PRI’s DC-based advocacy team has announced an important update for businesses that make research and development (R&D) investments.

When the “The Tax Cuts and Jobs Act of 2017” was enacted, it allowed companies to amortize (or write off) certain tax deductions over one year, but the benefit was only temporary. The business community urged Congress to extend the provisions in 2022; however, despite widespread support in Congress, lawmakers did not enact the extensions.

Of particular interest: 

• Until 2021, companies could take a 100% tax deduction for R&D spending in the year it occurred. Starting with the 2022 tax returns, companies have to deduct their R&D expenses over a five-year period.   
• Under the 2017 law, a company could expense 100% of the cost of any Section 179 property (including equipment, vehicles, and software) and deduct it in the year the property was placed in service between September 28, 2017, and December 31, 2022. The law increased the maximum deduction to $1 million and increased the phase-out threshold to $2.5 million, adjusted for inflation. The Section 179 deduction now phases out over the next four years: 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. 
• Unless the law is changed by 2027, the bonus deduction will disappear, and companies will have to return to spreading out the depreciation over many years. 
   

For more information, contact Eric Snyder at erics@sema.org.