SIGN-ON LETTER: Protect Manufacturing Research and Development  

Join manufacturers in mobilizing to urge Congress to protect manufacturers’ ability to continue to immediately deduct research and development expenses.  

Starting this year, businesses must amortize or deduct their R&D expenses over a period of years. This change will negatively impact manufacturers’ ability to create jobs and innovate. As such, we urge Congress to immediately act to ensure the tax code continues to support innovation by immediately reversing the amortization provision. Doing so will help to ensure that businesses can continue to innovate, grow the economy and create high-paying jobs. 

Interested industry associations, state and local chambers and allied organizations are eligible to sign onto this letter by Monday, February 28th, 2022. You will receive a copy of the final letter when it is distributed. 

Please contact David Eiselsberg, Senior Director for Tax Policy at the NAM, with any questions. 

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SIGN-ON LETTER: Protect Manufacturing Research and Development  

	Feb. XX, 2022
The Honorable Nancy Pelosi  Speaker  U.S. House of Representatives Washington, DC 20515	The Honorable Chuck Schumer  Majority Leader  U.S. Senate  Washington, DC  20510
The Honorable Kevin McCarthy  Minority Leader  U.S. House of Representatives  Washington, DC 20515	The Honorable Mitch McConnell  Minority Leader  U.S. Senate Washington, DC 20510

Dear Speaker Pelosi, Minority Leader McCarthy, Majority Leader Schumer and Minority Leader

McConnell:

We, the undersigned trade associations, representing thousands of businesses across the nation that collectively employ millions of Americans, write to urge Congress to take immediate action to reverse a tax change that threatens innovation and jobs in America.

Since 1954, the U.S. tax code has recognized the important role of investments in research and development in creating well-paying U.S. jobs and spurring innovation by allowing businesses to fully deduct their R&D expenses in the same year they are incurred. Yet starting this year, businesses will have to amortize or deduct these expenses over a period of years, making R&D more costly to conduct in the U.S. This change threatens not only the nearly $500 billion in private-sector R&D spending (of which manufacturers are the largest investors in R&D), but also the jobs directly and indirectly supported by such spending. 

According to a major study, requiring the amortization of research expenses will reduce R&D spending and lead to a loss of more than 20,000 U.S. R&D jobs in the first five years with the number of lost jobs rising to nearly 60,000 over the following five years. Moreover, when accounting for the spillover effect from R&D spending, nearly three times as many jobs would be affected.  This same study also found that for every $1 billion in R&D spending, 17,000 jobs are supported in the U.S.

The change in the tax treatment of R&D expenses comes at a time of increasingly fierce global competition for research dollars. The U.S. now has the dubious distinction of being just one of two developed countries with an amortization requirement (the other being Belgium). Meanwhile, China—which has made no secret of its plan to become the world leader in advanced manufacturing—has increased its super deduction for R&D expenses to an extra 100% of eligible R&D expenses in addition to actual R&D expenses incurred. That means a company performing $100 of R&D in the United States would deduct only $10 in 2022, while a company in China would deduct $200, or 20 times as much. This change is occurring when the U.S. already ranks 27 out of 37 for R&D tax incentives among the advanced economies comprising the OECD.

In addition to the negative impact on innovation, jobs and U.S. competitiveness, the amortization requirement also poses a threat to our national security. Recently, the National Science and Technology Council noted that R&D investments “are essential to ensure that the United States remains able to secure and protect the American people in the face” of other countries increasing support for R&D. 

While strongly supported bipartisan legislation has been introduced in the House and Senate to permanently repeal the amortization provision, the fact that the provision has now gone into effect will have dire consequences on future R&D spending and jobs if Congress does not act to immediately reverse this harmful change.  As such, we respectfully urge Congress to act without delay to make sure that the tax code continues to support innovation. Doing so will not only help to ensure that businesses can continue to innovate, grow the economy and create high-paying jobs but that the U.S. continues to be a global leader in innovation.

Signed,

cc:    The Honorable Ron Wyden

    The Honorable Mike Crapo

    The Honorable Richard Neal

    The Honorable Kevin Brady