The change to mandating companies take their deduction over five years was a part of Republicans’ 2017 tax law, but reversing the move has broad bipartisan backing. Senate Finance Chair Ron Wyden, D-Ore., and ranking member Sen. Michael D. Crapo, R-Idaho, had both been pushing to get the provision attached to a broader economic competitiveness package being negotiated between the House and Senate before it stalled and leadership turned to a slimmer chips-focused bill.
Young and Sen. Maggie Hassan, D-N.H., introduced a bill to restore the immediate deduction and expand other R&D incentives, and a House version from Rep. John B. Larson, D-Conn., has more than 100 co-sponsors.
A four-year delay of the switch was included in Democrats’ budget reconciliation package, estimated to deliver roughly $125 billion in tax benefits to businesses through 2025. Over a decade, the government’s cost would drop to $4 billion as companies would lose deductions in future years they’d otherwise claim.
While preserving full, immediate R&D expensing is popular among Democrats, some don’t want to move forward on the issue while party priorities to aid lower- and middle-income families like the child tax credit remain stalled.
If lawmakers don’t tuck it into the chips bill, the R&D delay could also move as part of an end-of-year tax package to extend expired tax provisions and other outstanding tax provisions with enough bipartisan support. Even if there is a one-year retroactive fix for the research deduction, Crapo said, it would still get another renewal as part of a year-end tax bill.