The American Innovation and R&D Competitiveness Act of 2025 (H.R. 1990), introduced by Representatives Ron Estes (R-KS) and John Larson (D-CT), seeks to restore the immediate deductibility of research and experimental (R&D) expenses. If passed, this legislation would allow businesses to fully deduct R&D expenses in the year they are incurred, reversing the current requirement to amortize these costs over five years.
Background: Historically, Section 174 of the Internal Revenue Code permitted businesses to immediately deduct R&D expenses in the year they were incurred, fostering innovation and economic growth. However, the Tax Cuts and Jobs Act of 2017 changed the deduction and required these expenses to be amortized over five years for domestic research and 15 years for foreign research, effective from 2022. This shift has increased the after-tax cost of R&D, potentially discouraging
investment in innovation.
The American Innovation and R&D Competitiveness Act of 2025 aims to revert to the pre-2017 treatment, allowing for immediate expensing of R&D costs. This change is expected to stimulate investment in research, support job creation, and maintain the United States’ competitive edge in the global market. The bill has garnered bipartisan support and endorsements from various industry groups who recognize the importance of fostering a conducive environment for innovation.
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