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Ahead of the 2024 election, President Biden has made it clear that infrastructure is one of his administration’s top priorities, signing several major pieces of legislation, including bipartisan laws to increase spending on infrastructure and incentivize research and development.

Pennsylvania has a golden opportunity to redefine its future thanks to millions in infrastructure funding awarded from the federal government and nearly $2 billion in investment from the private sector.
However, all of this — from the funding, the jobs created, to the projects themselves — could be in jeopardy should a little-known tax provision remain in its current form.

Until recently, companies conducting significant R&D efforts have been able to deduct these expenses in the same year they are incurred. This granted companies of all sizes the financial flexibility to invest in and develop new technologies and products that better our lives, such as water treatment systems or LED light bulbs, while still affording overhead costs.

But in 2022, many companies were thrown for a loop when this tax provision was changed, forcing companies of all sizes to now amortize R&D expenses over a five-year period. While it might not seem like a huge deal, this change effectively increases the tax burden of all companies engaged in R&D efforts, particularly small engineering, design and manufacturing firms.

These smaller companies, many of which work on essential projects here in Pennsylvania, will be unable to afford operational costs if their tax liability continues to increase. One study estimates that this lapse in the tax code will reduce investment by $4.1 billion annually, as well as a loss of 23,400 direct jobs in each of the first five years of the provision becoming law. This is bad news for our state’s infrastructure and our communities since these projects improve our roads and waterways, create and support jobs, and generate economic growth for the local areas where they are located.

At a time when so many companies, employees, and communities are battling rising costs, this tax provision only compounds the financial woes that so many are facing.

The time to fix this is now. We urge all of Pennsylvania’s Congressional delegation to join many of their colleagues in supporting bipartisan legislation to turn back the tax deduction into its original form.

This piece from Gina Suydam with the Wyoming County Chamber of Commerce appeared in the Williamsport-Sun Gazett and Wyoming County Examiner on December 20, 2023.

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Advocacy, R&D, Tax & Innovation Policy


December 20, 2023

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