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However, as of January 2022, this critical incentive was revoked, replaced by the requirement to amortize R&D investments over a prolonged period.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.
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.
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.