Source: United States Senator for Indiana Todd Young
April 17, 2023
Bipartisan Bill Would Incentivize Research and Development for Innovative Businesses and Startups
WASHINGTON, D.C. — Job creators and industry trade associations in Indiana and across the country are voicing support for S. 866, the American Innovation and Jobs Act.
The bipartisan legislation, introduced by U.S. Senators Todd Young (R-Ind.) and Maggie Hassan (D-N.H.) last month, would support research and development (R&D) investments by innovative companies across Indiana and the United States.
R&D tax incentives help job creators to invest in developing new, innovative products that lead to additional jobs and a stronger economy. Unfortunately, at the end of 2021, an R&D provision from the 2017 tax law expired and businesses can no longer deduct R&D expenses in the year in which they are incurred. The American Innovation and Jobs Act would ensure businesses can once again utilize this important economic growth tool, which also expands eligibility for the refundable R&D tax credit so that more startups and new businesses can use it.
Many job creators and industry trade associations have voiced support for the bill.
Here’s what they are saying about the American Innovation and Jobs Act:
Stephen L. Ferguson, Chairman of the Board of Cook Group Incorporated, said,“Cook supports the ‘American Innovation and Jobs Act’ as introduced by Senators Young and Hassan. As written, the legislation would restore immediate deductions for research and development (R&D) investments and expand the refundable R&D tax credit for startups by raising the existing credit cap. Based on an OECD analysis, the U.S. ranks twenty-eighth among OECD nations in tax incentive support for R&D trailing such countries as the UK and Italy. The U.S. ranking likely decreases further if companies are required to capitalize and amortize R&D expenses. Importantly, manufacturing and jobs often follow such research and development.”
Dave Anderson, Executive Vice President and Chief Financial Officer of Corteva Agriscience, wrote in a letter of support, “Innovation is one of the greatest strengths for American farmers and a significant contributor to job and economic growth, competitiveness, sustainability goals, and national security. On a level playing field, the United States can compete for R&D investment with any country worldwide. Unfortunately, the current playing field is tilted against the U.S., and every day this policy continues to be in place, it makes it harder for the U.S. to remain a global leader in innovation. Reversing the amortization‐driven tax hike that businesses performing R&D, like Corteva, have already incurred simply for pursuing innovation critical to the future success of our economy is vital.”
Christopher Cerone, Vice President of Public Affairs and Communications for Novelis, said, “Atlanta-based Novelis, with operations in Terre Haute, Indiana, applauds the reintroduction of the bipartisan American Innovation and Jobs Act, led by U.S. Senators Todd Young and Maggie Hassan. This bill will fuel innovation in the U.S., enhance the global competitiveness of U.S. firms, and allow Novelis to expand its U.S. capacity to meet the growing needs of customers for low-carbon, sustainable aluminum foils, sheets and plates.”
Michael Wall, Vice President at Zimmer Biomet Holdings, said, “The American Innovation and Jobs Act, if enacted, will enhance the R&D ecosystem in which we operate. It will help ensure the vibrancy of research partners and availability of talented U.S. engineers, scientists and medical researchers who engage in research and development for future innovation. The medical device industry has confronted tax headwinds in the past. By increasing the deductibility of R&D, this bill will support more R&D activities in this country, including Warsaw, Indiana where we conduct the overwhelming majority of our R&D as a company.”
Eric Fanning, President and Chief Executive Officer of the Aerospace Industries Association, wrote in a letter of support, “American research and development will create the next generation of technologies that keep our troops and everyday Americans safe — as long as our tax code incentivizes, not punishes, it. Sen. Young’s bill with Sen. Hassan, the American Innovation and Jobs Act, restores critical R&D tax policies that foster U.S. innovation and protect our competitive edge.”
Chris Jahn, President and Chief Executive Officer of the American Chemistry Council, said, “The corporate tax system should recognize and reflect the important role of American manufacturing and the jobs it creates. Manufacturing relies on research, and therefore, incentives for research and development expenses should be supported. Restoring the ability to deduct research and development is a key component to supporting American manufacturing and is a top priority for ACC members across the United States. For these reasons, ACC supports S. 866.”
Steve Pociask, President and Chief Executive Officer of the American Consumer Institute, said, “Restoring full expensing for R&D investment will unleash a wave of technological innovation that enables businesses to make much-needed price reductions and bring exciting new offerings to market. Consumers can expect to benefit from this encouragement to invest in making everyday luxuries available and affordable.”
