the states where you do pay.

These rules can significantly shift your tax liability — especially if you’re shipping into multiple states where you have no nexus but generate substantial sales volume.

In a recent engagement for a new client, we found that the location of the client’s warehouse was the largest factor in planning when potential throwback was considered. If the client relocated operations from a throwback state to a non-throwback state, the impact on the sales factor in the apportionment formula was neutralized. Setting up operations in a state with throwback led to an inflated sales factor in the apportionment formula and an unexpected state tax liability.

Having conversations before transactions is extremely valuable as proper planning can lead to potential tax savings.

Why Tariff Responses Are Quietly Changing Your Tax Profile

Tariffs aren’t just a global trade issue, they’re reshaping day-to-day decisions inside U.S. companies. For many manufacturers and distributors, the last year has been a series of rapid adjustments: rethinking where goods come from, how they’re delivered, and how quickly orders get to customers.

You may have shifted fulfillment closer to major markets to cut lead times. Maybe you’ve swapped offshore suppliers to sidestep new tariffs. Some companies have moved toward direct-to-consumer models, while others have quietly changed how customer orders are approved or supported.

Individually, these decisions may feel operational. But taken together, they have a real impact on how income is sourced and taxed across states. They can shift your exposure under throwback or throw-out rules — especially if your sales are increasing in states where you don’t currently have income tax obligations.

In short, what begins as a supply chain fix can evolve into a state tax issue — often without anyone realizing it until filing time.

Reshoring and Tax Considerations Go Hand in Hand

For many companies, reshoring has become a practical response to ongoing tariff uncertainty. Bringing operations back to the U.S. can reduce exposure to trade risk and improve supply chain control — but it also reshapes how and where your business is taxed at the state level.

Operational changes like relocation or restructuring can result in:

• Nexus creation in new states

• A shift in which sales are protected by P.L. 86-272

• Adjustments to your apportionment formula

• New reporting obligations, credits, or incentive opportunities

While every business has unique goals, involving tax professionals early in reshoring or fulfillment planning can help find potential exposure or compliance gaps — without delaying execution.

For example, when companies shift operations to avoid tariffs by opening new distribution hubs or adjusting shipping routes, the tax impact extends beyond coordination. These changes may influence how income is apportioned and whether certain sales fall under throwback or throw-out rules.

Tax professionals can support this process by:

• Modeling apportionment changes: Projecting how operational shifts affect sales factor weighting

• Evaluating throwback exposure: Estimating tax impacts from untaxed destination-state sales

• Finding new nexus points: Highlighting where physical or economic presence may trigger new filings

These insights help companies anticipate tax consequences tied to operational agility (without crossing into trade policy or legal advice). It’s about making sure strategic decisions don’t lead to unintended risk at the state level.

What You Can Do

Protecting your company from unexpected throwback exposure doesn’t require slowing down — it just takes coordination. Here are three practical steps to take now:

1. Evaluate protected sales: Identify where you’re relying on P.L. 86-272 and whether the destination states impose income tax.

2. Map shipping and fulfillment models: Understand where goods originate and whether origin states apply throwback rules.

3. Review apportionment exposure: Determine how throw-out rules or untaxed sales may affect your overall income distribution.

Tax May Not Be the Driver — But It’s in the Passenger Seat

You’re adapting to economic pressure with speed and creativity. But every supply chain move or sourcing shift may have tax implications your business didn’t see coming.

P.L. 86-272 may protect your business in some states, but it doesn’t stop others from taxing that income using throwback or throw-out rules. And when tariff-driven decisions lead to reshoring, the tax impact becomes even more layered.

Understanding how these state rules apply can keep your strategy intact and your risk exposure in check.

Where Tax Strategy Meets Business Agility

MGO is a national tax, audit, and consulting firm serving growth-minded organizations across manufacturing, distribution, and consumer sectors. Our State and Local Tax (SALT) team works with companies navigating complex operational shifts, helping you align your tax strategy with business agility.

From throwback analysis to nexus reviews, we bring practical insight that supports fast-moving decisions and long-term resilience. Talk to us today about how to keep your operations moving — and your tax strategy aligned.

The post How Tariff Changes Could Affect Your State Tax Profile appeared first on MGO CPA | Tax, Audit, and Consulting Services.

A Colorado-based design-build firm specialized in creating parking structures and other facilities for government entities, such as libraries, hospitals, and administrative buildings. Known for taking projects from concept to completion, the company handled both the design and construction phases. But because they didn’t own the completed structures, they assumed they couldn’t benefit from related tax incentives. 

Challenge 

While the firm regularly incorporated energy-efficient features into its designs, leadership was unaware that the energy efficient commercial building deduction under IRC Sec. 179D (179D) allowed primary designers of government-owned buildings to receive the tax benefit — even if they didn’t own the property. Without this knowledge, the company was missing out on valuable tax savings that could directly impact their bottom line. 

