PSC Urges Congress to Pass Bipartisan Efforts on Treatment of R&D Expenses

Arlington, Va. (January 31, 2024) Earlier this month, PSC joined more than 250 other entities in urging Congress to pass immediately the bipartisan Tax Relief for American Families and Workers Act of 2024 (H.R.7024). The House of Representatives may soon vote on this bill, which if enacted, would restore companies’ ability to deduct fully their research and development (R&D) expenses in the same year in which they were incurred.

“Restoring this tax policy is particularly important for federal agencies. Government contractors conduct research based on their existing knowledge of missions and functions and, through such informed R&D efforts, can generate and offer improvements for their agency customers.  This is the best and fastest way for federal agencies like the Defense and Veterans Affairs Departments to incorporate innovation into their work, which in turn supports national security and government operations across the board,” said PSC’s President and CEO David J. Berteau.  “Moreover, this bill helps to create and sustain well-paying, skilled jobs and incentivizes private sector innovations that benefit the entire U.S. economy.”

The bill would reverse provisions of the Tax Cuts and Jobs Act of 2017 (TCJA; P.Law 115-97) that took effect on January 1, 2022, requiring companies to amortize R&D expenses over five years.  That 2017 law had fundamentally changed a 1950’s pro-investment policy that allowed same-year deductions of R&D expenses.  Studies estimated that changed policy would in time cut U.S. R&D spending by $10 billion a year or more.

Berteau compared that five-year amortization requirement to the People’s Republic of China, which has a “super deduction” that allows firms to deduct immediately twice the amount of eligible R&D spending.   

“To retain the global lead in critical industries and to support research benefitting every federal agency, I strongly urge Congress to pass the Tax Relief for American Families and Workers Act and the President to sign it into law,” Berteau concluded.

###