The Senate recently passed an alternative version of the House-passed “America COMPETES” bill (H.R. 4521) to boost American competitiveness with China—setting the bill up for conferencing in the coming weeks and raising the possibility that language retroactively delaying the R&E amortization rules under Section 174 could be included in the final language of the bill.
In the coming weeks—and potentially months—a conference committee of senators and House members will convene to reconcile differences in the language of the bills passed by the House and the Senate. At that time, lawmakers could potentially add new language to the final version of the legislation—including language retroactively delaying the R&E amortization rules under Section 174. Several lawmakers are pushing to include a retroactive delay in the bill, but no such language is included in either version of the bill at the moment, and there is no certainty language will make it into the final package.
Nevertheless, there remains broad bipartisan congressional support for retroactively postponing the Section 174 amortization rules, and American businesses also have started voicing their displeasure at the expiration of full R&E expensing. At a March 23 hearing in front of the Senate Commerce, Science, and Transportation Committee, Intel CEO Pat Gelsinger asked for the final America COMPETES bill to include a reinstatement of full expensing for R&E, noting the expiration of the rules at the beginning of this year “created the most regressive treatment of R&D investments globally.”
After the conference committee concludes, both chambers would take a final vote on the bill.
If a retroactive extension is not included in the final America COMPETES language, a Section 174 fix could still be included in a slimmed-down reconciliation bill if Democrats—and most notably, pivotal holdout Sen. Joe Manchin, D-W.V.—can come to terms on an updated package in the coming months.
If no legislation is passed before then, the provision will likely be considered as part of a larger “tax-extenders” package in a lame-duck session. House Ways and Means Committee Chairman Richard Neal, D-Mass., recently indicated he believes postponement of the R&E amortization rules could be included in such legislation, and stated, “We think we can still move (a tax extenders package) before too long.”
For additional information on the Section 174 R&E rules, register for our March 31 webcast, “Section 174 R&E Capitalization – A Practical Discussion,” and see our prior story, “Capitalizing R&E expenditures requires detail focus.”
Dustin Stamper is a managing director in Grant Thornton’s Washington National Tax Office and leads the tax legislative affairs practice for the firm.
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