Immediate R&D Tax Expensing For Manufacturers Must Be Restored
Randy Wolken, President & CEO

For more than two years, manufacturers have been unable to deduct their research and development (R&D) expenses immediately. This especially hurts small manufacturers. For over 70 years, the U.S. tax code allowed manufacturers to deduct their R&D expenditures immediately. However, since the expiration of this key provision in 2022, manufacturers have been required to amortize their R&D costs over a period of years. Due to the expiration, manufacturers’ tax bills have increased. This means manufacturers are now less able to conduct groundbreaking research and support well-paying R&D job creation.

Importantly, it creates an uneven playing field for U.S. manufacturers. We are now one of just two developed nations that require the amortization of R&D expenses. This policy makes the U.S. much less competitive against China, which offers companies a 200% “super deduction” for R&D costs. This policy change leaves our country in a vulnerable position. In 2022, the first full year after the expiration of immediate R&D expensing, the European Union’s R&D growth surpassed that of the U.S. for the first time in nearly a decade—and China’s R&D growth was triple that of the U.S.

MACNY has heard from our members. They need a tax code that allows their businesses to be competitive in a global economy. Congress needs to act quickly to ensure that the tax code supports innovation.

The facts are compelling here.  The private sector accounts for more than 75% of total research and development spending. Small businesses alone account for over $90 billion of all private-sector R&D investments. With wages and salaries comprising approximately 75% of R&D spending, the R&D amortization requirement is, first and foremost, a jobs issue, with R&D jobs paying an average wage of more than $155,000. Just as important, for every $1 billion in R&D spending, 17,000 jobs are supported.

MACNY and other manufacturing advocacy organizations, such as the National Association of Manufacturers (NAM), call on Congress to restore immediate R&D expenses and other pro-growth tax provisions. It is crucial that the U.S. tax code support job-creating, life-changing R&D, And Congress must act to support manufacturing innovation and American competitiveness by reinstating immediate R&D expensing.

Please ask your Congressional representatives and candidates to support this vital change to our tax code. During this political season, it is essential that our federal leaders know this change must occur in the next session of Congress.