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Changes in R & D Tax Provisions Threaten Growth

Source: US Chamber of Commerce

Congress has a short-term window to act on a key tax provision that can increase research and development (R&D) spending in America.

Zoom out: For nearly 70 years, businesses have been able to immediately deduct 100% of their R&D expenses, which can include costs associated with the development, testing, and improvement of products and services. However, as of January 2022, businesses are no longer able to immediately write off these expenses.

Why it matters: This change in R&D tax rules is constraining investment in this critical economic activity. The rate of growth of R&D spending has declined from 6.6% on average over the previous five years to less than 1% over the last 12 months, notably decreasing by 1.2% in the most recent quarter.

Bottom line: Small businesses rely on new technologies to keep operations running smoothly and their business growing, but these new technologies are often costly for small enterprises.

Congress urgently needs to enact legislation addressing three key business tax provisions—restoring the deduction for research and development (R&D) expenses, 100% bonus depreciation, and the earnings before interest, taxes, depreciation, and amortization (EBITDA) standard for deducting business interest expense (collectively, “tax extenders”).

To learn more visit the U.S. Chamber of Commerce.

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