New Movement on the R&D Tax Credit and Section 174 Repeal

Key Updates Explained

As of February 26, 2025, the House of Representatives passed a budget resolution with expected provisions that could positively impact American businesses. One of the expected provisions included in the reconciliation bill is to fully repeal the mandatory amortization of R&D expenses under Section 174, reinstating the option for immediate deduction of expenses in the year they are incurred. The question still remains if R&D expenses can be deducted retroactively to tax year 2022.

This change is a significant win for businesses investing in innovation, as it restores the immediate expensing of R&D costs, which was previously eliminated under the Tax Cuts and Jobs Act (TCJA) of 2017. If this bill is enacted into law, businesses will once again be able to claim a full deduction for qualified research expenditures rather than spreading the deductions over a five-year amortization schedule.

After passing in the House, the Senate must vote for this bill to be enacted into law. The outlook of the Section 174 repeal looks promising as those who favor the bill  in the Senate have the majority vote. Businesses should prepare for this positive change in the R&D Tax Credit, and in the meantime contact their Senators to advocate for this bill to pass.

It is important to note that while the House has passed the motion to repeal the amortization requirement included in budget resolution, the Senate has not yet passed the corresponding legislation. Therefore, the full deduction of R&D expenses has not yet been reinstated, and the existing amortization rules continue to apply for this tax season.

Our tax experts at Ayming will continue to monitor the progress of this bill and report on the potential benefits to come. If you have any questions regarding this new legislation or would like to begin your R&D claim, you can schedule a free consultation with our team.