SB 419 / Chamber Supports
When Senate Bill 419 is scheduled for action in the House Ways and Means Committee, expect to see fiscal leaders in the House add a concept that the Chamber and key members have been championing.
Beginning in 2022, businesses with investments in research and development (R&D) were required to amortize those expenses over a period of five years. This change was part of the Tax Cuts and Jobs Act of 2017, and this provision has been hotly debated ever since. In fact, an effort in Congress to repeal this provision late last year stalled as members failed to gain consensus on a swath of tax policies that were eligible to be included in the omnibus spending package.
Amortizing R&D expenses over five years in essence requires businesses to overstate their earnings, which increases their federal tax liability. U.S. Senators Todd Young (R-Indiana) and Maggie Hassan (D-New Hampshire) recently re-introduced the American Innovation and Jobs Act. The federal legislation removes this onerous amortization provision from federal law and already boasts a bevy of sponsors from both parties in the U.S. Senate. More on this federal legislation can be found online.
The Chamber is also seeking an amendment to SB 419 that would allow businesses to fully expense any R&D investments in the year they are made on the state tax return. Requiring businesses to amortize their R&D investments will have a chilling effect on further investment in these business activities in our state. Further, the state would receive windfall revenues at a time when the state is awash with excess cash.
