Top US Business Group Warns of Congress Failure on R&D Tax Perk
(Bloomberg) -- One of Washington’s most prominent business groups sent a warning about an impasse in Congress over a corporate tax break for research and development costs.
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Business Roundtable Chief Executive Officer Joshua Bolten on Wednesday flagged concerns that reviving the deduction for R&D will fall off of Congress’s agenda later this year, despite it having bipartisan support.
“It looks like it risks being gummed up with a lot of other politics,” Bolten, whose group represents CEOs for many of the largest US companies, told reporters Wednesday. “Candidly, those of us who are in the business of following policymaking on behalf of our business members are worried.”
President Joe Biden and his economic team have focused on the importance of bolstering American research and development in the broader competition with China. The recent CHIPS Act offered some support for R&D in that sector, but the corporate R&D writeoff is a broader element of long-standing US tax policy.
The benefit allows corporations to write off all their research costs in the year in which they’re incurred. It expired at the end of 2021, and business groups have unsuccessfully tried to restore it in several pieces of legislation this year, including the Democrats’ Inflation Reduction Act that passed in August.
Stingier Benefit
Without an extension, companies can still deduct research expenses, but have to spread out domestic costs for five years and international ones over 15 years -- making the tax break much less valuable. The writeoff is important to a wide swath of businesses, including Alphabet Inc.’s Google, Pfizer Inc. and Ford Motor Co.
“Without this incentive, R&D becomes more expensive, and so companies have to make choices,” Lynn Good, the CEO of Duke Energy Corp., told reporters. “Over the long term, lack of constructive policy will have an impact.”
Some Democrats have suggested pairing the business tax break with some benefits for families, including an extension of the monthly child tax credit, which also expired at the end of 2021. But some Democrats, including West Virginia Senator Joe Manchin, don’t support the more robust version of the child tax credit.
The legislative outlook for the end of 2022 is still uncertain, and will be strongly colored by which party wins majorities in the House and Senate in the November midterm elections.
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