Aerospace Industries Association (AIA) president and CEO Eric Fanning appealed to Senate leaders to act on the Tax Relief for American Families and Workers Act (H.R.7024), which would restore full research and development (R&D) expensing, as well as 100 percent bonus depreciation for business assets such as aircraft.
A compromise agreement between Senate Finance Committee Chair Ron Wyden (D-Oregon) and House Ways and Means Chair Jason Smith (R-Missouri), the bill passed the House in late January but has since stalled in the Senate. Wyden said during a hearing on Tuesday that he and Smith are “gonna pull out all the stops” to push forward on the bill.
Meanwhile, Fanning stressed in a statement this week: “It’s time for the Senate to vote on the Tax Relief for American Families and Workers Act to put American innovation back in first place.”
Of particular concern to AIA is the provision surrounding R&D expensing. AIA has urged Congress to reverse the policy change that went into effect in 2022 that requires companies to amortize the cost of many R&D expenses over five years for domestic activities and 15 years for foreign activities rather than deducting those expenses in the year they occurred.
Mandated under the Tax Cuts and Jobs Act in 2017, the policy change, Fanning said, “is holding us back; we’re now one of only two countries not allowing full deductions for R&D expenses. This hampers our economy and global competitiveness, forcing employers to reduce their workforces and disincentivizing the very innovation that propels us forward.”
He added that nearly every other country, including China, is investing more in R&D. AIA noted that in 2023, the U.S. experienced the slowest annual growth in R&D investment since 2012.
The bill would restore full expensing through 2025 and would be retroactive to when the change occurred. It also would provide an extension for 100 percent depreciation for most qualified business property placed into service before Jan. 1, 2026. However, the provision extends that further, to before Jan. 1, 2027, “for longer-production period property and certain aircraft.” The measure would continue 20 percent bonus depreciation for two more years after that.