March 17, 2021

“What They Are Saying”: Support for Young’s American Innovation and Jobs Act

A Bipartisan Bill to Incentivize Research and Development for Innovative Businesses and Startups

WASHINGTON – This week, U.S. Senator Todd Young (R-Ind.), along with his Senate Finance Committee colleagues, Senators Maggie Hassan (D-N.H.), Catherine Cortez Masto (D-Nev.), Rob Portman (R-Ohio), and Ben Sasse (R-Neb.), reintroduced the bipartisan American Innovation and Jobs Actto incentivize research and development (R&D) investments by innovative businesses and startups.

 

Many job creators and industry trade associations have voiced support for the American Innovation and Jobs Act, including the National Association of Manufacturers, the R&D Coalition, Cook Group Incorporated, Intel Corporation, the Motor & Equipment Manufacturers Association, the National Venture Capital Association, Bosch in North America, Association of Equipment Manufacturers, Zimmer Biomet Holdings, Inc., The U.S. Chamber of Commerce, Biotechnology Innovation Organization (BIO), National Taxpayers Union (NTU), Aerospace Industries Association (AIA) and the Semiconductor Industry Association.

 

Stephen L. Ferguson, Chairman of the Board of Cook Group Incorporated wrote in a letter of support, “Cook supports the ‘American Innovation and Jobs Act’as introduced by Senators Hassan, Young, Cortez Masto and Portman. As written, the legislation would restore immediate deductions for research and development (R&D) investments and expand the refundable R&D tax credit for startups by raising the existing credit cap. Based on an OECD analysis, the U.S. ranks twelfth in government funding and tax support for R&D trailing such countries as Russia, the UK, and Italy. The U.S. ranking likely decreases further if companies are required to capitalize and amortize R&D expenses. Manufacturing and jobs located where research develops new technology.”

 

Sharon Heck, Chief Tax Officer of Intel Corporation, who chairs the R&D Coalition, said,"R&D investments in the U.S. spur innovation and are critical to our economy and millions of American jobs. For 67 years, our tax code has long recognized this and created a favorable environment for R&D investment in the U.S. by allowing U.S. companies to immediately deduct their R&D expenses. We applaud the bipartisan leadership of Senators Hassan, Young, Cortez Masto, Portman and Sasse for introducing legislation that would help encourage companies to invest and innovate in the U.S." 

 

The Motor & Equipment Manufacturers Association wrote in a letter of support,“The Motor & Equipment Manufacturers Association (MEMA) commends Senators Todd Young (R-IN) and Maggie Hassan (D-NH) for introducing the “American Innovation and Jobs Act of 2021.” This measure when passed, will continue full availability of the research and development tax credit for U.S. companies. This step is vital for our small, medium, and large sized motor vehicle parts manufacturing members, with 907,000 employees in all 50 states. Unfortunately, the 2017 tax reform legislation ended full first year deductibility of this important credit on January 1, 2022. We thank Senators Young and Hassan for their leadership in correcting this problematic provision.”

 

Jay Timmons, president and CEO of the National Association of Manufacturers wrote,“Manufacturers are grateful to Senators Hassan and Young for introducing bipartisan legislation to stop R&D amortization from taking effect. We respectfully urge the Committee to expedite consideration and approval of this important bill. Without it, the innovation that has so long characterized manufacturing in America stands at risk.”

 

John Neuffer, President and CEO of Semiconductor Industry Association said,“The semiconductor industry is among the most R&D-intensive sectors in the world, and semiconductor innovation is critical to America’s ability to create and lead the game-changing technologies of today and tomorrow. While U.S. semiconductor companies invest about one-fifth of revenue in R&D annually, the U.S. R&D credit is relatively weak compared with our global competitors, and the requirement to amortize R&D expenses will further weaken incentives for research in the U.S. At a time when federal funding for chip research has been flat as a share of GDP for years, even as the governments of global competitors are massively increasing their research investments, robust tax incentives for private sector research assume even greater importance. We applaud the bipartisan group of leaders in Congress for introducing this timely legislation to promote U.S. R&D, urge its swift enactment, and look forward to working with policymakers to advance semiconductor research in the United States.”

 

Bobby Franklin, President and CEO of National Venture Capital Association said,“VC-backed startups are the most innovative companies in the world, with many spending over 50 percent of their total expenditures on R&D. Allowing these companies to access the value of their tax assets will accelerate innovation and job creation across the country. As the U.S. recovers from the COVID-19 pandemic and one of the most severe economic downturns in modern history, policy that supports startup investment into R&D—and the innovation and job creation that comes from that investment—is more imperative than ever. We are excited about the American Innovation and Jobs Act’s proposed expansion of the R&D tax credit for startups and look forward to working with the bipartisan co-sponsors and other policymakers to advance this important legislation.”

 

Mike Mansuetti, President of Bosch in North America, said,“Research and innovation are essential components of the Bosch DNA. It is critical that the U.S. tax code continues to encourage innovation and enable businesses to invest in research and development of new ideas and products. We applaud the focus on this critical business issue and we look forward to working with lawmakers and other stakeholders to uphold a U.S tax policy that promotes investment, growth and competitiveness.”

