R&D Expensing Is Back: How OBBBA Changes the Cash-Flow Line for Innovative Businesses
For the last few years, the tax code has acted like a pace car for innovation.
Businesses were spending real money on engineering, software development, product testing, manufacturing improvements, process design, and other research activities, but the tax deduction was forced into slow motion. Under the prior TCJA rules, domestic research and experimental costs generally had to be capitalized and amortized over five years. Foreign research costs were amortized over fifteen years.
That meant cash went out today, but the deduction came back in pieces. Wonderful, if your business enjoys lending money to the federal government at zero interest while trying to fund growth, payroll, inventory, and equipment.
Now the pace car is off the track.
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