Larson: Connecticut Businesses Need R&D Expensing to Invest in Technologies of the Future
East Hartford, CT – Today, Rep. John B. Larson (CT-01) joined local business leaders to announce the introduction of the bipartisan American Innovation and R&D Competitiveness Act.
“Research and development play an integral role in creating good-paying jobs across the country, especially as we rebuild our economy from the impacts of the pandemic,” said Larson. “The 2017 Tax Law’s elimination of immediate R&D expensing has made it more difficult for Connecticut businesses of all sizes to invest in developing the technologies of the future, putting up to 60,000 jobs at risk if Congress fails to act. My bipartisan legislation will fix the R&D tax deduction so American businesses and workers can continue to be the world leader in technology and innovation.”
“Research and development costs have historically been expensed in the year incurred, and small businesses have budgeted for and planned around this,” said Tom Beach, President of Peening Technologies of Connecticut. “Starting in tax year 2022 R&D costs must be capitalized and amortized over five years. What does this mean to us? It means we’ve had to absorb a staggeringly high 2022 tax bill causing a serious negative impact on cash flow. In addition, we’ve had to rethink some growth and hiring plans. It’s especially painful to those of us in aerospace as we are just now emerging from the damage caused by Covid. We at Peening Technologies appreciate and support Congressman Larson’s efforts to address this.”
“Bloomy is a small business with 50 employees - mostly engineers - headquartered in South Windsor. We design and manufacture complex automated test equipment for aerospace, battery energy storage, electronics, and defense purposes. We have over $4 million worth of qualified R&D expenses, primarily consisting of the payroll for our engineers. The new capitalization and amortization requirements have increased our taxes well in excess of $1 million. It is critically important for small, innovative businesses like mine that Congress overturn these provisions by passing the American Innovation and R&D Competitiveness Act,” said Peter Blume, President of Bloomy Controls, Inc.
“Businesses large and small are significantly affected by this new amortization requirement. Wright-Pierce is an employee-owned water, wastewater and civil infrastructure consulting engineering firm of 325 employees with 30 staff located in Middletown, Connecticut,” said Paul Birkel, President and CEO of Wright-Pierce. “At a time when our country needs engineers more than ever to support the reinvestment in our vital public infrastructure, the expense amortization requirement in Section 174 unduly and unfairly triples our tax obligation and threatens the very existence of many firms such as ours. Repeal of this requirement retroactive to tax year 2022 is essential to achieve the goals of the Infrastructure Investment and Jobs Act and to prevent the disruption of critical municipal and governmental engineering services needed to support the economic prosperity of our country.”
Larson’s legislation would incentivize long-term investments in innovation and technological breakthroughs by allowing a business to deduct research and development activities in the tax year that they occur. The American Innovation and R&D Competitiveness Act would reinstate immediate research and development expensing, an option that was eliminated for businesses as a result of the 2017 Tax Law Rep. Larson opposed. Rep. Larson introduced this bipartisan legislation in Congress alongside Reps. Ron Estes (KS-04), Darin LaHood (IL-16), Suzan DelBene (WA-01), Jodey Arrington (TX-19), and Jimmy Panetta (CA-19), among 66 original cosponsors.