Kip Eideberg, Senior Vice President of Government and Industry Relations at the Association of Equipment Manufacturers, said, “The American Innovation and Jobs Act is a ‘shot in the arm’ for equipment manufacturers at a time when they face significant headwinds from adverse effects of inflation and persistent supply chains disruptions. Restoring immediate deductions for investments in research and development will promote domestic innovation, accelerate growth, and strengthen our industry’s global competitiveness. Equipment manufacturers are grateful to Senators Hassan and Young for introducing this critical bipartisan legislation that will ensure that the United States continues to outcompete and out-innovate the rest of the world.”
Rachel King, President and Chief Executive Officer of the Biotechnology Innovation Organization (BIO), said, “We mustn’t allow today’s tax policy to put tomorrow’s biotech breakthroughs at risk. BIO urges Congress to pass the American Innovation & Jobs Act to remove a tax on innovation and accelerate the development of cures and solutions that people need.”
Nancy McLernon, President and Chief Executive Officer of the Global Business Alliance, said, “International companies operating in the United States spend over $71 billion on U.S. R&D activities and support 245,300 American R&D jobs. We thank Senators Hassan and Young for reintroducing the bipartisan American Innovation and Jobs Act to allow businesses to fully deduct R&D expenses and incentivize future long-term R&D investment in America.”
Jason Oxman, President and Chief Executive Officer of the Information Technology Industry Council, wrote in a statement of support, “Investments in U.S. research and development drive future innovation and economic growth that benefits consumers, creates new jobs, and advances U.S. competitiveness globally. ITI appreciates the leadership of Senators Hassan, Young and the bill’s co-sponsors for introducing the American Innovation and Jobs Act and encouraging investments in cutting-edge technology. Congress should advance this legislation to create the right business environment to encourage the world’s leading companies to invest, create jobs, and grow the economy in the U.S.”
Roberta Dressen, President and Chief Executive Officer of Medical Alley, said, “The American Innovation and Jobs Act is critical to ensure American companies can continue to invest in research and development – particularly in the healthcare industry. This bipartisan legislation recognizes the vital role these companies play in creating jobs in the United States, strengthening the economy, and advancing the next generation of medical breakthroughs and technologies.”
Ann Wilson, Senior Vice President of MEMA, The Vehicle Suppliers Association said, “Members of MEMA, The Vehicle Suppliers Association, strongly support legislation introduced by Senator Todd Young (R-IN) and Senator Maggie Hassan (D-NH) that restores full first-year deductibility of R&D expenses. Passage of this bipartisan American Innovation and Jobs Act by Congress in 2023 will enhance competitiveness and job creation in the U.S. motor vehicle supplier sector. MEMA members are grateful for the leadership of Senator Young on the R&D issue.”
Chris Netram, Managing Vice President of Tax and Domestic Economic Policy at the National Association of Manufacturers, wrote in a statement of support,“Manufacturers applaud the introduction of the American Innovation and Jobs Act, which will help the U.S. out-compete China. Across the country, manufacturers are hiring workers, investing in communities and creating the products, materials and processes that drive us forward. Congress should approve the American Innovation and Jobs Act quickly to support critical research that allows manufacturers to improve lives in America and for people around the world.”
Andrew Lautz, Director of Federal Tax Policy at the National Taxpayers Union, said, “Allowing American businesses to fully recover the costs of their research and development (R&D) investments is one of the most important, bipartisan actions Congress can take this year to fuel the economic growth and innovation that will benefit workers, consumers, and middle-class investors. NTU applauds Senators Young and Hassan for their ongoing leadership in the effort to restore full expensing for R&D.”
Bobby Franklin, President and Chief Executive Officer of the National Venture Capital Association, said, “As the need for domestic investment in critical technologies to address societal challenges such as national security and energy continues to increase, policies that support startup investment into R&D are more imperative than ever. We are excited that the American Innovation and Jobs Act’s proposed fix to the R&D amortization challenge and the expansion of the ability for startups to monetize their R&D tax credits will accelerate the pace of innovation in the United States and support our leadership position in a range of critical technology areas.”
Sharon Heck, Chief Tax Officer at Intel and Chair of the R&D Coalition, wrote in a statement of support, “Capitalizing R&D is a jobs issue as wages and salaries comprise approximately 75% of R&D spending. R&D investment in the U.S. is critical to our economy and innovation. For nearly 70 years, the tax code has supported innovation by allowing U.S. companies to deduct their R&D expenses in the year incurred. We are encouraged by the bipartisan efforts driven by Senators Hassan and Young for introducing legislation that would restore this critical ability to invest and innovate in the U.S.”
