Oregon has long been home to some of the nation’s biggest names in manufacturing, including Daimler, Intel, and Nike. The state has earned the nickname “Silicon Forest” for its cluster of high-tech companies concentrated in the Portland Metro Area.
Yet, in recent years, concerns have grown about a potential “doom loop” affecting the state’s economy and infrastructure.
Economists across Oregon are weighing in on where the state’s manufacturing future is headed. According to Oregon Business & Industry, manufacturing remains a cornerstone of Oregon’s economy, contributing roughly 14% of the state’s GDP and 11% of all jobs.
Current Challenges Facing Oregon Manufacturing
The Skilled Labor Shortage
However, the industry faces mounting challenges, most notably, a shortage of skilled labor. As experienced workers retire or exit the field, new talent has been slow to fill the gap, despite manufacturing offering a median wage of around $65,000.
Leveraging R&D Tax Credits for Growth
One tool aimed at stimulating continued investment and innovation in this sector is the Research and Development (R&D) Tax Credit. This incentive allows manufacturers to offset costs tied to developing or improving products and processes, with wages being one of the largest qualifying expenses.
If Oregon’s manufacturing sector were to grow by just 10%, analysts estimate it could generate roughly 51,000 new jobs and contribute more than $7 billion to the state’s GDP.
Economic Headwinds & Market Volatility
However, as of November 2024, Oregon’s manufacturing industry has entered a mild recession. The state has lost approximately 9,400 manufacturing jobs over the past year, ranking 50th in the nation for manufacturing job growth. The pace of layoffs has drawn comparisons to the downturn experienced during the Great Recession.
Despite these challenges, many manufacturers remain deeply rooted in Oregon. They’ve built their businesses here, drawn by the state’s natural beauty, innovation culture, and skilled workforce.
Yet, many also express frustration with Oregon’s tax environment and regulatory landscape, which can make it difficult to expand or remain competitive.
Industry leaders argue that manufacturing has been overlooked by policymakers, even as it continues to play a pivotal role in Oregon’s economic vitality. Neighboring states have seized this opportunity, actively recruiting Oregon-based manufacturers with friendlier tax structures and growth incentives, and 60% of Oregon manufacturers have already expanded operations outside the state.
Still, the manufacturing community in Oregon continues to demonstrate resilience and creativity. Companies are investing in product development, process innovation, and job creation, the very spirit the R&D Tax Credit was designed to encourage.
Whether Oregon can harness that momentum and translate it into sustainable growth will depend on how the state balances innovation with a more supportive business climate in the years ahead.
Ways Leyton Can Help
R&D Tax Credit Benefits for Manufacturers
Oregon used to have a state level Research and Development Tax Credit for all industries but now it’s solely for Semiconductors. Where it offers roughly 15% in tax credits for qualified research expenses or basic research payments in Oregon, up to $4 Million per taxpayer, per year.
The credit is available through tax year 2029 with a cap on the total credit available each year.
In addition, manufacturers can significantly benefit from the federal Research & Development (R&D) Tax Credit, which rewards companies for investing in innovation, process improvements, and new product development.
Eligible activities include designing new tools, improving manufacturing techniques, automating production lines, and developing prototypes.
The credit can offset payroll taxes for qualified start up businesses and reduce income tax liability, and is something that should be build into their financial plans.
By leveraging this incentive, manufacturers can reinvest in technology, workforce training, and infrastructure. All of which enhance competitiveness in domestic and global markets.
State and Local Taxes for Manufacturers
Reverse Sales and Use Tax Audit can reveal instances where manufacturers have overpaid on taxable purchases. Such as equipment, materials, or utilities, often leading to significant refunds or future savings.
Together, these incentives and audits help manufacturers reinvest capital back into innovation, workforce development, and business expansion.
It is important to note that Oregon does not have Sales Tax, but with the manufacturers expanding to neighboring states that do incur Sales Tax, a review of sales tax exemptions for Manufacturers would be a good practice.
Nexus studies help manufacturers identify where they have taxable business activity across multiple states, ensuring compliance while uncovering opportunities to optimize their tax footprint.
Duty Drawback Mandates
For manufacturers impacted by import tariffs, duty drawback programs offer a valuable way to recover costs and protect margins. A duty drawback allows businesses to claim refunds on customs duties, taxes, or fees paid on imported materials that are later exported, either in their original form or after being used in manufacturing.
For example, if a manufacturer imports raw components from overseas, assembles them into a finished product in the United States, and then exports the final goods, they may be eligible to reclaim a significant portion of the import duties originally paid.
These programs help:
- Mitigate the financial strain of global trade policies
- Improve cash flow
- Enhance competitiveness in international markets
Grants
Grants can be a powerful catalyst for manufacturers looking to innovate, expand, or modernize operations.
Federal, state, and local manufacturing grants often target areas such as:
- Workforce training
- Technology adoption
- Energy efficiency
- Research and development
Helping businesses offset upfront costs that might otherwise slow progress.
Programs like the Manufacturing Extension Partnership (MEP) or Small Business Innovation Research (SBIR) grants, for example, provide both funding and technical support to help manufacturers implement new processes, develop advanced products, and strengthen supply chains.
By leveraging these resources, manufacturers can enhance productivity, maintain global competitiveness, and create high-quality jobs that contribute to the state’s long-term economic growth.
Commercial Real Estate Services
Property Tax Assessments: Help ensure manufacturers aren’t overpaying on facilities or equipment by verifying valuations and identifying potential exemptions.
Cost Segregation Studies: Further enhance cash flow by accelerating depreciation on specific building components. Such as lighting, ventilation, and specialized machinery. Allowing manufacturers to recover costs more quickly, especially if they’ve purchased or built a new building in recent years.
§179D Energy Efficiency Deduction: Rewards investments in energy-efficient building systems, such as upgraded HVAC, insulation, or lighting, by providing substantial federal tax deductions.
Collectively, these tools can improve liquidity, support reinvestment in new technology, and drive long-term operational efficiency for manufacturers.
Conclusion
The State and Federal Government are trying to help manufacturing companies stay competitive and continue advancing and growing. Growth during challenging times is truly the American way, and yet so is paying taxes.
Leyton helps companies empower their futures!
As a global consulting firm we help businesses leverage financial incentives to accelerate their growth and achieve long lasting performance.
Our consultants simplify access to complex incentives. Combined teams of highly skilled Tax and Technical specialists enhanced with cutting-edge digital tools maximize the financial and non-dilutive benefit for all types of businesses and organizations.
Please feel free to reach out to us for help with any of the business solutions above.
