Weekly Policy Blog: CBSA Advocates for Return of Immediate R&D Expensing

CBSA is working to generate support for the bipartisan American Innovation & Jobs Act of 2023 (S. 866), sponsored by Senators Maggie Hassan (D-NH) and Todd Young (R-IN). This federal bill, which was introduced on March 16, 2023, seeks to restore the immediate expensing of research and development/experimentation expenditures, removing what is essentially a tax on innovation. R&D is critical to the development of innovative breakthroughs, especially in life sciences, and we must ensure U.S. tax policy enables and encourages investment in this innovation.  

The Issue 

  • Research and development (R&D) is critical to the development of innovative breakthroughs in the life sciences industry.  
  • R&D represents a major, necessary expense for life sciences companies to develop novel, safe, and effective products to serve patients.  
  • Wherever appropriate, the tax code must promote investment in R&D. 


  • Previously, Section 174 of the Internal Revenue Code allowed businesses to deduct “research and experimentation” expenses in the same taxable year in which they occurred. 
  • The 2017 Tax Cuts and Jobs Act (TJCA) modified Section 174 so starting in 2022, businesses could no longer deduct such expenses in the same taxable year.  
  • Currently, businesses must amortize such deductions over five years for domestic expenditures or over 15 years for foreign expenditures. 
  • This change requires companies to pay taxes on 90% of the funds used to support their R&D expenses in 2022 and has created a new, significant tax burden on companies investing in R&D. 


  • The 2022 changes to Section 174 makes it harder for companies to make critical investments in R&D and makes U.S. businesses less competitive. 
  • This tax burden is particularly difficult for small, early-stage, pre-revenue companies, including, notably, many Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) awardees.  
  • The situation is even more difficult for partnerships and LLCs, where individual owners will be personally liable for the company’s taxes. 
  • As was noted by Dr. Stephen J. Susalka, Chief Executive Officer of the Association of University Technology Managers (AUTM): “An analysis conducted by a state land-grant R1 public university found that Section 174 would bankrupt almost every one of their ten SBIR startup companies. In fact, Section 174 would have a deleterious effect on SBIR/STTR startup companies across the nation, deforming the SBIR/STTR mission and undercutting its impact.” 

The Solution 

The American Innovation & Jobs Act of 2023 (S. 866), a bipartisan bill introduced on March 16, 2023, by Senators Maggie Hassan (D-NH) and Todd Young (R-IN), would repeal this new amortization provision and restore the immediate expensing of R&D expenditures.  

CBSA is encouraging members of the Colorado Congressional delegation to sign on as co-sponsors of the bill, which now has 20 other co-sponsors in addition to Sen. Hassan and Sen. Young. 

Categories: CBSA News