Here’s Why Congress Must Restore The Research And Development Tax Credit
As Connecting the Dots reported last year, a provision that went into effect at the beginning of 2022 would only allow businesses to amortize or deduct research and development (R&D) expenses over a period of years instead of allowing them to deduct 100 percent of their expenses in the same year.
The Metals Service Center Institute has continued to argue that this change creates a competitive disadvantage for U.S. manufacturers. China currently provides a 200 percent deduction for R&D expenses for manufacturers, for example.
Congress can still change course and avoid harming manufacturers by:
- Reversing the R&D amortization provision, which would again allow firms to deduct 100 percent of their R&D expenses immediately and in the same year in which they are incurred.
- Protecting interest deductibility by eliminating the new, stricter limit on interest deductibility (the earnings before interest and tax, or EBIT, standard) and returning to the standard in place prior to 2022, which was based on earnings before interest, tax, depreciation and amortization; and
- Going back to allowing businesses to take 100 percent deductions for equipment and machinery purchases in the tax year of purchase.
For nearly 70 years, the U.S. tax code recognized the importance of R&D by allowing businesses to fully deduct these expenses in the same year. If not reversed, this provision could devastate industrial metals companies. In fact, the change effectively tightens the limit for U.S. firms at the same time that interest rate continue to rise, a problem that will create a tax increase for many firms.
To make your voice heard on this important issue, please use the National Association of Manufacturers’ Action Center, which allows interested individuals to send a letter to their representatives in Congress asking them to vote to reverse this harmful tax change. The NAM Action Center also provides background information, R&D policy updates, and industry stories.