MSCI Asks Congressional Leadership To Reverse R&D Tax Credit Changes

With the National Association of Manufacturers and dozens of other stakeholders, last week MSCI sent a letter to U.S. House and Senate leaders asking them to take immediate action to reverse a tax change that threatens U.S. innovation and jobs.

The letter, available here, opposes a change to the tax code that would make research and development (R&D) more expensive.

Starting this year, businesses must deduct or amortize their R&D expenses over a period of years (as opposed to historically being able to deduct those expenses in the same year in which they were incurred).

Since they drive more innovation than any other sector, manufacturers would be disproportionally impacted by these requirements, which would impose significant new burdens, create taxpayer uncertainty and hurt the ability of manufacturers, particularly small and medium-sized firms, to file a valid R&D tax credit refund claim.

According to one study, requiring the amortization of research expenses will reduce R&D spending and lead to a loss of more than 20,000 U.S. R&D jobs in the first five years with the number of lost jobs rising to nearly 60,000 over the following five years. When accounting for the spillover effect from R&D spending, nearly three times as many jobs would be affected.

The study also found that for every $1 billion in R&D spending, 17,000 jobs are supported in the United States. The letter concluded, “[W]e respectfully urge Congress to act without delay to make sure that the tax code continues to support innovation. Doing so will not only help to ensure that businesses can continue to innovate, grow the economy and create high-paying jobs but that the U.S. continues to be a global leader in innovation.”

In related news: the U.S. Internal Revenue Service recently issued frequently asked questions (FAQs) regarding its new filing requirements relating to refund claims for the R&D tax credit. The FAQs cover issues such as how the IRS will inform a taxpayer of a deficient claim and how a taxpayer can perfect the claim. Read more here.