Biden will craft R&D tax incentives with congressional input

By Doug Connolly, MNE Tax

Strengthening tax incentives for research and development (R&D) is a high priority for President Biden, and his Administration is interested in working with Congress to determine the best way to do that, according to comments from US Treasury Secretary Janet Yellen during a June 16 Senate Finance hearing.

The President’s budget set aside money for enhanced R&D tax incentives but did not include details of any R&D-related changes in its tax proposals, leaving an open question of what exactly the Administration planned.

Senator Todd Young (R-IN) asked Yellen in the hearing whether the Administration would seek to eliminate a provision that takes effect next year that would require amortizing R&D expenses over five years, rather than allowing immediate expensing as under current law.

The R&D expensing change was enacted by the 2017 Tax Cuts and Jobs Act, and bipartisan bills have since been introduced, by Young and others, to undo the change before it takes effect.

Yellen answered that promoting innovation is a “critical priority” for Biden and that the Administration is looking at ways to do that. She added that allowing continued immediate expensing of R&D “could be one very effective way to bring that about.”

However, Yellen said there are other possible approaches. For instance, “there could also be more generous R&D tax credits.”

With that in mind, Yellen explained that the President “wants to work with Congress to decide on what is the best approach.”

Senator Maggie Hassan (D-NH), who is co-sponsoring with Young a bipartisan bill to expand R&D incentives, asked a similar follow-up question, specifically with respect to the Administration’s commitment to expanding the R&D credit for startups and small businesses.

Yellen reiterated that, although “there are some areas that lack specificity,” promoting R&D is a priority of Biden’s and the Administration looks forward to working out the details with Congress.