Senate Releases Latest Version of the Reconciliation

The Senate Finance Committee has released its latest update of the massive reconciliation package known as the One Big Beautiful Bill (OBBA). The latest version completely repeals the requirement that businesses amortize domestic R&D expenses. However, it goes a step further to apply this repeal retroactively to 2022, 2023, and 2024 for businesses with less than $30 million in revenues.

This is a huge win for small businesses and US innovation in general. As background, in 2022 a law went into effect that required any company engaged in R&D to amortize associated costs. Losing the ability to immediately deduct these R&D costs led to a substantial increase in taxes due to the “phantom income” that forced amortization created. For three years now, Congress has been working to repeal this harmful provision but has failed in its efforts.

The version of the OBBA that came out of the House called for restoring immediate R&D expensing for tax years 2025-2029. The Senate version of the Bill goes much further, aligning with a bill titled American Innovation and Jobs Act that was introduced in the Senate back in early May. That Bill calls for permanent repeal and retroactive allowance of immediate R&D expensing.

ATS Takeaway

Obviously, if the provisions in the Senate Bill are adopted, it would be a huge win for businesses that have withstood 3 years of increased taxes. However, the Bill still has a long row to hoe before passing. Other provisions of the Senate Bill give it a hefty price tag and there is plenty that Republican moderates and hardliners will have to fight about. With that said, placing retroactive R&D expensing for small businesses on the table is a huge signal. It may be hard for representatives of either ilk to vote against helping small businesses.

On timing. The Senate has stated that it wants to vote on this Bill before the July 4th recess. As of today (06/25) news sources report a vote aimed for the end of the week. However, there are still many hold outs. No one should be surprised if negotiation on this continues into August.

ATS will be watching closely as we have for years. If you have any questions on how this new change could impact your taxes please contact us today.