Lawmakers Omit R&D Tax Break From 2023 Spending Bill – By Marcus Weisgerber (Defense One) / Dec 21, 2022
Company execs have credited the multibillion-dollar tax break with spurring innovation.
Congress has failed to pass much-expected legislation that would have allowed companies to write off research-and-development expenses on their annual taxes.
That was the rule from 1954 to 2020, but companies can no longer deduct R&D expenses, a change that cost big defense firms an estimated $5 billion last year. Defense execs asked lawmakers to restore the tax break, but the 2023 omnibus spending bill unveiled on Tuesday contains no such provision.
“American industry has always played a leading role in advancing the technologies needed to maintain our competitive edge, but it’s up to Congress to remove any roadblocks to innovation,” Aerospace Industries Association CEO Eric Fanning said in a statement. “It’s unfortunate that Congress couldn’t come together and pass a commonsense fix to a tax change that limits investment in American manufacturing and innovation, especially at a time when China is doubling down on research and development incentives. If Congress is serious about competing with China, they will put this on the top of their to-do list for 2023.”
The omission caps a mixed year for the defense industry. Companies are still facing supply-chain and inflation challenges. But lawmakers are poised to pass a 2023 spending plan that would bring a 10 percent increase over this year’s record-high budget. Defense firms are also expected to see billions of dollars in contracts to resupply American and ally stockpiles given to Ukraine.
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