Policymakers Offer Proposals to Fix Upcoming Tax Changes

Three upcoming tax law changes scheduled by the 2017 Tax Cuts and Jobs Act (TCJA) to help offset its revenue losses would be canceled by proposed legislation that would prevent the tax treatment of investment from worsening over the coming years.

The most interesting of these changes, at least in our eyes, is the change to the Research & Development (R&D) Amortization. Unfortunately, the upcoming change does not have great ramifications.

Previously, companies had to fully deduct R&D costs. This has been the norm since 1954. Starting in 2022, this practice will change, allowing companies to amortize R&D expenses over five years. Amortization raises the marginal cost of investments and reduces growth in the long term by reducing the real value of the deductions to the business.

In response to these changes, a bipartisan group of House policymakers introduced the “American Innovation and R&D Competitiveness Act of 2021” and a bipartisan group of Senators introduced the “American Innovation and Jobs Act.” Both would eliminate the five-year amortization requirement for R&D expenses, which would allow companies to continue fully deducting R&D expenses. The American Innovation and Jobs Act would also increase R&D tax credit for small and start-up firms.

Are you developing new software 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 www.swansonreed.com/webinars or contact your usual Swanson Reed representative.

Recent Posts