House and Senate leaders have purportedly decided to narrow the scope of negotiations on the innovation bill currently in conference, dimming hopes that lawmakers in the conference committee will restore expensing of research and experimentation (R&E) costs and create a tax credit for semiconductors.
The underlying innovation bill is with a formal conference committee charged with merging the Senate-passed version of the United States Innovation and Competition Act (USICA), with the House-passed bill known as “America COMPETES.” Neither underlying bill currently carries a tax title, but that does not preclude the conference committee from adding one in conference. Nonetheless, Senate Majority Leader Chuck Schumer and Speaker Nancy Pelosi recently discussed setting aside issues on which the two chambers and two parties won’t find consensus—such as tax and trade issues—choosing to instead focus on areas where they can find ultimate, and speedy, agreement.
While there is strong bipartisan support for both restoring R&E expensing and incentives for semiconductor manufacturing, numerous political factors have complicated the outlook of adding these provisions to the innovation bill. The Senate overwhelmingly passed a nonbinding motion to “instruct” lawmakers participating in the conference to include provisions retroactively extending R&E expensing—and also approved a similar motion for semiconductor manufacturing—but there is strong resistance to adding a tax title to an already contentious bill, as it could open up the process for other members to push various tax priorities. Many Democrats also appear reluctant to pass business tax relief while the enhanced child tax credit is stalled, and could push for “social” tax relief that would complicate the process. Schumer and Pelosi’s recent discussions on narrowing the scope of negotiations may preclude a tax title for these exact reasons.
The timeline for completion of the conference committee and final passage of the updated legislation remains uncertain. Negotiators and leadership are now pushing hard to get agreement by the July 4 break to remain hopeful that the ultimate legislation can pass before the August recess. Still, potential additions and revisions to the underlying bills could take weeks—if not months—to resolve.
If the Section 174 R&E fix is not included in the innovation legislation, it still has a good chance of being addressed in a year-end “extenders” bill after the November elections. Businesses should seek to remain apprised of the ongoing conference committee and its underlying negotiations, as significant developments are expected in the near-term.
Contact:
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
More tax hot topics

No Results Found. Please search again using different keywords and/or filters.