WASHINGTON, D.C. – The immediate tax deductibility of research and development (R&D) investments is a vital incentive driving small business innovation across the digital economy.

“We commend Chairman Smith and the U.S House Ways and Means Committee for taking action to restore immediate expensing of R&D investments for five years,” said ACT | The App Association President Morgan Reed. “This is a good first step to restoring this critical incentive supporting small business innovation, job creation, and economic growth. As the reconciliation process continues, we look forward to working with our allies in the House and Senate to further improve the provisions in the final bill.”

What Small Businesses Still Need

  1. Make Full Expensing Permanent: A five-year extension does not give small businesses the predictability and security to make the long-term investment in R&D for the next generation of solutions. Making the immediate full expensing of R&D investments permanent allows small firms to build multi-year strategies for innovation.
  2. Apply Full Expensing Retroactivity to 2022: Since the current rules took effect in 2022 small businesses across the country have seen debilitating increases in tax bills. Members of the App Association have been forced to make drastic changes to development and hiring plans, take out loans, or sell shares of their company to predatory VC firms. Retroactivity would allow these affected businesses to reclaim tax overpayments and re-invest in innovation.
  3. Include Immediate Foreign Expensing: U.S. small technology businesses are innovation leaders in the global economy. By excluding immediate expensing of foreign R&D investments, U.S. companies are placed at a competitive disadvantage compared to their foreign counterparts.