While companies are lobbying Congress to bring back immediate tax deductions for research-and-development costs, analysts are sounding downbeat on the prospects for that issue in any year-end tax package.
Starting this year, corporations have been required to write off domestic R&D expenses over five years rather than deduct them right away, with the shift due to a provision in Republicans’ 2017 tax overhaul.
But companies focused on the R&D issue are likely to be disappointed at year’s end, according to Tobin Marcus, senior U.S. policy and politics strategist at Evercore ISI. “I’m fairly skeptical that any of it is going to happen, but I think that the most likely way for something to happen is for Democrats to basically back down on the CTC thing and take a clean bipartisan extension of R&D, but I don’t really see much appetite to do that on the Democratic side, which is why I think the deal probably just falls apart,” he added.
Still, CTC advocates have been sounding hopeful, with one of them telling MarketWatch last month that a tax credit for business is “the engine,” and lawmakers “need to make sure the train doesn’t leave without working families on board.” “With inflation surging and debt approaching record levels, policymakers should avoid passing costly end-of-year policy changes,” the watchdog group added.
The Trump administration pushed for this beefed-up tax break in late 2020, saying it would help restaurants hurt by the COVID-19 pandemic, while critics derided it as the “three-martini lunch” deduction.“The environment isn’t there for for renewing that for business meals and entertainment,” he said.
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