ONSHORE Manufacturing Act

The ONSHORE Manufacturing Act creates three new tax credits to encourage domestic manufacturing of critical medical supplies and drugs, and requires annual reports to Congress on their use and impact. The credits are a domestic medical and drug manufacturing credit, a credit for advanced medical manufacturing equipment, and a credit for equipment used to comply with environmental regulations.

Sec. 2, Domestic medical and drug manufacturing credit: This section creates a new tax credit equal to 10.5% of the taxpayer's qualified medical and drug manufacturing income, limited to 50% of the taxpayer's W-2 wages. The credit applies to income from selling specified medical products (essential drugs, devices, active pharmaceutical ingredients, and countermeasures) that are manufactured in the U.S. The credit is part of the general business credit and applies to taxable years beginning after December 31, 2026.

Sec. 3, Qualifying advanced medical manufacturing equipment credit: This section creates a tax credit for machinery or equipment used to manufacture specified medical products that incorporates novel technology or improves product quality. The credit is 30% for equipment placed in service before 2031, 20% in 2031, 10% in 2032, and 0% after 2032. It is part of the investment credit.

Sec. 4, Medical manufacturing EPA compliance credit: This section creates a tax credit for property used to meet Clean Air Act emissions limits or Clean Water Act wastewater standards in the manufacturing of specified medical products. The credit is 30% for property placed in service before 2031, 20% in 2031, 10% in 2032, and 0% after 2032. It is part of the investment credit.

Sec. 5, Reports to Congress regarding supply chain resiliency: This section requires the IRS, the Department of Veterans Affairs, the Department of Defense, and the FDA to each submit annual reports to Congress starting in 2027 on the utilization and impact of the three new credits, including their effect on compliance with the Buy American Act for domestically manufactured drugs, biologics, active pharmaceutical ingredients, countermeasures, and devices.