Article

Congress Introduces Bipartisan Legislation to Preserve Immediate R&D Expense Deductions

April 29, 2021

Both the U.S. House and Senate have introduced bipartisan bills to allow companies to continue expensing R&D credits in the year the costs are incurred. Currently, the amortization provision in the Tax Cuts and Jobs Act will require companies to amortize R&D expenses over five years beginning in 2022. This provision would be repealed with passage of S. 749, the American Innovation and Jobs Act, or H.R. 1304, the American Innovation and R&D Competitiveness Act.

The cash savings opportunities that qualified businesses realize by expensing R&D costs in the year the costs are incurred supports ongoing advancements in American-made products and services, and helps spur innovation and job creation in the United States. This immediate deduction of R&D expenses has been available to innovative companies since 1954.

Not allowing companies a full deduction of R&D expenditures during a taxable year that they occurred deters innovation because the expenses associated with R&D are not offset by immediate tax savings incentives. If S. 749 and H.R. 1304 are not passed, the U.S. will be the only developed country that requires the amortization of R&D expenses.

These two bills are supported by several businesses and associations, including the R&D Coalition. Cherry Bekaert’s Credits and Accounting Methods Leader, Ron Wainwright, serves on the R&D Coalition’s Leadership Committee. If you have specific questions about the potential impacts of these bills, or R&D credits or other federal and state incentive opportunities, contact Ron Wainwright.