Approach 

Introduced to the company through a banking contact, MGO identified the opportunity and explained the 179D deduction in plain terms. At the time, the deduction offered up to $1.80 per square foot for energy efficiency improvements across three building systems: 

• Building envelope: Structural, exterior materials and insulation to optimize energy performance 

• HVAC: Systems meeting high efficiency ratings 

• Lighting: Energy-efficient lighting such as LED installations 

Because the firm acted as the primary designer for government-owned facilities, the government entity could allocate the deduction to them. MGO guided the client through the certification process — reviewing designs, materials, and energy calculations to confirm compliance with the required standards. 

Value to Client 

The project yielded approximately $250,000 in tax deductions — savings the company could reinvest in future projects. Beyond the immediate benefit, the engagement opened the firm’s eyes to an incentive they had never considered. They continued to apply 179D opportunities to other qualifying projects, creating an ongoing tax savings strategy that complemented their core business. 

Helping You Capitalize on Hidden Opportunities 

Tax incentives can be complex — and easy to overlook without the right guidance. MGO’s tax credits and incentives professionals can help you identify and claim the benefits you’ve earned.  

Contact our team today to find out how we can help you uncover savings to strengthen your business. 

The post Case Study: Unlocking Tax Savings for a Government Structure Designer  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Aligning international tax strategy with global supply chain planning helps reduce tax exposure, capture incentives, and increase operational agility.

• Ignoring exit taxes, transfer pricing, or cross-border compliance risks can create multi-year tax liabilities, penalties, and restructuring costs.

• Involving tax leaders early in global supply chain restructuring leads to smarter decisions, improved timelines, and long-term business scalability.

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In today’s dynamic global business environment, aligning your organization’s international tax planning with supply chain planning strategy isn’t just a best practice — it’s essential. From shifting trade relationships and tariffs to increased scrutiny from global tax authorities, your company’s ability to make tax-informed supply chain decisions can directly impact cash flow, risk profile, and competitive positioning.

Here’s how your tax and operations leaders can collaborate to build a globally agile structure, and why international tax strategy must be at the core.

Why International Tax Strategy Must Drive Global Supply Chain Decisions

Mid-market organizations are rethinking their operational footprint — reshoring, nearshoring, or diversifying supplier bases. But without a clear international tax lens, these shifts can trigger unintended consequences: exit taxes, loss of treaty benefits, or transfer pricing risks.

A tax-aligned supply chain strategy allows you to:

• Forecast and manage global tax liabilities

• Capture incentives and avoid inefficiencies

• Make faster, more informed decisions across jurisdictions

Integrate International Tax Early in the Planning Process

Waiting until after operations moves are underway can leave your business with a fragmented tax structure that requires costly remediation. This is especially critical for mid-market companies operating across the U.S., EMEA (Europe, the Middle East, and Africa), or APAC (Asia-Pacific) regions, where cross-border structuring can create unexpected tax burdens. Tax should be involved from the outset — modeling scenarios across jurisdictions, projecting costs, and identifying risk exposure.

For example:

• Moving production from China to Mexico might avoid certain tariffs — but could expose your business to exit taxes in China or permanent establishment risk in Mexico.

• Relocating intellectual property (IP) from Ireland to the U.S. might trigger a deemed disposal event under local exit tax regimes.

Technology platforms and predictive models can help tax teams simulate these impacts before major decisions are finalized.

Strengthening Transfer Pricing and Global Compliance

Global tax authorities are tightening enforcement — especially around transfer pricing and cross-border restructurings. If your tax structure no longer reflects your actual operations, you may face:

• Double taxation

• Disallowed deductions

• Penalties and disputes

Update your transfer pricing documentation to reflect the new supply chain model. Intercompany agreements, economic analyses (including IP valuation), and jurisdictional reporting must all align with your post-transition structure.

Unlock Incentives Through Coordinated Strategy

Supply chain shifts aren’t just about avoiding risk — they’re also an opportunity to capture new value. Jurisdictions including the U.S., Canada, Mexico, and certain European Union countries offer targeted tax incentives for reshoring, green investment, R&D, or job creation.

If these incentives aren’t launched early in planning, your business could miss out. Tax should coordinate with operations and finance teams to explore:

• U.S. federal and state credits for manufacturing investment

• R&D credits tied to newly localized functions

• Foreign tax credits or deferrals available in new jurisdictions

Create a Globally Scalable Tax Playbook

Reactive tax planning doesn’t scale. As your organization enters new markets, integrates M&A targets, or adds new suppliers, your international tax model must be flexible and supported by a clear global tax governance framework.

A forward-looking playbook helps you:

• Align tax structure with business decisions

• Build global tax governance into location changes, IP moves, and new legal entities

• Reduce friction during rapid growth or operational transformation

The Path Forward: Strategy, Agility, and Risk Reduction

International supply chain restructuring can unlock efficiency, improve margins, and reduce geopolitical exposure — but only if tax is at the table from the start.

Organizations that treat tax as a strategic partner rather than a compliance function are better positioned to navigate volatility and create long-term value.

How MGO Can Help

At MGO, we help companies navigate the complexities of global tax strategies and cross-border operations. From international structuring and transfer pricing to tax technology and incentive optimization, we serve clients across manufacturing, life sciences, technology, and more.

