Last Updated: 3/17/2025

As Congress and the President continued to debate over a large tax reform package, there is one costly issue that has been top-of-mind for millions of businesses around the US.  Companies have been waiting to see if immediate R&D expensing will be restored as part of broader tax reform and, if it is restored, which years it will applied to. There has been some positive momentum in recent weeks towards getting this done with the House, the Senate, and the President all displaying positive signals.

For context, beginning in 2022, all US companies engaged in research and development, or software development were forced to amortize those expenses over five years for tax purposes under what is called Section 174. This eliminated the ability to deduct salaries, contractor costs, supplies and other miscellaneous R&D items. It led to significant increases in taxable income for innovative American businesses and made the US the most tax prohibitive country in the OECD to do R&D in.

There have been a number of actions in DC over the past few weeks that signal this adverse tax treatment may soon be coming to an end. Here is a timeline of events:

Feb 25– House Representatives passes appropriations framework which includes a mandate to the Ways and Means Committee to restore immediate R&D expensing

March 4- President Trumps specifically mentions “restoring 100% expensing” and making it “retroactive” in his speech to a Joint Session of Congress.

March 10- Reps Larson (D-CT) and Estes (R-KS) reintroduce American Innovation and Competitiveness Act to restore immediate R&D expensing. The provisions of this bill had passed the house last February but suffered defeat under a highly political vote in the Senate during election season.

March 14- ATS received an email from the office of Sen Todd Young (R-IN) stating that he and Sen Maggie Hassan (D-NH) plan on introducing the American Innovation and Jobs Act in the Senate. This bill would restore immediate R&D expensing AND increase the amount of payroll tax credits from $250,000 to $500,000.

Both bills aim to make R&D expensing retroactive to 2025 and discuss how the Treasury should allow for companies to handle amortization adjustments for prior years.

ATS Takeaway

Overall, this is very good news. It signals that lawmakers in both chambers understand that this issue specifically needs to be fixed and that businesses cannot wait for the “one big, beautiful bill” that lawmakers and the President are working on (which Speaker Johnson says wont be ready for a vote until early May). Also, both bills have wide bi-partisan support.

However, lawmakers have continually shown that they have a hard time focusing on more than one thing at once. It will be hard for all members to digest and vote on this bill in the midst of the larger bill that is garnering all of the headlines. There is also a cost issue. Lawmakers will see restoring these deductions as additional spending, even though the government doesn’t actually receive any additional from R&D amortization as companies recover these costs over time. Pretending that immediate R&D expensing will result in less Treasury income is a smoke and mirrors accounting trick.

Take Action

The Senate is looking for co-sponsors for this bill. They are attempting to get co-sponsors in Republican and Democrat pairs and need to hear your voice on this issue. For tips on how you can reach out to congress on this issue please contact ATS here and write “Outreach on R&D.”

Conclusion

These actions present a strong signal that the R&D tax regime is about to change for the better. It is important for taxpayers to ensure that they are receiving expert guidance from tax professionals that focus on R&D Tax law to ensure that they maximize tax benefits while maintaining compliance. Contact ATS today for a no cost analysis of your R&D tax picture.