{"id":55341,"date":"2021-05-27T09:00:00","date_gmt":"2021-05-27T09:00:00","guid":{"rendered":"https:\/\/one.sightlinemg.com\/defensenews\/uncategorized\/2021\/05\/27\/wrong-policy-wrong-time-dont-hinder-american-innovation\/"},"modified":"2026-08-08T00:04:46","modified_gmt":"2026-08-08T00:04:46","slug":"wrong-policy-wrong-time-dont-hinder-american-innovation","status":"publish","type":"post","link":"https:\/\/one.sightlinemg.com\/defensenews\/commentary\/2021\/05\/27\/wrong-policy-wrong-time-dont-hinder-american-innovation\/","title":{"rendered":"Wrong policy, wrong time: Don\u2019t hinder American innovation"},"content":{"rendered":"\n

In its zeal to pass the Tax Cuts and Jobs Act of 2017, Congress \u2014 seemingly without debate or considering consequences \u2014 included a provision that soon will alter the way innovative American companies account for investments in research and development. It is imperative that Congress modify this provision before it unwittingly damages America\u2019s research enterprise and its engine of growth. <\/p>\n\n\n\n

In the midst of global competition, and at exactly the time we need to encourage and invest in innovation through research and development, we are faced with a pending tax provision that will do the exact opposite. Without corrective action, come Jan. 1, 2022, the Tax Cuts and Jobs Act will make corporate R&D investments more expensive. Instead of accounting for those expenses the year of, the act will require companies to amortize those expenses over five years, meaning they can only make deductions on 20 percent of those expenses per year.<\/p>\n\n\n\n

Requiring companies to capitalize and amortize these expenses amounts to a significant effective tax increase and undermines what has been one of the foundational drivers of American technological progress. These changes are bound to discourage R&D investment in the United States<\/a> and will hurt U.S. innovation, especially notable at a time when our economy is still recovering from the COVID-19 pandemic.<\/p>\n\n\n\n

In 2017, as Congress debated the Tax Cuts and Jobs Act, this received scant attention amid the certainty Congress would revisit, revise or reverse this provision. Instead, it was mostly forgotten and proposed fixes were neglected, even as the implementation date approached. The full execution of the act now looms, and it is already having a negative impact on corporate R&D investment decisions.<\/p>\n\n\n\n

We call on Congress to enact the bipartisan House and Senate legislation (HR 1304 and S 749, respectively) introduced to remove the amortization requirement for R&D expenses. This would align with the push from both the Biden administration and Congress to counter Chinese R&D gains. <\/p>\n\n\n\t