PrAtlas - Make Innovation Matter: Support H.R.1's R&D Expensing Relief for American Small Businesses

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Summary: The proposed H.R.1's permanent, retroactive provisions for R&D expensing protect American innovation while offering tax relief to small businesses.

THOUSAND OAKS, Calif. - PrAtlas -- Washington, D.C. — The proposed H.R.1 or "One Big Beautiful Bill Act" offers research and development (R&D) expensing provisions to revitalize American innovation, stimulate job creation, and provide tax relief to small businesses. Passed by the House and now before the Senate, these measures directly address the burden of R&D capitalization by providing for the immediate, permanent, and retroactive expensing of domestic R&D costs. This reversal of the 2017 mandate that companies amortize these costs would take effect in the tax years after December 31, 2024.

These measures are critical to U.S. businesses' strategic planning and global competitiveness:

Retroactive expensing for small businesses: Qualifying companies could apply the new expensing rule for incurred domestic R&D costs retroactively to the tax year 2022. Previously paid taxes on amortized R&D expenses could be reclaimed.

Eligible small businesses must meet the gross receipts test under Section 448(c), which generally specifies corporations with average annual gross receipts of less than or equal to $31 million, adjusted for inflation.
If the provision passes, these companies would need to make an election to claim the incentive within one year of the bill's enactment and file amended tax returns for 2022, 2023, or 2024.

R&D expensing for all other taxpayers: All other qualifying taxpayers would have the flexibility to deduct any remaining unamortized R&D from the tax years 2022 to 2024 either entirely in 2025 or evenly between 2025 and 2026.

These taxpayers must have incurred domestic R&D expenditures between December 31, 2021, and January 1, 2025.
This option would be made available via an automatic accounting method to simplify compliance and eliminate the need for amended returns or special elections.

American small businesses need advocacy now! Comments regarding H.R.1's R&D expensing relief provisions should be directed to elected Senators. Key takeaways include:

The importance of permanent, immediate R&D expensing of domestic costs, starting in 2025, to give companies the certainty to plan and invest in scientific advancement.
The need for retroactive, immediate R&D expensing, from 2022 to 2024, for small businesses to reclaim the taxes they previously paid on innovation for reinvestment.

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Acena Consulting is a multidimensional tax consultancy specializing in R&D tax credits. Our approach is hands-on, conservative, and technically driven, and our experienced team of tax professionals includes former Big Four CPAs, and engineers. Our proactive, responsive, and impactful service provides a strong foundation for your R&D documentation.