Joe Stockunas, President of SEMI America, said, “This legislation is a key step forward for federal policy supporting robust R&D in an industry that enables countless technologies, drives innovation in sectors throughout our economy, and powers the electronic systems essential to critical infrastructure and defense. Additionally, the bill will make the intricate, globally interwoven supply chain that supports the production of semiconductors more resilient. SEMI applauds the leadership of this bipartisan group of Senators who are working together to build a stronger semiconductor ecosystem, and we look forward to working towards the bill’s swift passage.”
John Neuffer, President and Chief Executive Officer of the Semiconductor Industry Association, said, “R&D propels breakthroughs in the semiconductor industry and the countless chip-enabled technologies of today and tomorrow. The American Innovation and Jobs Act will promote innovation, drive economic growth, and strengthen America’s high-tech workforce for years to come.”
Kim Kerrigan, President and Chief Executive Officer of the Small Business and Entrepreneurship Council, said, “Now, more than ever, policies must fully support America’s innovative spirit. Full expensing for R&D investments is an important tool for leveraging and scaling the small business innovators and entrepreneurial firms that drive innovations and make the U.S. economy more vibrant and resilient. SBE Council strongly supports S.866, as its passage is vital to America’s economic, competitive and national security interests.”
Garrett Watson, Senior Policy Analyst and Modeling Manager at the Tax Foundation, said, “Restoring businesses’ ability to fully and immediately deduct R&D expenses the year they are incurred is a big step forward to ensure the federal tax code does not penalize innovative activity in the U.S. and maintains U.S international competitiveness. This is a common sense move to also ensure our broader set of R&D incentives are not needlessly blunted by an amortization penalty in the tax code.”
David Williams, President of the Taxpayers Protection Alliance, said, “TPA is proud to support the American Innovation and Jobs Act, introduced by Senators Todd Young (R-Ind.) and Maggie Hassan (D-N.H.). Taxpayers and consumers have overwhelmingly benefitted by research and development (R&D) investments made by American companies. Allowing corporations to fully expense R&D investments promotes a business-friendly tax environment, increases wages, stimulates GDP and GNP growth, and reverses the bad practice of amortization.”
Neil Bradley, Executive Vice President and Chief Policy Officer at the U.S. Chamber of Commerce, said, “The U.S. Chamber of Commerce strongly supports the reintroduction of the bipartisan American Innovation and Jobs Act, which would restore the ability of businesses to fully deduct their research and development (R&D) investments each year. Failure to act now to restore immediate R&D expensing will increase the cost of innovation in the United States and slow economic growth for companies of all sizes.”
Craig Riebe, Chief Executive Officer of ABGI, wrote in a letter of support, “On behalf of the thousands of American innovation workers ABGI supports, I commend Senators Young and Hassan for their efforts to repeal IRC Section 174 amortization. Small and mid-size businesses must be incentivized, not penalized, to invest in R&D. This legislation is critical to saving jobs and protecting America as the world leader in innovation. I urge Congress to act fast on this bill bringing much needed relief to American workers.”
Andrew Parrish, Vice President of Alternate Tax Solutions LLC in North Smithfield, R.I., said, “As a tax consultant I am seeing the impact of Section 174 forced R&D amortization on small businesses across the country who do not have the money to pay for this massive tax increase. It’s painful every time I have to tell a business owner that they are going to need to drain their bank accounts to pay these taxes, the same business owners who barely survived COVID, are getting crushed by rampant inflation, and are under constant threats from international competitors. Passing the American Innovation and Jobs Act will allow these business owners to feel that the government actually encourages their innovation. Right now, they feel like they are being penalized for it.”
Dave Tourje, President of Alpha Structural Engineering in Sunland, Calif., said, “I have invested heavily in processes and expertise needed to solve Los Angeles’s deteriorating infrastructure and earthquake life-safety problems. Because of my investment in R&D no other structural firm in Los Angeles can do what I do; now I’m being told I need to pay more taxes because I can’t deduct R&D costs. It is good to know that someone in Congress is acting to fix this. We appreciate Senators Young and Hassan for picking this effort back up.”
Lily Sarikas, President of Conveyor and Automation Technologies Inc. in Sparks Glencoe, Md., said, “The American Innovation and Jobs Act is desperately needed for small businesses like mine. The taxes I will have to pay because of R&D amortization law will definitely halt any capital expenditures and hiring I had planned for 2023. We will also have to increase our pricing to build automated robotic systems here in Maryland which will make us less competitive than our foreign competitors. We appreciate Senators Young and Hassan for working to end forced R&D amortization.”
