Beginning in 2022, major changes made to section 174 of the Internal Revenue Code by the 2017 Tax Cuts and Jobs Act went into effect that will require businesses to amortize R&D expenses over a five-year period. Previously, these expenses were allowed to be deducted in the year they were incurred. The effect of this change is that beginning in 2022, the cost of performing R&D will be much higher, and will result in a larger tax burden for many high-tech companies. This will have a chilling effect on American R&D in general, but it will particularly harm R&D-focused small businesses like those participating in the SBIR and STTR programs. The move to five-year amortization will further push these companies into negative territory in the near-term, limiting their ability to attract investment and obtain loans.
SBTC has drafted a letter to Congress and other government officials outlining our concerns and urging them to quickly make changes to Sec. 174 to restore the immediate deduction on R&D work. After going out to SBIR firms across the country, over 450 small businesses and organizations from 44 states and territories have added their name to the list of signees. Click on the link below to view the letter and signatures:
We have also set up an personalizable Action Alert email to Congress that you can modify and send to your Representatives and Senators sharing your concerns about the Section 174 and urging them to take action. Follow the link below to fill out the form and customize the email to send to your members of Congress: