Tax

To restore a U.S. tax landscape that promotes manufacturing competitiveness, Congress should act quickly in advancing bicameral, bipartisan legislation that would ensure the tax code once again supports innovation.

That was the message from the NAM and several manufacturers to lawmakers last week.

What’s going on: The NAM and company leadership from manufacturers Westminster Tool and Brewer Science visited Capitol Hill last week to brief legislators on a harmful change to the tax treatment of research and development.

• The briefing was held by the NAM-led R&D Coalition in cooperation with the offices of Reps. John Larson (D-CT) and Ron Estes (R-KS) and Sens. Maggie Hassan (D-NH) and Todd Young (R-IN).
• Larson and Estes introduced the American Innovation and R&D Competitiveness Act in the House, while Sens. Hassan and Young introduced the American Innovation and Jobs Act in the Senate. These are the measures manufacturers are urging legislators to pass.

Why it matters: “We paid $26,679 per full-time employee in additional federal tax this past year” because of the change, Westminster Tool Chief Financial Officer Colby Coombs told lawmakers at the briefing.

• “This increased federal tax on R&D forced us to cancel a major aviation contract that would have added … new jobs in our community and forgo a significant capital investment. Without fixing this issue, in 2023, we expect an additional tax bill of almost $18,000 per employee,” he continued.
• Added Brewer Science Government Programs Director Doyle Edwards: “We have lost IP to China in the past, and fight[ing] that in the courts is a no-win situation. So the only way to win is to out-invent them. And that’s what we invest our money to do. However, with [the tax change] … we’re allowing China to actually catch up.”

The background: For nearly seven decades, manufacturers could deduct their R&D expenses fully in the year in which the costs were incurred. However, since the change last year, businesses must instead deduct these expenses over a period of years, making R&D more costly. 

Legislative fix: To protect manufacturers’ R&D, jobs and competitiveness, Congress should move immediately on bipartisan legislation to restore R&D expensing.

• “R&D is the lifeblood of advanced technology development for our company, for our industry, but really for the nation,” Edwards continued. “And so our message is, we need your help. We need your leadership to resolve this policy issue.”

Take action: Learn more about what the NAM is doing to advocate for sound tax policy at our R&D action center.