We work closely with CFOs and tax executives to align tax planning with business transformation — supporting global agility, regulatory compliance, and strategic growth. Let’s talk about how your international tax strategy can support your global operations.

The post How to Align Your Global Supply Chain and International Tax Strategy appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Cross-border supply chain changes can trigger exit taxes, compliance penalties, and tax inefficiencies if not planned with international tax in mind.

• Proactive coordination between tax and operations helps reduce global tax exposure, unlock incentives, and speed of execution across jurisdictions.

• Country-by-country reporting (CbCR), transfer pricing alignment, and entity structuring are critical to avoiding double taxation and audit risk.

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Global supply chain changes are rarely just operational — they’re deeply connected to international tax exposure. From exit taxes and transfer pricing risks to missed incentives and compliance hurdles, tax leaders must be part of the decision-making process from day one.

6 Supply Chain and International Tax FAQs

In this FAQ, we answer the most frequent questions our clients ask when planning cross-border restructurings, relocations, or supplier changes — so your business can move faster, smarter, and with fewer tax surprises.

1. What are the international tax risks when shifting supply chain operations?

Relocating manufacturing, coordination, or key functions across borders creates exposure to multiple tax regimes. Common risks areas include exit taxes, transfer pricing, permanent establishment issues, and customs duties. Without early tax planning, these costs can result in long-term liabilities or missed opportunities.

2. How do exit taxes work, and when do they apply?

Exit taxes are levied when valuable functions, assets, or risks — such as intellectual property (IP), staff, or customer relationships — are moved between countries. For example, transferring IP from Ireland to the U.S. may trigger a deemed disposal under Irish tax law. These taxes can be significant and must be modeled early in any restructuring.

3. What should I know about transfer pricing when moving suppliers or functions?

Transfer pricing must reflect your current business operations. If you shift suppliers, relocate production, or move functions without updating your intercompany pricing, tax authorities may challenge the arrangement — leading to adjustments, penalties, and double taxation. All intercompany agreements and transfer pricing documentation must align with your post-change structure.

4. Are there tax incentives available when reshoring or nearshoring operations?

Yes. Countries such as the U.S., Canada, Mexico, Ireland, and Singapore offer targeted tax credits and incentives for domestic investment, clean energy transitions, and R&D localization. Examples include:

• U.S. federal/state manufacturing credits

• Job creation and infrastructure grants

• R&D and capital investment incentives

However, these must be planned early to capture their full value.

5. How can technology help manage international tax complexity?

Tax technology platforms help model jurisdictional impact, manage data for compliance reporting (like CbCR), and simulate the tax effects of operational changes. Integrated enterprise resource planning (ERP) and tax systems also improve visibility and reduce risk in real-time decision-making.

6. What role should international tax play in supply chain strategy?

International tax teams should be involved from the start of any supply chain realignment. Embedding tax early helps you find risks, unlock incentives, and structure deals for long-term compliance and flexibility. A reactive approach often results in avoidable costs, delays, and exposure.

Next Steps for Smarter Global Planning

Successfully navigating international tax risks requires more than compliance — it takes a forward-thinking approach aligned with your global operations. At MGO, we support CFOs and tax leaders with international tax planning, transfer pricing analysis, and incentive identification to help reduce exposure and drive business agility.

Learn more about our International Tax and Transfer Pricing services or contact us to discuss how we can support your global growth strategy.

The post Frequently Asked Questions About International Tax and Supply Chain Realignment appeared first on MGO CPA | Tax, Audit, and Consulting Services.

Bill: Let’s start with the fun stuff first: by day, you’re an audit partner but your not-so-secret passion is your band.  Tell me about your gig earlier this week.  

Simon: We were playing at the Harp, a bar in Newport Beach. An Irish bar and pub.  

Bill: So, what kind of stuff do you all play? 

Simon: A little bit of everything — rock, classic rock, country, punk, pop, even hip hop. Yeah, we do a Nelly song. We ended up playing until 12:30 AM that night — which is late for us old folks. 

Bill: Impressive. Now, shifting gears — you work with several manufacturing clients. What are they telling you about how tariffs are now, or could potentially, impact their business? 

Simon: Honestly, it’s one of the biggest disruptors they’re facing. Tariffs throw a wrench in long-term planning. A lot of clients had diversified out of China, moving production to countries like Vietnam, Cambodia, or Bangladesh… only to get hit with new tariffs there, too. It makes supply chain strategy feel like a moving target. One of my apparel y clients was doing great shifting manufacturing across countries. But now their strategy’s wiped. They might not make it through the year.  

Bill: That’s brutal. So, you’re telling me it’s not just a China issue anymore? 

Simon: Exactly. Tariffs have become a much broader, more unpredictable challenge. One apparel client had a solid multi-country sourcing strategy, but when U.S. tariffs expanded beyond China, their margins collapsed. They went from thriving to barely surviving, just like that. 

Bill: That’s rough. How do you advise clients to respond 

Simon: There’s no silver bullet, but flexibility, nimbleness, is key. We’re encouraging clients to build sourcing redundancy. Think “China-plus-one” or “China-plus-two.” It’s also about monitoring policy shifts closely, so they’re not blindsided. We help them plan for every scenario and understand where their risks are concentrated. But as with most things, uncertainty is the biggest challenge. Companies don’t know when or where tariffs will hit, so planning can become almost impossible.  

