US Senators Push for Last-Minute Tax Break in Semiconductor Bill
2022.07.19 23:45
© Bloomberg. Todd Young
(Bloomberg) — A bipartisan group of lawmakers is making a last-minute attempt to revive a tax break for corporate research and development in the semiconductor funding bill that the Senate is debating this week.
Senator Todd Young, the Indiana Republican who has been leading the negotiations for his party, told reporters Tuesday that lawmakers are discussing a one-year extension to a tax break for R&D costs that expired at the end of 2021. The addition, which is still being debated, would let companies deduct research expenses in the year they’re incurred, rather than a multi-annual period.
The addition would be a boon to technology, pharmaceutical and manufacturing companies with lots of R&D expenses, including Alphabet (NASDAQ:GOOGL) Inc.’s Google, Pfizer Inc. (NYSE:PFE), and Ford Motor (NYSE:F) Co. Without the change, companies starting this year will have to spread out the writeoffs for their domestic expenses over five years and the foreign costs over 15 years.
Corporations seeking the change say it’s critical to pass the tax break soon, because they’re currently incurring research costs that aren’t eligible for preferential tax treatment.
The measure has support from a broad swath of senators, including Democrats Mark Warner of Virginia and Jon Tester of Montana, and Republican Shelley Moore Capito of West Virginia. The extension of the tax break passed the House last year as part of President Joe Biden’s Build Back Better plan.
Other Vehicle
“I support it,” Tester said Tuesday. “We just need the votes.”
The attempts to add the R&D tax break — valued at an estimated $2 billion, according to Young — may yet fall short, as lawmakers continue to squabble over last-minute additions. Senate Majority Leader Chuck Schumer is pushing for a vote as soon as this week.
Young is also pushing to add provisions that would establish a directorate for technology and innovation within the National Science Foundation to support basic and applied research and bolster education in science, technology, engineering and mathematics.
Those further measures were included in a draft of the bill that was circulating Tuesday afternoon that didn’t include the tax break.
The overall legislation is a scaled-down version of a more expansive bill intended to make the US more competitive with China in technology and advanced manufacturing. That legislation has been hung up for months in negotiations between the House and Senate over how to merge their different versions.
If the R&D tax break is left out, it’s still likely to be considered by the Senate this year. Senator Tim Kaine, a Virginia Democrat, said it’s “not impossible” for it to be included in the semiconductor package, but more likely to be in a subsequent vehicle — such as a government funding bill later this year.
“There’s bipartisan support for that. However, I think that gets done in the year-end bill,” John Thune, the No. 2 Republican in the Senate, said. “I think that gets fixed one way or the other.”
©2022 Bloomberg L.P.
