Listen in on a Fireside Chat with Aldrich Partner, Alex Bray, as he discusses how recent changes to IRC Section 174 have made research and development (R&D) investments more costly for businesses and what you can do to advocate for the return of R&D deductions.Â
For over 40 years, the R&D credit, governed by IRC 41, has been one of the best vehicles for incentivizing and encouraging domestic innovation. In addition to the R&D credit, for over 70 years, IRC Section 174 has been a boon to businesses investing in R&D by allowing them to choose whether to deduct eligible expenses or amortize them. The tax credit and deductions for research expenditures have helped fuel R&D leading to innovative solutions that serve our companies and communities and fire the economic engine that drives the US economy.Â
Research and Development Deductions Disappear
In 2017, Congress passed the Tax Cut and Jobs Act (TCJA), changing how IRC Section 174 expenses are treated for tax purposes. The changes to Section 174 meant that firms investing in R&D lost the option to deduct their R&D expenses and were left with amortizing domestic costs over five years (15 years for international costs). The Act hit manufacturing, engineering, and construction industries particularly hard by making R&D more challenging, expensive, and less cost-effective.
Don’t Let Bad Tax Law Impact Your Business
We all know that innovation is key to progress and beneficial change for businesses and the communities in which they thrive. Fortunately, the benefits of the R&D credit remain permanent and intact. Because many of the provisions in the TCJA are set to expire at the end of 2025 (though not IRC 174), the opportunity for the next Congress to fix the IRC 174 issue remains high. Â
This year, we have an opportunity for elected officials to hear our voices. Lawmakers need to hear from you to understand how Section 174 has strained or stalled your company’s dedication to innovation. Contact your legislators and make your voice heard.Â
Learn More
Connect with Aldrich Partner, Alex Bray to learn more about Section 174 and how your company can take action to reinstate the option to deduct R&D expenses.Â