Bill: Are there clients that are weathering this well? 

Simon: The ones who’ve invested in agility — like tech-enabled supply chains, diverse vendors, adaptable logistics — they’re more resilient. But even they’re feeling the pressure. Tariffs are just one part of a much larger uncertainty picture, and you’ve got to stay sharp. 

In today’s volatile global trade environment, manufacturers need more than a Plan B. Let’s talk about how MGO can help you stay agile, mitigate risk, and drive growth. 

The post MGO Stories: From Rock Covers to Real Talk on Tariffs, Audits, and M&A appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• AI in manufacturing boosts efficiency, but poor data quality can lead to costly errors and flawed forecasts.

• Cyber threats grow as AI connects IT and operational technology (OT) systems. Secure your infrastructure to reduce exposure.

• AI tools risk IP leaks and job disruption. Protect proprietary data and invest in workforce upskills.

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Amid growing cost pressures and dampened sentiment, manufacturers are turning to artificial intelligence (AI) to improve visibility, decision-making, and efficiency across complex operations. According to the Q2 2025 Outlook Survey from the National Association of Manufacturers, 84.7% of manufacturers plan to prioritize digital transformation in the next 12 months — with 21.8% placing significant emphasis on these initiatives.

While 72% of manufacturers already report measurable cost savings and performance gains from AI, overall optimism has dropped to 55.4% (the lowest level since Q2 2020). With rising input costs — particularly tariffs and raw material inflation — manufacturers must adopt AI with discipline and oversight.

But with accelerated adoption comes elevated risk. Manufacturing leaders must proactively manage the challenges AI introduces to avoid exposing the business to unnecessary vulnerabilities. This includes building strong governance frameworks with human-in-the-loop oversight, so critical decisions and outputs are always validated by skilled professionals rather than left entirely to automated systems.

Top 5 AI Risks in Manufacturing (and How to Manage Them)

Here are five critical AI risks manufacturing organizations face — and strategies to manage them responsibly:

1. Poor Data Quality Can Lead to Faulty AI Outputs

Manufacturers generate massive amounts of data from internet of things (IoT) sensors, machinery, and supply chain systems. However, if this data is unstructured or inconsistent, AI algorithms may produce inaccurate or misleading insights. This can result in flawed inventory levels, distorted demand forecasts, and even safety risks due to unreliable quality control systems.

How to manage it: Invest in foundational data hygiene and governance, such as continuous metric monitoring. Standardizing, structuring, and validating data across systems before deploying AI models is critical to ensuring reliable outcomes.

2. Cybersecurity Threats Expand with AI-Driven Connectivity

As AI tools integrate with OT and IoT infrastructure, they increase the attack surface across the manufacturing environment as well as regulatory risk exposure. Legacy OT systems, often not built with security in mind, become vulnerable when connected to AI-driven IT networks.

How to manage it: Implement robust cybersecurity protocols across IT and OT systems and adopt zero-trust architecture. Prioritize threat detection, continuous monitoring, and security-by-design when deploying AI platforms.

3. Risk of Intellectual Property (IP) Exposure

AI tools often rely on proprietary data — including process flows, equipment settings, and production methodologies — to generate insights. When shared on open platforms or in unsecure environments, this sensitive information can be at risk of theft or misuse.

How to manage it: Leverage secure AI environments with limited internet exposure and implement enterprise-wide access controls and data classification protocols. Train staff on responsible data handling practices and limit AI exposure to critical IP when possible.

4. Workforce Disruption from Automation and Digital Tools

AI technologies like computer vision and digital twins are redefining job functions on the factory floor. While these tools enhance efficiency, they may also displace certain roles — such as manual inspectors — unless companies invest in reskilling initiatives.

How to manage it: Develop talent strategies that focus on digital upskilling. Align workforce planning with technology adoption and support employees through change management and training programs.

5. Operational Disruptions from AI Model Failures

Without structured oversight, AI systems can produce unexpected outputs, including “hallucinations” — inaccurate or fabricated information. In critical functions like demand forecasting, these errors can lead to overproduction, tied-up capital, or delays.

How to manage it: Establish a cross-functional AI governance model with clear testing, validation, and human-in-the-loop oversight protocols. Embed monitoring systems to continuously evaluate model performance and flag anomalies early.

How MGO Can Help: Strategic AI Risk Management for Manufacturers

We work closely with manufacturing leaders to develop customized AI governance strategies that align with operational goals and industry regulations. Whether you’re adopting AI for the first time or scaling your digital infrastructure, our solutions — including cybersecurity, risk management, technical accounting, and digital transformation — are designed to help you harness innovation responsibly.

From safeguarding intellectual property to implementing secure, auditable AI platforms, we help you drive performance while reducing exposure to operational, financial, and reputational risk. Let’s build a smarter, safer future for your manufacturing operations together.

The post AI Risks in Manufacturing: How to Protect Your Operations, IP, and Workforce appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• New EBITDA-based deduction rules may reduce your company’s taxable income significantly.

