Companies Are Delaying Research And Development Because Of Tax Uncertainty

The Wall Street Journal recently reported that, due to uncertainty surrounding a tax bill that is stalled in the U.S. Senate, some companies have reconsidered how much they will invest in research and development (R&D). Indeed, one manufacturer told The Journal that because of an expired expensing provision, their tax bill will be $25 million higher. “That’s $25 million less that I have to invest back into my business, whether it’s R&D, whether it’s plants and equipment, hiring new people.”

Stories like this one are why the Metals Service Center Institute (MSCI) has urged industrial metals leaders and employees to contact members of the U.S. Senate to ask them to quickly approve legislation that would renew the R&D expensing provision. (Lawmakers in the U.S. House of Representatives already have approved the legislation on a bipartisan basis.) Interested individuals can use the resources at NAM’s Tax Action Center, available at this link, to do so. As a reminder, the tax bill would:

• Restore immediate research and development (R&D) expensing;
• Return to a pro-growth interest deductibility standard; and
• Reinstate full expensing, also known as 100 percent accelerated depreciation, for businesses’ capital investments.

This tax relief is retroactive and stretches back to tax years starting in 2022, meaning many businesses would be able to claw back some taxes levied in prior years if the bill is signed into law.