Josh Reeves, Chief Executive Officer of Gusto, said, “Gusto, on behalf of its thousands of small business customers in Indiana and over 300,000 nationwide, including companies that utilize our R&D tax services, stands in full support of S. 866, the American Innovation and Jobs Act. Since the start of tax season we have heard from small businesses about the strain on cash flow caused by their inability to immediately deduct R&D expenses. We applaud Senators Young and Hassan for championing R&D investments by small innovative companies and call on Congress to promptly pass S. 866.”
Matt Talcoff, Washington National Tax Partner in Charge at RSM US LLP, wrotein a letter of support, “There is not a day that goes by that we are not asked, ‘When will Congress fix the research and development expensing provision under section 174?’ As the nation’s leading provider of assurance, tax and consulting services focused on the middle market, we’re seeing firsthand the negative impacts and the restraining effects on crucial R&D spending that the new section 174 requirements are having on businesses of all sizes. A return to immediate expensing appears to be a common-sense, noncontroversial provision that Congress should act as fast as possible to restore.”
William Housh, President of Same Day Supply Inc. in Lebanon, Ohio, said, “I commend Senators Hassan and Young for their efforts to protect US innovation by restoring R&D expensing. My company has sunk millions of dollars of investment into software that attempts to bring brand new ecommerce capabilities to the world of contracting. I am told I will have to pay over $400k in additional taxes because I can no longer immediately expense these costs, which will eliminate my incentive to keep my software development team employed never mind expand it.”
Josh Raffel, Head of External Affairs for Standard Industries, said, “As the largest producer of both traditional and now solar roofing materials in the US, we rely on R&D to innovate our product line. After several years and millions of dollars in research, in 2021 we brought to market the first commercially-available solar shingle that can be installed by a traditional roofer. The ability to expense R&D is a critical benefit that enhances our capacity to finance new and innovative products that will usher in a more sustainable housing and building industry.”
Samantha Wellington, Executive Vice President of Business Affair, Chief Legal Officer and Secretary of TriNet Group, said, “TriNet, a leading provider of comprehensive human capital management solutions for small and medium-size businesses (SMBs) nationally, supports legislative efforts to bring back the ability for SMBs to immediately deduct R&D expenses and expand the R&D credit. The American Innovation and Jobs Act is critical to U.S. economic growth, innovation, and competitiveness for SMBs and the customers we serve.”
David Schwarzbach, Chief Financial Officer of Yelp, said, “As a U.S.-based company with employees in all 50 states, Yelp strongly supports Senator Young’s and Senator Hassan’s bipartisan effort to keep U.S businesses on the cutting edge of innovation and progress. This legislation would immediately restore America’s ability to compete against foreign-subsidized companies by rolling back harmful policies that disincentivize investments in research and development. We urge Congress to address this bipartisan issue in 2023.”
Background:
Currently, businesses and startups investing in R&D can claim tax incentives that help them to invest in developing new, innovative products that lead to additional jobs and a stronger economy. The American Innovation and Jobs Act builds on this by expanding the refundable R&D tax credit and ensuring that businesses can once again fully deduct R&D expenses each year.
The American Innovation and Jobs Act supports innovative businesses and helps create jobs by:
- Restoring incentives for long-term R&D investment by ensuring that companies can fully deduct R&D expenses each year
- Raising the cap over time for the refundable R&D tax credit for small businesses and startups
- Expanding eligibility for the refundable R&D tax credit so that more startups and new businesses can use it
Full bill text is available here.
In addition to Young and Hassan, Senators Catherine Cortez Masto (D-Nev.), John Barrasso (R-Wyo.), Kyrsten Sinema (I-Ariz.), Thomas Tillis (R-N.C.), Dianne Feinstein (D-Calif.), Steve Daines (R-Mont.), Mark Kelly (D-Ariz.), Bill Hagerty (R-Tenn.), Patty Murray (D-Wash.), Jerry Moran (R-Kan.), Gary Peters (D-Mich.), Roger Wicker (R-Miss.), Alex Padilla (D-Calif.), Shelley Moore Capito (R-W. Va.), Amy Klobuchar (D-Min.), Deb Fischer (R-Neb.), Angus King (I-Maine), Roger Marshall (R-Kan.), Christopher Coons (D-Conn.), and Tommy Tuberville (R-Ala.) are cosponsors of the legislation.