• Capital-intensive and IP-driven businesses stand to benefit the most from this tax change.

• Your tax strategy may need updates to maximize savings and follow new interest deduction rules.

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If your business carries significant debt and works in a capital-intensive or intellectual property (IP)-heavy industry, a long-anticipated tax law change could substantially lower your federal tax bill. The shift — part of recent legislation — reintroduces a more favorable formula for deducting business interest, allowing many mid-market companies to benefit — especially those in manufacturing, telecom, life sciences, and tech.

Background

As of July 2025, businesses can now calculate interest deductions using 30% of EBITDA (earnings before interest, taxes, depreciation, and amortization), rather than EBIT. This adjustment expands the deduction cap and directly benefits companies with heavy equipment investments or large intangible asset portfolios. The change could translate into millions in annual savings — freeing up cash flow for reinvestment, hiring, or expansion.

What’s Changed — And Why It Matters to You

Before this change, companies could only deduct interest up to 30% of EBIT — a narrower measure of income. This penalized firms with large depreciation and amortization expenses, reducing their ability to fully deduct interest on debt.

Now, with EBITDA back in the calculation, more of your interest expense is deductible. This especially benefits companies:

• Investing in equipment or facilities (high depreciation)

• Relying on patents, software, or brand value (high amortization)

• Backed by private equity or using debt to scale operations

While large companies drive headlines, middle-market firms with aggressive growth plans or recent capital investments are equally poised to benefit — if they act quickly.

How This Impacts Your Tax Strategy 

If you’re a CFO or tax executive, this isn’t just a policy footnote — it’s a planning opportunity. Here’s what you should assess right now:

1. Model Your EBITDA Versus Interest Exposure

Review your financials and calculate interest as a percentage of EBITDA. Even if you were under the earlier EBIT-based cap, rising interest rates may have brought you closer to the limit. With EBITDA, you could have new room to deduct more.

2. Re-Evaluate Capitalization and Asset Strategy

High depreciation and amortization are now helpful again. Consider whether capital expenditures or amortized IP assets (like patents or software licenses) can be timed or structured to further boost EBITDA.

3. Evaluate Foreign Income Impacts

Not all changes are favorable. The law also requires exclusion of certain foreign income and includes capitalized interest in deciding whether you’re over the cap. These nuances may reduce the benefit for some companies.

Which Industries Should Pay Close Attention?

This shift disproportionately benefits sectors where depreciation or amortization drives EBITDA higher, such as:

Manufacturing and Distribution

Heavy equipment investments often drive large depreciation. This change lets you deduct more interest related to equipment purchases, expansions, or upgrades. Explore our manufacturing solutions »

Life Sciences and Biotech

Drug and device companies with large IP portfolios now have more headroom to deduct interest — especially helpful if your company is scaling or recently completed an acquisition.

Technology

Amortizing intangibles like proprietary software and brand assets could boost EBITDA, giving you a wider deduction window — vital if your company used debt to fund growth.

Telecommunications

With substantial infrastructure depreciation, this rule is especially impactful. Businesses can now recapture deductions lost under EBIT rules.

What You Should Do Next

This is the time to:

• Re-model your tax position using EBITDA-based caps

• Reassess financing strategies considering increased deductibility

• Analyze carryforwards and future-year tax projections

• Revisit capitalization policies and M&A financing structures

Even if your interest expense is well below the cap today, this law creates a more favorable environment for future borrowing and investment.

How MGO Can Help

At MGO, we help mid-market companies translate complex tax changes into clear business advantages. Our tax professionals work with clients in manufacturing, life sciences, technology, cannabis, and other fast-evolving industries to build strategies that align with your capital structure and growth goals.

We go beyond compliance — helping you improve interest deductibility, forecast future liabilities, and stay ahead of shifting regulations. Let’s talk about how this change can strengthen your bottom line.

The post How Your Business Can Save Millions on Interest Deductions appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Manufacturers are reassessing supply chains and tax strategies to adapt to shifting tariffs and tighter margins.

• Retailers and overseas suppliers are pushing back on price increases, placing more pressure on distributors.

• Rapid scenario planning and operational agility are essential as companies navigate a fast-changing trade and demand environment.

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After a brief period of optimism, the U.S. manufacturing sector has slipped back into contraction. The Institute for Supply Management (ISM) reported a decline in activity for July 2025, raising fresh concerns about the resilience of an industry already strained by global instability, cost volatility, and labor shortages.

According to ISM reporting, July continues a multi-month downturn in U.S. manufacturing. Rising tariffs on semiconductors, clean tech components, and electronics are contributing to declining optimism and margin pressure.

In response, manufacturers are accelerating reshoring strategies, rethinking sourcing models, and reallocating capital toward U.S.-based production. But these operational shifts carry downstream effects — including supply chain disruption, pricing tensions with retailers, and growing tax complexity.

Tariff Impacts Driving Operational and Financial Restructuring

The latest round of tariff policy changes — particularly those targeting semiconductors, clean tech components, and consumer electronics — has added urgency to supply chain reassessment across the manufacturing and distribution sector. For many mid-sized companies, this is no longer a matter of long-term planning, but of near-term survival.

