Companies are Concerned about R&D Tax Deal Held Up in Senate

Many large U.S. companies are pushing lawmakers to revive the expired tax breaks for research and development spending.

The 2017 Tax Cuts and Jobs Act (TCJA) had a provision for Section 174 of the internal revenue code (IRC) which came into effect in 2022 and resulted in research and development expenditures now needing to be amortized over 5 years rather than deducted in the year they occurred. The Tax Relief for American Families and Workers Act of 2024, a bipartisan bill, proposing a change back to deducting methods sprang into action and gained momentum in recent months but has now stalled in the Senate. 

At present, various large companies are stating that the law as it stands is costing them hundreds of millions or billions of dollars, while some owners of small and medium-size businesses are wondering if their firms will survive.

Companies of all sizes have been urging lawmakers to reverse the law. The House passed a bipartisan bill in January to restore immediate domestic research deductions retroactively from 2022, but Republicans have held up the bill in the Senate over details of child-credit changes, their inability to amend the bill and the prospect of a better deal if the GOP wins a Senate majority in November’s election. 

With matters like the House’s impeachment of Homeland Security Secretary Alejandro Mayorkas and reauthorization of a section of the Foreign Intelligence Surveillance Act potentially on the agenda, the Senate isn’t likely to take up the tax bill before a break later this month. “I don’t think there’s been any movement,” said Sen. Todd Young (R-Ind.), who supports the bill.

To add to the frustration caused by this delay, the current bill runs only through 2025 and is, if passed, only a stopgap anyways.

At this point, with hope of the bill passing waning, it is no surprise to see that companies are now considering offshore R&D activities where they could take advantage of other country’s R&D tax incentives. This would bring the benefits of innovation to other countries rather than keeping it local and supporting the United States.

Are you developing new technology for an existing application? Did you know your development work could be eligible for the R&D Tax Credit and you can receive up to 14% back on your expenses? Even if your development isn’t successful your work may still qualify for R&D credits (i.e. you don’t need to have a patent to qualify). To find out more, please contact a Swanson Reed R&D Specialist today or check out our free online eligibility test.

Who We Are:

Swanson Reed is one of the U.S.’ largest Specialist R&D tax advisory firms. We manage all facets of the R&D tax credit program, from claim preparation and audit compliance to claim disputes.

Swanson Reed regularly hosts free webinars and provides free IRS CE and CPE credits for CPAs. For more information please visit us at or contact your usual Swanson Reed representative.

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