Arlington, Va. (May 15, 2023) – Thirty-five small business members of the Aerospace Industries Association (AIA) today urged Congress to act immediately on legislation to restore research and development (R&D) tax incentives. In a letter to congressional leaders, the owners and operators of aerospace and defense supply chain companies from across the country detailed the harmful effects of a recent change that requires R&D expenses to be amortized over five years, rather than receiving a full tax deduction in the year incurred.
“Our businesses, though small, are significant drivers of American innovation,” the letter states. “However, with this recent tax change, our investment in innovation is now being penalized… We are already feeling the very real, punitive effects of this policy. When filing our taxes last month, many of us were hit by alarming numbers, far beyond what we anticipated. These higher tax bills greatly reduce our cash flow — meaning that we will struggle to hire and retain qualified talent, and for some of us, we will need to take out loans to cover these larger-than-expected expenses.
“Congress now has the opportunity to right this wrong,” the letter continues. “Two pieces of legislation have been introduced — S. 866, the American Innovation and Jobs Act, and H.R. 2673, the American Innovation and R&D Competitiveness Act — that will fix this harmful policy, and we urge you to bring them to the floor swiftly. These bills offer a critical lifeline not only to us, but also to American small businesses across every industry and from every part of the country.”
Click here or see below for the text of the letter.
AIA’s President and CEO Eric Fanning hailed H.R. 2673 as a “lifeline to small businesses across the country” in aletter to the bill’s lead sponsors, Reps. Ron Estes (R-Kan.) and John Larson (D-Conn.), and urged swift consideration of the Senate counterpart bill, S. 866, in a letter to the bill’s lead sponsors, Sens. Maggie Hassan (R-N.H.) and Todd Young (R-Ind.). Learn more about the need to address the R&D tax challenge and support American innovation here.
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Dear Speaker McCarthy, Majority Leader Schumer, Democratic Leader Jeffries, and Republican Leader McConnell,
As the owners and executives of some of America’s leading small businesses in the aerospace and defense industry and members of the Aerospace Industries Association (AIA), we write with urgency asking you to address a recent research and development (R&D) tax policy that is threatening our livelihoods and those of our employees.
Our businesses, though small, are significant drivers of American innovation. We support national security as part of the defense industrial supply chain, we develop and manufacture innovative technologies that make air travel safer, greener, and more efficient, and we are helping send Americans back to the moon and beyond. Our industry has always been on the cutting edge of what’s next because of the ingenuity, talent, and financial and human resources we’ve put into it. However, with this recent tax change, our investment in innovation is now being penalized. Rather than receiving a full tax deduction for our R&D expenses in the year they are incurred, we are now required to amortize them over five years — essentially reducing our annual tax benefit to just 20% of what it used to be.
We are already feeling the very real, punitive effects of this policy. When filing our taxes last month, many of us were hit by alarming numbers, far beyond what we anticipated. These higher tax bills greatly reduce our cash flow — meaning that we will struggle to hire and retain qualified talent, and for some of us, we will need to take out loans to cover these larger-than-expected expenses. Additionally, we will have fewer dollars to invest into the future R&D that will keep our country on the cutting edge of aerospace and defense technologies — and ahead of our foreign competitors.
These are the most direct impacts of this tax change on our businesses – but more broadly, this tax policy is already having chilling effects on U.S. investment in R&D. According to PwC, private investment in R&D fell for the first time in seven years at the end of 2022.
Congress now has the opportunity to right this wrong. Two pieces of legislation have been introduced — S. 866, the American Innovation and Jobs Act, and H.R. 2673, the American Innovation and R&D Competitiveness Act — that will fix this harmful policy, and we urge you to bring them to the floor swiftly. These bills offer a critical lifeline not only to us, but also to American small businesses across every industry and from every part of the country.
Both bills already have broad, bipartisan support from your colleagues, with 30 Senators co-sponsoring S. 866 and 88Members co-sponsoring H.R. 2673. We thank Sens. Hassan and Young and Reps. Estes and Larson, as well as every member who has co-sponsored this bill, for their leadership and willingness to fight for America’s innovators.
We appreciate your attention to this pressing issue, and welcome the opportunity to speak with you further on this topic.
Sincerely,
Acorn Growth Companies
Oklahoma City, OK
Acutec Precision Aerospace
Meadville, PA
ADI American Distributors LLC
Randolph, NJ
Advanced Navigation & Positioning Corp.
Hood River, OR
Aerospace Alloys, Inc.
Bloomfield, CT
AMI Metals
Brentwood, TN
Andrews Aerospace
Fort Worth, TX
APECS Aerospace
Charleston, SC
Athena Manufacturing
Austin, TX
Bauer, Inc.
Bristol, CT
CAE USA
Chantilly, VA
Click Bond, Inc.
Carson City, NV
Cox Machine, Inc
Wichita, KS
CPI Aero Inc.
Edgewood, NY
Exostar, LLC
Herndon, VA
Expedited Climb Capital LLC
Andover, MA
GSE Dynamics
Hauppauge, NY
IERUS Technologies
Huntsville, AL
Integrated Support Systems, Inc.
Seneca, SC
InterConnect Wiring
Fort Worth, TX
Machine Specialties, Inc.
Whitsett, NC
Marotta Controls
Montville, NJ
Mercury Systems
Andover, MA
Meyer Tool, Inc.
Cincinnati, OH
Muon Space
Mountain View, CA
Paulo
St. Louis, MO
PGL
West Irving, TX
Precision Arrow Gear Group
Downers Grove, IL
Rocker Industries
Huntington Beach, CA
Patriot Group LLC
Pasadena, MD
Therm, Incorporated
Ithaca, NY
Third Wave Systems
Minneapolis, MN
Verify
Irvine, CA
Weldaloy Specialty Forgings
Warren, MI
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