In addition to long-term shifts, companies are contending with immediate pressures that demand more agile, real-time responses. With the policy environment shifting rapidly, firms need to be able to redirect sourcing, adjust pricing, and adapt operations quickly in response to new trade terms or economic signals. Retailers are resisting price increases amid soft consumer demand, while overseas suppliers show little willingness to absorb added tariff costs. This dual resistance leaves U.S. manufacturers and distributors caught in the middle — facing rising input costs and shrinking pricing power.

This pricing stalemate has forced many companies to absorb margin pressure themselves, accelerating the need for real-time scenario planning and rapid cost modeling. Facing inflexible suppliers and impatient buyers, some firms are exploring new supplier relationships altogether — often under compressed timelines and uncertain economic conditions.

These dual pressures are driving a shift toward faster, more flexible operational planning. Traditional multi-quarter strategy cycles have given way to real-time adjustments, where pricing models, sourcing plans, and capital deployment decisions are made in weeks rather than quarters. Today, manufacturers are engaging in rapid scenario modeling, adjusting pricing structures on the fly, and mapping out contingency plans for everything from inventory shifts to capital deployment.

These changes are not occurring in silos. Every sourcing decision affects tax exposure, every pricing adjustment impacts working capital, and every supplier switch creates new compliance considerations. That’s why companies are increasingly approaching supply chain restructuring as a cross-functional exercise — integrating finance, tax, and operations into a single planning framework built for speed, resilience, and data-informed execution.

Technology Investment Moves to the Forefront

Despite economic headwinds, many manufacturers are prioritizing tech adoption. Automation, AI, and advanced data tools are being used to improve throughput, reduce waste, and alleviate workforce gaps.

However, technology investments only deliver value when aligned with operational and financial systems. That’s why firms are increasingly focused on integrating data across functions, streamlining reporting, and tracking ROI in real-time. The shift isn’t just about adopting new tools — it’s about embedding them into core workflows and decision-making processes.

Advisory support in this space is helping companies make smarter, phased tech decisions — prioritizing high-impact areas first, then expanding as capacity grows. By focusing on tangible results and incremental wins, companies can build momentum while managing risk and preserving capital.

Operational Risk and Controls Under Strain

As manufacturers digitize operations and integrate more advanced technologies, traditional internal controls are being tested in new ways. Increased reliance on connected systems and data flows elevates operational risk — not just in terms of security, but also in accuracy, oversight, and regulatory compliance.

Legacy systems often require updated controls to support modern processes and maintain reporting integrity and process reliability, particularly as companies scale or reconfigure supply chains. In some cases, control gaps can expose the business to financial reporting risks as well as operational disruptions that affect fulfillment, cash flow, or customer trust.

Many organizations are reevaluating risk frameworks, updating governance structures, and taking a more proactive approach to finding and addressing control deficiencies that legacy operating models may have masked. This includes reassessing control ownership across departments and embedding real-time monitoring into critical workflows.

A Time for Reinvention

Strategic roadmaps are being replaced by agile frameworks that enable cross-functional teams to pivot quickly. Multi-year plans have given way to agile playbooks that allow operations and finance teams to redirect quickly. Tariff pressures, labor challenges, and rising technology demands are converging in an environment that is increasingly unpredictable and fast-moving.

The ability to scenario-plan and reallocate resources in near-real time is becoming a competitive advantage — particularly as pricing power erodes and supplier relationships grow more complex. The ability to act quickly — operationally and financially — is becoming a key differentiator, particularly as pricing power weakens and supplier negotiations become more complex.

For mid-sized firms, this creates both pressure and opportunity. Those that realign operations, improve visibility, and strengthen internal decision-making processes will be better equipped to lead through change. Outside advisors are playing a critical role — supporting companies with financial modeling, tax strategy, and operational planning that’s built for speed and uncertainty.

In this climate, long-term success will favor firms that can move with both speed and precision.

Supporting the Industry Through Change

MGO works with manufacturing and distribution companies navigating disruption and building for what’s next. Our team delivers practical, industry-informed guidance to help middle-market companies make confident, forward-looking decisions in times of change.

As pricing pressures and policy shifts reshape the landscape, we can help your organization respond quickly and strategically — adapting financial strategies, modeling supply chain scenarios, and reinforcing risk and control frameworks. Reach out to our team today to learn how MGO can help you move forward with clarity, confidence, and resilience.

The post Your Manufacturing Strategy in a Tariff-Driven Market appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• The One Big Beautiful Bill Act restores 100% bonus depreciation for qualified property placed in service after January 19, 2025.

• A new provision allows 100% expensing of qualified production property used directly in U.S.-based manufacturing, with strict eligibility criteria.

• Manufacturers should begin planning now to align construction timelines and tax strategy.

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The One Big Beautiful Bill Act (OBBBA) contains wide-reaching tax provisions that could reshape capital investment decisions for manufacturers and distributors. Two potentially impactful provisions are the return of 100% bonus depreciation and the introduction of a new incentive for qualified production property (QPP). For asset-intensive businesses, the new rules present significant planning opportunities.

