Arlington, Va. (April 18, 2023) – The Aerospace Industries Association (AIA) today sent a letter of support to Representatives Ron Estes (R-Kan.) and John Larson (D-Conn.) for the American Innovation and R&D Competitiveness Act — legislation to restore the full tax deductibility of research and development (R&D) expenses. In the letter, AIA President and CEO Eric Fanning wrote that the change requiring R&D expenses to be amortized over five years is creating enormous financial burdens for small businesses — including much larger tax bills.
“Without the small businesses in our supply chain, many of them family owned, building the next generation of aerospace and defense technology would not be possible. Unfortunately, last year’s change to the tax code requiring R&D expenses to be amortized over five years has limited small businesses’ ability to make these types of investments,” Fanning wrote. “For many small businesses, the financial burden has already multiplied and their significantly larger 2022 tax bills are paralyzing. Rather than investing in R&D, which includes growing their workforce, many are at a standstill with how to proceed unless Congress acts soon.
“Your bill will protect American jobs, save small businesses, and spur the innovation needed to ensure America’s future competitiveness,” Fanning continued.
The full letter is available here and below. AIA also sent a letter of support for the American Innovation and R&D Competitiveness Act’s Senate companion bill, S. 866, which can be found here. Read more about the importance of Congress fixing the R&D tax change here.
___________________________________________________________________________________________
April 18, 2023
Dear Congressman Estes and Congressman Larson:
On behalf of the Aerospace Industries Association (AIA), which represents more than 320 American aerospace and defense companies of all sizes, thank you for your leadership in introducing the American Innovation and R&D Competitiveness Act. This legislation would restore the full tax deductibility of research and development (R&D) expenses and be a lifeline to small businesses across the country.
Our members are America’s leading designers and manufacturers of highly advanced innovations and technologies including commercial aircraft, engines, satellites, and launch vehicles. Without the small businesses in our supply chain, many of them family owned, building the next generation of aerospace and defense technology would not be possible. Unfortunately, last year’s change to the tax code requiring R&D expenses to be amortized over five years has limited small businesses’ ability to make these types of investments. Your legislation, the American Innovation and R&D Competitiveness Act, is crucial to ensuring the incentive to invest in the innovation continues for decades to come.
If the American Innovation and R&D Competitiveness Act is not enacted soon, we risk extending the decline in real private investment in R&D, which began in the two final consecutive quarters of last year[1]– the first time private investment in R&D has dropped in seven years. For many small businesses, the financial burden has already multiplied and their significantly larger 2022 tax bills are paralyzing. Rather than investing in R&D, which includes growing their workforce, many are at a standstill with how to proceed unless Congress acts soon.[2]
The private sector accounts for more than 75 percent of total R&D spending[3] in the U.S., with small businesses alone accounting for about 15 percent of all private sector R&D investments.[4] Not only does our tax code now disincentivize this investment, but it makes the U.S. only one of two developed countries with this policy at a time when we must retain our competitive edge, particularly in the aerospace and defense industry. This is not only to benefit the U.S. economy, but also to outpace the growing China threat.
Your bill will protect American jobs, save small businesses, and spur the innovation needed to ensure America’s future competitiveness. Therefore, we urge the House Ways and Means Committee to mark up the American Innovation and R&D Competitiveness Act as soon as possible and congressional leadership to bring it to the House floor for a vote soon after. Delaying action risks the permanent loss of private R&D spending as budgets are trimmed and projects are shelved. We must avoid this self-inflicted injury.
We thank you again for your leadership on this issue and for introducing this timely, critical bill.
[1] U.S. Bureau of Economic Analysis, “Table 5.3.1. Percent Change From Preceding Period in Real Private Fixed Investment by Type“.
[2] https://www.wsj.com/articles/small-businesses-face-big-tax-bills-from-research-deduction-change-a189b113?mod=hp_listb_pos1
[3] National Center for Science and Engineering Statistics, National Science Foundation, National Patterns of R&D Resources: 2020-21 Data Update, NSF 23-321, January 4, 2023, https://ncses.nsf.gov/pubs/nsf23321.
[4] National Center for Science and Engineering Statistics, National Science Foundation, InfoBrief, NSF 22-343, October 4, 2022, https://ncses.nsf.gov/pubs/nsf22343.
###
