“Shift in tax treatment for R&D expenses a hit to innovation”

Originally published by Roll Call–

Innovation leadership in the United States is at serious risk with the 2022 shift in income tax treatment of research and development (R&D) expenses. 

For the first time in nearly 70 years, business cash flow is negatively affected by the inability to immediately write-off their R&D expenses in the year incurred. As of the new year, businesses must instead forgo the immediate write-off of their current year R&D investments. This tax change makes the U.S. a global outlier and puts a constraint on innovation and high-paying R&D jobs at a time when the U.S. needs to accelerate investment in R&D. Congress must move quickly to ensure that our tax code continues the long policy position of supporting U.S. innovation. 

According to estimates from the Joint Committee on Taxation, Congress’ nonpartisan tax scorekeeper, the amortization requirement in the 2017 tax overhaul law could cost businesses $29.1 billion in just the first nine months of 2022 alone. Unless reversed, one study concluded that estimated R&D spending will fall by $4.1 billion annually, costing more than 23,000 high-paying U.S. R&D jobs over a five-year period.