This article outlines the OBBBA’s key bonus depreciation and QPP provisions, and how they apply to your manufacturing or distribution business.

100% Bonus Depreciation Returns in 2025

Bonus depreciation allows your business to immediately deduct a significant portion of the cost of qualifying property in the year it’s placed in service, rather than depreciating it over several years. Under prior law, bonus depreciation was gradually phasing down from 100% to 0% by 2027.

OBBBA resets that clock: For qualified property placed in service after January 19, 2025, 100% bonus depreciation is restored and made permanent. This applies to a wide range of capital investments — including machinery, equipment, and certain improvements to nonresidential real property.

However, for 2025, it’s crucial to keep the placed-in-service date in mind. Property placed in service on or before January 19, 2025, remains subject to the prior phase-down schedule (40% for 2025).

Bonus depreciation is generally automatic, meaning you need to elect out of it if you don’t want to take it. It’s available for both new and used property.

New: 100% Expensing for Qualified Production Property

In addition to bonus depreciation, OBBBA introduces a new, separate provision for 100% expensing of QPP with unique eligibility rules and timelines.

This is a major development if your manufacturing business is planning new facility construction, as bonus depreciation generally doesn’t apply to buildings (although it does apply to certain qualified improvements).

What Is Qualified Production Property?

Qualified production property includes a portion of nonresidential real property that is:

• Newly constructed in the United States

• Used as an integral part of manufacturing activities

• With construction beginning after January 19, 2025, and before January 1, 2029

• Placed in service before January 1, 2031

To qualify, the space must be used directly in the manufacturing process. The provision doesn’t apply to any square footage used for administrative offices, research and development, sales, or other ancillary functions.

Crucially, there is no de minimis exception — meaning there’s no threshold below which non-manufacturing space can be ignored. So even small areas used for offices or other non-manufacturing functions must be identified and excluded from the QPP calculation. This will likely drive demand for more detailed cost segregation studies to allocate building costs appropriately.

It’s also important to note that, unlike bonus depreciation, QPP expensing is not automatic. Taxpayers must affirmatively elect into this deduction. Final regulations will clarify how and when taxpayers must make the election and whether a single election applies across multi-year construction projects.

Who Qualifies?

This provision applies specifically to manufacturing businesses engaged in the production of tangible property involving “substantial transformation”. The IRS will issue regulations to define this standard more precisely, but the intent is to reward activities that significantly alter raw materials or components into finished goods.

Some exclusions apply. Lessors of the property and businesses preparing food and beverages on-site (such as a deli in a grocery store) are not eligible. Additionally, property subject to the alternative depreciation system (ADS) does not qualify.

A Word on Recapture

There’s also a 10-year recapture provision. If the use of the property changes during that period — such as converting a manufacturing area into administrative offices — the taxpayer may have to recapture the expensed depreciation as ordinary income under Section 1245.

Section 179: Increased Limits, but Strategic Considerations

OBBBA also raises Section 179 expensing limits. For 2025, your business can expense up to $1 million in qualifying property — with the deduction phasing out once total equipment placed in service exceeds $2.5 million. For assets placed in service after December 31, 2025, the expense limit increases to $2.5 million — with the deduction phasing out if total fixed assets placed in service exceed $4 million.

While small and mid-sized businesses often use Section 179 to write off qualifying property, it can be more limited in application than bonus depreciation (if available) since Section 179 is (a) limited to the amount of business taxable income; and (b) only available for assets used 50% or more for business purposes.

However, it may still be worth considering when bonus depreciation isn’t available or when coordination with taxable income limitations makes Section 179 more beneficial. There also may be benefits at the state level, as some states conform with the federal 179 expensing provisions while decoupling from federal bonus depreciation rules.

Taxpayers should discuss their fixed asset strategy with their advisors to decide how and when to leverage bonus depreciation, Section 179, and QPP expensing.

Implications for Manufacturing and Distribution

The manufacturing sector can benefit from these provisions with careful planning and implementation. Here are some decisions and considerations to discuss with your tax advisor:

1. Facility construction and expansions: The QPP rules reward businesses that start new construction after January 19, 2025, but before January 1, 2029. Companies on the fence may want to move quickly to meet the deadline and qualify for 100% expensing.

2. Cost segregation studies: Because only certain portions of a facility count as “qualified production property”, taxpayers will need cost breakdowns to support their deductions if any part of the building is used for non-qualified activities.

3. State conformity is uncertain: Some states may decouple from the federal rules, particularly for QPP expensing, given its potentially large impact on revenue. Businesses with operations in multiple jurisdictions will need to monitor state responses.

4. Private equity and tax-exempt complications: The use of ADS, especially when tax-exempt entities are involved, could disqualify certain projects from QPP expensing. Additional analysis will be required in joint ownership scenarios.

5. Recapture risk: Planning should also account for potential changes in facility use within the 10-year recapture window.

Looking Ahead

Bonus depreciation has been part of the tax code in various forms since 2001, but this is the first time it’s been made permanent. Meanwhile, the addition of a new QPP expensing provision clearly shows that the federal government wants to incentivize domestic manufacturing investment.