Dennis Slater, President of Association of Equipment Manufacturers, said, “Equipment manufacturers applaud Senators Hassan and Young, along with their colleagues Sens. Cortez Masto, Portman, and Sasse, for their leadership to ensure that the United States is the premier place in the world for innovation and for introducing bipartisan legislation that will restore immediate deductions for investments in research and development. The $288 billion equipment manufacturing industry’s ability to innovate leads to investments in our people, groundbreaking advances in our industry, productivity gains for our customers, the spreading of beneficial technologies to other sectors, and new and improved products and processes. Research and development is the lifeblood of the more than 1,000 equipment manufacturers in the United States, driving economic growth and creating family-sustaining jobs, and we look forward to working with the co-sponsors and other lawmakers to advance this important legislation.”

Michael Wall, Vice President of Zimmer Biomet Holdings, Inc. wrote in a letter,  “Your bill, if enacted, will enhance the R&D ecosystem in which we operate. It will help ensure the vibrancy of research partners and availability of talented U.S. engineers, scientists and medical researchers who engage in research and development for future innovation. The medical device industry has confronted tax headwinds in the past, as you know. By increasing the deductibility of R&D, your bill will support more R&D activities in this country, including Warsaw, Indiana where we conduct the overwhelming majority of our R&D as a company. This bill helps set the right tone as Congress and the Administration consider significant tax reform.”

 

Neil L. Bradley, Executive Vice President & Chief Policy Officer of The U.S. Chamber of Commerce wrote in a letter, “Without action, businesses will have to amortize R&D expensing over a five-year period beginning in 2022. Requiring amortization of these expenses would make the United States a global outlier, as only two other developed countries have such a policy. This bipartisan legislation to repeal this provision will ensure that the R&D tax credit, along with the ability to deduct R&D expenses, remains an effective engine for American innovation… The American Innovation and Jobs Act and American Innovation and R&D Competitiveness Act would ensure that the United States continues to be the world leader in this space.”

Cameron Arterton, VP of Emerging Companies and Capital Formation for Biotechnology Innovation Organization (BIO) said, “BIO is pleased to see progress on this important issue and will continue to advocate with its allies for swift passage of this bipartisan, bicameral legislation. Policies that seek to expand U.S. R&D are critical in supporting the biotech industry as we work to solve society’s most pressing challenges.”

Andrew Lautz, Director of Federal Policy of National Taxpayers Union (NTU) wrote in a letter, “The American Innovation and Jobs Act could not come at a better time. With COVID-19 vaccine distribution ramping up, both entrepreneurs and workers are hoping for a robust economic recovery from this devastating period. Your legislation will ensure that a key reward for R&D investments in the tax code remains in place. As companies large and small stare down the expiration of full and immediate expensing for R&D expenditures on January 1, 2022, your legislation will stop this step backwards for the tax code.”

The Aerospace Industries Association (AIA) wrote in a letter of support, “Bipartisan legislation in both the House and Senate (H.R. 1304 and S. 749) has been introduced to remove the requirement to amortize R&D expenses starting in 2022. By repealing this new provision, these bills would provide much-needed relief to all sectors of the U.S. economy, including aerospace and defense. We applaud the many Members of Congress who have already agreed to cosponsor these bills.”

During yesterday’s Senate Finance Committee hearing,a number of witnesses testified in support of the American Innovation and Jobs Act.

 

George Davis, Chief Financial Officer of Intel Corporation, said during the hearing,“Starting next year, businesses will be required to amortize their R&D expenses over several years. Removing this deduction will make the U.S. virtually the only developed country in the world with this policy. This change will significantly increase the cost to perform R&D in the U.S. We applaud the bipartisan work of Senators Hassan, Young, Cortez Masto, Portman, and Sasse, whose bill, the American Innovation and Jobs Act, would prevent this regressive policy from taking effect.” 

 

“We are looking forward to building a post-COVID economy and strengthening – even super-charging – our manufacturing sector. It’s critical that as we think about this we identify as many ways as possible to increase investment in Research and Development (R&D) in this country. To that end, yesterday I reintroduced a piece of legislation – the American Innovation and Jobs Act– along with Senator Hassan. This would expand the R&D Tax Credit for innovative startups and ensure companies can continue to expense R&D costs in the year they are incurred,” Senator Young said during the hearing.

 

Senator Young also noted the need to bolster American competitiveness against China, and how supporting domestic research and development through his bill could help. 

 

“In the 21st Century, the U.S.’s share of global R&D investments has fallen drastically from 39% to 29%. Meanwhile, we continue to face stiff competition from countries like China. China has aggressively focused on growing its R&D sector and by some estimates will surpass American R&D investment just by the end of this decade,” Senator Young continued“If we fail to take our competitors seriously, I have grave concerns about the ability of the U.S. to maintain our role as a global leader in this regard.”

 

Background:

 

Companies and startups investing in R&D can either claim a tax credit or deduct their investments, which helps them to invest in developing new, innovative products that lead to additional jobs and a stronger economy. The bipartisan American Innovation and Jobs Act doubles the refundable R&D tax credit and extends it to more startups and small businesses. It also ensures that companies who do not elect to take the credit may continue to deduct the full amount of their R&D expenses in the year they are incurred — an important tax incentive that expires at the end of this year.

 

The American Innovation and Jobs Actsupports innovative businesses and helps create jobs by:

  • Restoring incentives for long-term R&D investment by ensuring that companies can continue to fully deduct R&D expenses each year.
  • Immediately doubling and then further raising the cap over time for the refundable R&D tax credit for small businesses and startups.
  • Expanding eligibility for the refundable R&D tax credit so that more startups and new businesses can use it.

 

You can read the full bill text here