Repeal of R&D Amortization

The America Innovation and R&D Competitiveness Act of 2023 or HB 2673 was reintroduced that would repeal current rules and allow a business to deduct of R&D costs in the tax year that they occur and thereby incentivize long-term investments in innovation. Such repeal has been a top policy priority for MichBio and the bio-industry generally as it would aid many early-stage companies who have suffered greatly by not being able to immediate qualified tax relief for their businesses. HB 2673 has broad support from the Michigan Congressional delegation with Reps. Huizenga, Moolenaar, Kildee, Scholten, Slotkin, and Stevens, having signed as co-sponsors.

Regrettably, like many things in D.C., it often unfortunately takes feeling the full force of the negative impacts before Congress can achieve enough political momentum to address a problem. To this end, businesses of all sizes, and MichBio included, continued a massive lobbying campaign to achieve a fix in a year-end package in the waning days of 2023. We were able to point to the tangible and damaging impacts of the amortization requirements across the spectrum of Fortune 500 companies to small businesses.

There continues to be no real “opposition” within Congress to returning to immediate deductibility of R&D expenses, but was caught up in quagmire of political divisions, tax revenue impact, and party dynamics at play: 1) Congress is facing even more difficulty than normal finding compromise within their own parties, let alone across the aisle; 2)  Reversing the TCJA R&D amortization rule will result in a high cost to government tax revenue; and 3) Democrats view this as being the Republicans’ fault (because the 2017 Tax Cut & Jobs Act was a partisan law with little Democratic input) and therefore believe the Republicans should support another Democratic tax priority in return for helping to fix the R&D problem.

Repeal of the R&D amortization regulation will be top priority for MichBio in 2024. Since we are headed into an election year, there will be added pressure to get these bills done sooner rather than later to avoid being caught up in the 2024 presidential election. But it’s anyone’s guess given the dynamics at play, as noted above.

Leave a Comment