The US House of Representatives has passed a $78 billion tax bill that restores the ability for businesses to immediately deduct research and experimentation (R&E) expenses for the current tax year.
Along with eliminating the rule that required domestic R&E expenses to be deducted over five years, businesses will also be able to immediately deduct 100 percent of their investments in machinery and equipment.
The bill also allows businesses to deduct interest expenses—especially helpful for those who had to borrow at high rates to pay employees and fuel their growth.
On the international front, the legislation removes double taxation for companies operating in both Taiwan and the US, aiming to strengthen competitiveness with China.
If this landmark bill clears its final hurdle and wins Senate approval, all these measures would apply through 2025—rolling back some of the most talked-about (and dreaded) provisions of the 2017 Tax Cuts and Jobs Act that were set to take effect for the 2023 tax year.
According to the House Ways and Means Committee, the package secures $600 billion in tax incentives designed to:
- Drive over $70 billion in new US R&D investment
- Support 2 million direct R&D jobs and ultimately help sustain more than 21 million jobs overall, with a focus on manufacturing
- Put $58 billion more in American workers’ pockets
- Boost investment by $400 billion.
Bipartisan support in the House; eyes on the Senate
The bill passed with a 357 to 70 vote, marking the House’s first major bipartisan bill to pass this year—even though 47 Republicans and 23 Democrats voted against it.
The legislation would be funded by scaling back the employee retention tax credit (ERC)—a pandemic-era measure meant to keep workers on payroll, but one that’s been plagued by fraudulent claims.
Although the bill had broad support in the House, the heated election season means some Senators are threatening to slow things down to avoid giving Democrats—especially the Biden Administration—a perceived victory.
Still, many lawmakers remain hopeful that this crucial legislation will pass in time to help innovative US businesses continue to grow and succeed.
“Most of the country is really eager for us to work together in a bipartisan way,” said Representative Greg Murphy, Republican of North Carolina, in an interview with the New York Times. “We’ve seen a lot of gridlock because some people just want to say no to everything. I think it’s time to move forward and show people we can actually govern.”
Racing Against Tax Day
Even with strong backing from both the private and public sectors, there’s no guarantee these changes will be approved in time to affect this year’s tax filings—especially since the IRS already started accepting federal returns on January 29.
The silver lining? With more businesses now facing taxable income—sometimes at higher rates or for the first time—Section 41 R&D tax credits are more valuable than ever for offsetting what you owe.
At Boast, we work with hundreds of companies across North America to help them optimize their R&D and maximize access to the non-dilutive government funding they deserve.
Our AI-powered platform connects your financial and payroll data with the project tracking tools your product teams use every day. This gives you a real-time, automated way to identify and quantify all eligible R&D activities and expenses—taking the guesswork out of your claims.
Check out our Guide to R&E Amortization and Capitalization for a quick overview of how current Section 174 rules are creating challenges for startups across the US.
Then, connect with a Boast expert today to see how we can help you unlock funding and extend your R&D runway.