As with any major tax law, the details matter — and many remain forthcoming. We expect the U.S. Treasury Department and the IRS to release additional regulations clarifying key definitions, election mechanics, and compliance requirements.

In the meantime, manufacturers and distributors should begin evaluating capital plans for the next five years — especially if you are contemplating large-scale facility construction.

How MGO Can Help

At MGO, we help manufacturing and distribution companies identify opportunities and understand the potential tax outcomes. From evaluating capital investments to coordinating cost segregation studies and modeling the effects of federal and state tax treatment, we work alongside clients to support informed decision-making.

If you’re planning to expand or modernize your operations, our team can help you assess how these provisions apply to your business and align your plans with the latest tax laws. Contact us today to start the conversation.

The post Bonus Depreciation and Qualified Production Property: What Manufacturers Need to Know appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Your board should boost tech literacy and structure to oversee innovation, risk, and digital transformation effectively. 

• Staying current on AI, cybersecurity, and data privacy laws is essential for strong technology governance. 

• If you want strong, effective tech oversight, it’ll require cultural alignment, workforce readiness, and smart investment strategies.  

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Technology is no longer just an operational tool; it is a core driver of strategy, risk, and opportunity. For boards, the imperative to innovate is matched only by the responsibility to govern technology effectively. As organizations harness emerging technologies, the boardroom must be equipped to navigate complex issues ranging from regulatory compliance and risk management to cultural alignment and investment prioritization.  

Here we explore the top five boardroom conversations shaping technology governance for directors seeking to foster innovation while safeguarding organizational integrity and value. 

1. Assessing the board’s technological literacy and access to expertise  

• Determine whether the board, as a whole, has the appropriate knowledge and experience with technological innovation and implementation to provide strategic oversight.  

• Assess the board’s familiarity with the company’s technology debt when considering opportunities to implement emerging technologies.  

• Consider whether the circumstances of the company indicate the need to appoint a member with specific and relevant technology expertise. 

• Discuss whether the current board structure supports the strategic technology goals, objectives, and identified risks.   

• Weigh potential decisions for a dedicated technology committee, assigning technology to a specific existing committee, or keeping responsibility with the full board.   

2. Remaining apprised on a shifting regulatory landscape 

• Given the fast-evolving nature of data privacy, cybersecurity, and AI regulations, consider the board’s ability to confirm compliance with all laws and regulations.  

• Request continuing education and updated thought leadership from counsel and other advisors, subscriptions to emerging legislative trackers, etc.  

3. Engagement with management to understand risk management effectiveness  

• Consider whether management has adopted a viable framework that provides accountability and instills trust in its use and deployment of AI. 

• Assess whether the underlying data hygiene of the organization – including data integrity, access and privacy rights protections, effective internal controls, and system security – will enable technology to provide usable and ethical outputs. 

• Evaluate management’s use case identification in prioritizing the opportunity/problem being addressed versus the risk exposure to the organization. 

• Assess how human supervision and continuous monitoring are built into the process to identify and mitigate issues promptly. 

4. Cultural alignment and workforce preparation 

• As technology is being integrated and implemented, consider the appropriateness of training and upskilling the workforce to use and monitor new tools, identify and remedy associated risks, and comply with internal policies, procedures, and external rules and regulations.  

• Determine the existence and robustness of cross-disciplinary change management to foster a cultural of innovation acceptance and empowerment.  

• Discuss management strategies in place to address cultural and operational challenges to widespread adoption and use.  

• Assess the quality and effectiveness of communication throughout the organization to drive employee understanding of the use cases being deployed, changes to workflows, and how their roles may continue to evolve. 

5. Prioritizing technology investment 

• Consider the process applied by management for evaluating use cases against the mission, values, and agreed upon strategy of the organization. 

• Determine whether management’s technology strategy focuses not only on the investment in specific tools and their implementation but includes adequate investments in security and risk management.  

• When planning to deploy AI technology, consider whether critical input is being provided by others responsible for related risks such as cybersecurity teams, general counsel, finance, human resources, and operations.   

Stay Engaged 

Directors are encouraged to stay educated, informed, and in constant contact with management when integrating and utilizing new and complex technologies. The BDO Center for Corporate Governance endeavors to support directors in engaging in effective governance by providing insights, learning, and networking opportunities in collaboration with BDO subject matter specialists, advisors, and peer networks designed specifically for boards of directors. 

Written by Amy Rojik, Rachel Moran and Lee Sentnor. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com 

How MGO Supports Boards in Technology Oversight 

As technology becomes central to strategy and risk, MGO helps boards elevate their governance capabilities. From assessing board tech literacy to advising on AI risk frameworks and regulatory compliance, MGO offers tailored insights that empower directors to make informed decisions. Our team supports board and committee structures, provides continuing education on emerging tech, and helps align technology investments with organizational values. With deep experience in cybersecurity, data governance, and digital transformation, we work with you to navigate the complexities of modern technology oversight as it continues to evolve. Contact us to learn more.  

The post Top 5 Boardroom Conversations on Technology Governance  appeared first on MGO CPA | Tax, Audit, and Consulting Services.