Another Tax Code Issue Threatens to Offset CHIPS Incentives
Expiration of federal R&D exemption could prove costly
Unless Congress acts soon, companies providing scientific support and enhancements for the microelectronics supply chain could soon be required to change the way they expense the costs of money invested in research and development (R&D), which will result in a net increase of corporate income taxes and decrease incentives for private investment in R&D.
This additional year-end tax obligation flows from the expiration at the beginning of 2022 of a law previously allowing R&D expenses to be deducted from the current year’s income, which has been in place since 1954. This raises concerns that the additional tax burden will undercut the value of any recent CHIPS Act funding.
“At a time when our microelectronic supply chains and essential components are at risk, it would be an overall step backward to allow such incentives to lapse,” American Materials Technology Partnership (AMTP) Executive Director Dan Brewer said in a statement released to the media.
So far, there have been two attempts to reinstate the previous R&D tax incentive, first in the initial broader “Build Back Better” legislation, and then in the CHIPS Act itself. However, re-instatement of the incentive also didn’t make it into the final version of either the Inflation Reduction Act or the newly signed CHIPS and Science Act.
There is one legislative tax measure anticipated before the end of August in which the tax incentive for R&D could be reinstated: S. 749 and H.R. 1304. AMTP and its members are highlighting this issue with their various congressional representatives and requesting their support for the legislation. Learn more here.
For more detail on this issue, please review the Forbes article published earlier this year.
Learn more about the AMTP coalition.
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