Budget Deadline Looms and the R&D Credit Hangs in the Balance

Budget Showdown: The Fate of the R&D Credit in Congress’s Hands


It is imperative that Congress restores it in the new budget agreement due October 1st.


Innovation is the cornerstone of progress and economic prosperity. For nearly seven decades, American businesses had a powerful tool at their disposal – immediate research and development (R&D) expensing. This tax provision allowed businesses to swiftly deduct 100% of their R&D expenses, spurring innovation across industries.


However, as of January 2022, this critical incentive was revoked, replaced by the requirement to amortize R&D investments over a prolonged period. This change has cast a shadow over innovation and economic growth.

Kevin Mccarthy is facing the daunting task of getting a budget passed in a deadlocked congress

As the deadline for the October 1st, 2023 budget agreement approaches, Congress faces a pivotal decision: whether to restore immediate R&D expensing. Here’s why this is imperative:


1. Igniting Innovation:

Immediate R&D expensing has long been a driving force behind innovation and technological advancement. It serves as a powerful incentive for businesses to invest in research and development, pushing the boundaries of what’s possible. Reinstating this provision sends a resounding message that innovation is a top national priority.


2. Global Competitiveness:

The removal of immediate R&D expensing has placed the United States at odds with global competitors. In a world driven by technological advancements, this change has made us an outlier, jeopardizing our global competitiveness.


3. Supporting Small Businesses:

Small businesses, the lifeblood of our economy, have borne the brunt of this change. They rely on innovation to stay competitive, and the removal of immediate R&D expensing has burdened them with an additional tax cost of 32%, averaging $59,000 per business.

Chuck Schumer Budget Fight

Recent data underscores the urgent need for action:


Utilization: A mere 29% of small businesses have utilized immediate R&D expensing, with tech companies leading the way at 45%.


Surprise: An astonishing 28% of small businesses were taken by surprise at the unavailability of the R&D tax credit.


Financial Strain: A staggering 35% of small businesses that would otherwise rely on the R&D tax credit will be forced to borrow to meet their tax obligations.


Threat to Survival: A dire 19% fear that their firms may be compelled to close their doors due to the adverse effects of this tax change.


Bipartisan Support: An overwhelming 86% of small businesses rally behind a bipartisan approach to reinstate and make permanent the R&D tax credit.


In summary, as we approach the October 1st, 2023 budget agreement deadline, Congress faces a momentous decision. Reinstating immediate R&D expensing is not just a matter of policy; it’s a commitment to innovation, growth, and global competitiveness. Congress must act decisively to ensure that innovation continues to thrive, lighting the path to a brighter future for all.


If you’d like to contact your representative about passing the R&D Credit in the new budget, you can start by clicking HERE.

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