Research and development is essential for the future of America's economy. This is why for the last 70 years companies were allowed to write off their R&D expenses on their annual taxes.

Unfortunately in 2017, this law was changed. The Trump Administration oversaw many changes to the tax code, including changes to the treatment of R&D expenses. As a result of this, a harmful tax policy went into effect in 2022 making it so companies could no longer deduct R&D expenses annually, a change that so far, has cost industries billions of dollars. Now companies have to amortize, or deduct these expenses over a period of five years, making R&D much more costly.

We urge Congress to restore the historic precedent for R&D that existed in 2021 and that has benefited the country for the past 70 years.

The Tax Foundation has stated the following on this matter:

"Expensing is the proper tax treatment of investment and other business costs, as it prevents a firm’s profits from being overstated in real terms. This lowers the cost of investment. Requiring a firm to amortize business costs over a number of years overstates the firm’s taxable income, reducing business capital investment."

"Starting in 2022, the Tax Cuts and Jobs Act (TCJA) will require companies to amortize their R&D costs over five years, instead of deducting them immediately each year. This change will raise the cost of investment, discourage R&D, and reduce the level of economic output."

"Canceling amortization of R&D costs would result in a 0.15 percent larger economy, a 0.26 percent larger capital stock, 0.12 percent higher wages, and 30,600 full-time equivalent jobs."

R&D tax policies are designed to encourage companies to invest in research and development activities by offering tax incentives or credits. These policies can be beneficial in promoting innovation. Innovation is a significant contributor to jobs, economic growth, competitiveness, and national security.

If we don't restore the former benefits for R&D, we will fall behind our competitors around the globe. For instance, China provides a superior deduction for R&D, expenses up to an extra 100% of eligible R&D expenses in addition to actual R&D expenses. Other countries are also going in the opposite direction of the U.S. and making R&D more affordable, countries such as Austria, the Czech Republic, Greece, Hungary, Lithuania, the Slovak Republic, Turkey, and the United Kingdom.

If Congress does not take action to reverse course on this policy, America may no longer be a leader of innovation in our world. The United States will be directly harmed by this policy. This is not only a threat to the economy, it is a threat to America's national security. It is a threat to our future.

Congress must restore the full deductibility of R&D expenses as soon as possible.

Letters to Congress

178 Chief Financial Officers Demand Congress Restores R&D Tax Breaks (PDF)

Over 400 Businesses and Trade Associations Ask Congress to Reverse Harmful Tax Change (PDF)



Amortizing Research and Development Expenses Under the Tax Cuts and Jobs Act (Tax Foundation, 2-5-19)


News Articles

Congress Ends Extension For Tax Breaks (The Washington Post, 12-23-22)

Lawmakers Omit R&D Tax Break From 2023 Spending Bill (Defense One, December 2022)



R&D Coalition