To encourage innovation, the federal government allows companies to take a tax deduction for spending on research and development (even if some pro-tax advocates say that the money a company spends researching, say, new packaging materials for its products doesn’t do much to advance society as a whole).
In the major 2017 tax bill, Congress offset the cost of some of its other tax breaks for corporations by making this R&D benefit less generous later on. Starting in 2022, that law said, companies would have to deduct their research expenses over a period of five years, rather than deducting the R&D spending all at once in the year that the spending happened.
Corporations spent this year trying to prevent the change from taking effect. A group called the R&D Coalition, led by major companies including Amazon, Ford and Microsoft, sent letters to Congress repeatedly, signed by dozens of name-brand companies, saying that the change would stifle job growth and put the United States at a competitive disadvantage with China.
Senators from both parties seemed to agree — in a nonbinding vote in May, they supported keeping the full deduction in place by a vote of 90-5. But the idea did not make it into the omnibus bill as it neared a final vote on Thursday.