The American Innovation and Jobs Act will help American workers and entrepreneurs for decades to come by ensuring that America remains a competitive and welcoming place for companies large and small to invest in research and development.
April 18, 2023
Respected Maggie Hassan
324 Hart Senate Office Building
Washington, D.C. 20510
The Honorable Todd Young
185 Dirksen Senate Building
Washington, D.C. 20510
Senators Hassan and Young, gentlemen:
On behalf of the undersigned taxpayers, consumers, and free-market advocates, we commend your continued leadership in efforts to recover full and immediate expenditures on investments in U.S. research and development (R&D). This leadership is embodied in reintroducing you American Innovation and Jobs Actwhich will help American workers and entrepreneurs for decades to come by ensuring that America remains a competitive and welcoming place for companies large and small to invest in research and development.
As you know, the federal government’s tax treatment of research and development expenses shifted from a full, immediate expense to a five-year amortization in the 2024 tax year, as a result of the 2017 tax reform law. Prior to 2024, companies were able to fully incur research and development expenses for decades, going back Its history dates back to the enactment of Section 174 of the Internal Revenue Code in 1954.
Switching to a five-year amortization, after decades of full spending, has the practical effect of making it more expensive for companies large and small to invest in research and development here in the United States. In a globally connected and technologically advanced world where the United States competes with countries around the world for workers, ideas, talent, and innovation, the shift from research and development expenditures to consumption has come at the worst of times.
The Tax Foundation found that a return to full R&D expenditures would increase US gross domestic product, US gross national product, capital stock, and US wage rates. The USA Innovation and Jobs Act will permanently restore research and development expenditures in the US tax code.
The USA Innovation and Jobs Act also expands Section 41 research credit in several ways. While full recovery of research and development expenditures is the most important and impactful provision of your legislation, research credit expansions appear right and narrow aimed at small and start-up companies, who should be the primary beneficiaries of any research credit.
Thank you again for your diligent and thoughtful work on the vital issue of recovering the full expenditure of corporate R&D expenditures in the United States. Your proposal will have a significant and positive impact on the US economy and wage growth.
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