Sen. Todd Young (R-Ind.) reintroduced legislation last week to fully restore expensing for research and development for businesses while expanding accessibility to startups.
The American Innovation and Jobs Act fully restores the proper tax treatment for long-term research and development investment by ensuring that companies can continue to fully deduct R&D expenses each year.
The 2017 Tax Cuts and Jobs Act singed into law by President Trump allowed full R&D expensing in the first five years of the legislation but that provision expired in 2022 after Congress failed to extend the provision.
Under current law, businesses are required to deduct research or experimental expenditures over a five-year period while research or experimental expenditures that are conducted outside the U.S. are required to be deducted over a 15-year period. This current tax treatment makes R&D far more expensive to undertake.
Restoring R&D expensing will help make the U.S. economy more competitive with global rivals like China by lowering tax burdens on American businesses and encouraging innovation.
Sen. Young’s legislation also expands the R&D tax credit for startup businesses by doubling the cap on the refundable R&D tax credit from $250,000 to $500,000 in year one, gradually raising the cap to $750,000 over ten years. Additionally is expands access to the R&D tax credit for startups by lowering certain thresholds needed to qualify.
Americans for Tax Reform supports the American Innovation and Jobs Act and encourages members of Congress to support this effort.