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08.31.2023
Businesses are able to take advantage of numerous tax credits that incentivize certain activities. The research and development (R&D) credit, for example, allows companies to claim a tax credit for expenses related to improving existing products or services or developing new ones. The Tax Cuts and Jobs Act of 2017, however, interferes with this credit by requiring taxpayers to capitalize certain R&D costs. HR 3938 is a new bill pending in Congress, also known as the Build It in America Act (BIAA). It would amend the Internal Revenue Code (IRC) to delay the impact of the capitalization rule. The bill would extend two other important tax deductions, The Business Interest Deductions and 100% Bonus Depreciation, and modify the Clean Vehicle Credit. It would also, however, repeal several tax credits related to clean energy. While the future of this bill is uncertain, it’s helpful to note what tax law changes are being proposed by members of congress. Read on to learn more about the potential impact of the BIAA.
Improvements to the R&D Credit and Deductions
Title I of the BIAA, entitled “Investment in America,” modifies the rules for deducting R&D expenses. This could allow more businesses to take advantage of the R&D credit.
What Is the R&D Credit?
Section 41 of the IRC allows taxpayers to claim a credit equal to a portion of their expenses related to both in-house and contract research expenses. This may include wages paid to employees, fees paid to contractors, supply costs and expenses related to the use of computer equipment.
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