Why The Metals Industry Needs Immediate Research And Development Expensing

For more than two years, U.S. businesses have not been able to immediately deduct their research and development (R&D) expenses — and, according to the National Association of Manufacturers (NAM), it taken a toll, particularly on small businesses.

As a reminder, for more than 70 years, the U.S. tax code allowed companies to immediately deduct their R&D expenditures. Since the expiration of a key provision in 2022, however, businesses have been required to amortize their R&D costs over a period of years. As a direct result of the expiration, industrial metals companies’ tax bills have increased, according to a new NAM fact sheet.

Higher tax levies mean metals firms are:

• Now less able to conduct groundbreaking research and support well-paying jobs;
• Less competitive globally since the United States is now one of just two developed nations that requires the amortization of R&D expenses; and
• At a distinct disadvantage against Chinese companies because the Chinese government offers companies a 200 percent “super deduction” for R&D costs.

According to NAM, in 2022, the first full year after immediate R&D expensing expired, the European Union’s R&D growth surpassed that of the United States for the first time in nearly a decade. China’s R&D growth was triple the U.S. growth rate that year.

The Metals Service Center Institute joins NAM in calling on U.S. lawmakers to restore immediate R&D expensing, along with enacting other pro-growth tax provisions. Congress must act to in order to bolster industrial metals innovation and U.S. competitiveness by reinstating immediate R&D expensing.