Wydra added that if Congress is able to make the R&D expensing permanent, “you’re gonna have unprecedented growth on your hands.”
Subcommittee Ranking Member Greg Landsman (D-Ohio) observed that the hearing lasting a little more than an hour suggests “the consensus is there in terms of resolving this [and] fixing what is a no-brainer.”
Similar stories heard at Senate roundtable
Less than 24 hours after the House subcommittee hearing concluded, a roundtable discussion was convened by the Senate Finance Committee and the Senate Committee on Small Business and Entrepreneurship.
Michael Norris, president and CEO of Warrant Technologies, noted that the change from R&D expensing to R&D amortization over five years for a small business with $2.5 million in net income in the 21 percent tax bracket would see their tax bill rise from $315,000 to $504,000. And if the changeover to amortization is not properly accounted for, there could also be penalties and interest if a small business was not aware of the changes.
“This will result in the demise of small businesses,” Norris said.
Stephanie Camarillo, owner of Molly Maid of Boise and the Treasure Valley, described how much of the tax savings from provisions that have expired have been reinvested back into the company. She highlighted how the tax savings helps provide employees with better wages and funded a childcare facility adjacent to corporate offices to give employees who have kids another option to allow them to perform their duties.
Alicia Chapman, CEO of Willamette Technical Fabricators, also said that company earnings were reinvested back into the workforce, and while the company has been able to take advantage of the R&D expensing, “I need to be able to support my workers,” something that becomes more difficult when cash is being diverted to pay for a now increased tax bill.
Much like the climate in the House subcommittee hearing, this roundtable demonstrated a bipartisan intent to work on some of these issues to help alleviate the tax burden particularly on small businesses. And although a broad tax bill is not expected this year, Congress is now under pressure to pass all the budget bills or face an automatic one percent across the board budget cut. This could provide legislators with a vehicle to move these kinds of widely popular provisions since the likelihood of standalone bills is minimal. Hearings in both chambers suggest we could see some movement before the end of the fiscal year in September.
