Weekly Policy Blog: Urge Congress to Fix R&D Expensing 

CBSA and our partners at BIO urge you to act now! Encourage members of Congress to pass a tax package before the end of January that includes restoration of immediate R&D expensing to protect our innovation economy. 

As of 2022, U.S. law requires businesses to amortize R&D expenses over multiple years, which takes resources away from small, R&D-intensive companies as they seek to develop new treatments, cures, and discoveries. BIO is urging Congress to advance strong bipartisan support to reverse this policy threatening biotech innovation. 

Use this custom email link to encourage your members of Congress to pass this critical legislation. 

The Problem: The 2017 Tax Cuts and Jobs Act (TCJA) modified Section 174 of the Internal Revenue Code so that, beginning in 2022, businesses could no longer deduct “research and experimentation” expenses in the same taxable year. Instead, businesses must amortize R&D expenses over five years, meaning they can only deduct 20% per year for spending on innovation. 

The Impact: The recent changes to Section 174 make it harder for companies to make critical investments in R&D and make U.S. businesses less competitive. Even very small, early-stage companies are being hit with large, surprise tax bills. Numerous case studies have been shared illustrating how Section 174 threatens our country’s most innovative small businesses. An Ernst and Young Economic Impact Estimate shows that, unless Section 174 is fixed, Colorado will lose: 

  • $115 million per year in R&D spending 
  • $163 million per year in R&D-related wages 
  • 1,922 highly compensated jobs 

The New Proposal: The “Tax Relief for American Families and Workers Act of 2024” (H.R.7024) was introduced on January 17th, 2024, and was passed by the House Ways and Means Committee by a vote of 40-3 on January 19th. This bipartisan tax proposal from House Ways and Means Chair Jason Smith (R-MO) and Senate Finance Chair Ron Wyden (D-OR) would expand the Child tax Credit and restore the full tax deduction for R&D expenses—R&D spending would be fully tax deductible retroactively and through 2025. 

Next Steps: The proposal now awaits a full House vote, but is expected to advance rapidly through both the House and Senate. Wyden and Smith said they aim to pass the tax package before January 29th to avoid disruptions to tax filing season.  

Alongside our partners at BIO, CBSA encourages you to use this custom email link to urge your members of Congress to pass this critical legislation. 

Thanks to Colorado’s Congressional Delegation: CBSA thanks Representative Joe Neguse (D-CO-2) for signing on as an original co-sponsor of a prior effort to address the R&D tax, H.R.2673. CBSA also thanks Representatives Brittany Pettersen (D-CO-7), Jason Crow (D-CO-6), Yadira Caraveo (D-CO-8), Doug Lamborn (R-CO-5), and Ken Buck (R-CO-4) for signing on as co-sponsors of H.R.2673 as well.  

Categories: CBSA News