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Technology allies push virus bill to extend R&D spending
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Law360 (April 30, 2020, 5:35 p.m. EDT) –
Defenders in Silicon Valley and Other Sectors Gain Pull in Congress for Emerging Strategy to Use Anti-Virus Legislation as a Vehicle to Stop Expected Expenditure of Research Costs in 2022 and development.
Representative John Larson, D-Conn., Left, wants to establish a full standing charge for R&D costs. (AP)
Representative John Larson, D-Conn., A senior member of the House Ways and Means Committee, told Law360 that he was seeking consensus for a full permanent expenditure of R&D costs with allies of both parties. of the tax preparation group. Business advocates have endorsed a campaign by Larson and other legislators to try to link such a proposal to legislation to counter the economic effects of the COVID-19 pandemic.
“I think it is very important that we focus on research, especially in these times,” said Larson, former chair of the House Democratic Caucus.
Supporters of the U.S. Larson Innovation and Competitiveness Act, H.R. 4549, warn that the economic setbacks associated with the virus will cause companies to focus on results and reduce research and experimentation costs. They say that his plan to permanently expand all spending and avoid its replacement in 2022 with five-year depreciation, as enacted under the 2017 tax law, would encourage companies to launch initiatives research and help them attract investors.
Ways and Means President Richard Neal, D-Mass., Ceased to support Larson’s proposal, but made clear that he would be open to business tax incentives as a way to attract GOP support for ambitious democratic priorities in the next virus rescue measure.
House Speaker Nancy Pelosi, D-Calif., Said she wanted to follow up on a $ 484 billion support package for small business, hospitals and testing promulgated last week with assistance to state and local governments and a second potential wave of economic impact payments similar to those contained in the Coronavirus Aid, Rescue and Economic Security Act.
Legislators on both sides are also evaluating proposals to offer tax incentives to front-line workers and their employers in health care, law enforcement and other sectors directly facing the COVID pandemic -19.
Another Ways and Means member, representative Ron Estes, R-Kan., Said he hoped there would be an agreement to move Larson’s proposal into a bipartisan set of tax incentives to help businesses to recover from virus woes. He added that he feared Pelosi and his team would push through a partisan package, which could lead to GOP roadblocks in the Senate and lengthy negotiations between the chambers.
“It would make a lot of sense to add this to a lot of the stuff we’re talking about. It would help companies keep their cash flow and get to the other side of this peak in the coronavirus epidemic,” Estes told Law360.
Other proposals supported by some Republicans include one by Senator Pat Toomey, R-Pa., To preserve immediate full deductions, or 100% amortization of bonuses, for commercial equipment and eliminate a schedule in the law. 2017 for gradual reductions in the incentive over four years starting in 2023 and a full sunset at the end of 2026.
The pursuit of all R&D spending instead of depreciation has been encouraged by the National Association of Manufacturers and other groups, including Silicon Valley advocates.
Peter Chandler, director of federal policy and government relations for TechNet, an alliance of senior executives for tech companies, told Law360 that his group supported Larson’s efforts to accelerate a proposal to save 100% of spending. R&D by putting it into legislation to fight against fallout from viruses.
“This would support American jobs that focus on developing or improving new products and drugs, and allow companies to make pro-innovation planning decisions in times of uncertainty,” he said.
Former IRS Commissioner Mark Everson, now vice-president of Alliantgroup LP, said that total ongoing spending on R&D costs would provide crucial support to a wide range of somewhat smaller businesses, including understood startups, and would help stimulate economic growth.
“This is a big problem for small and medium businesses,” Everson told Law360.
But some critics have opposed the inclusion of business R&D incentives in anti-virus legislation. For example, Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy, a progressive think tank, said he was skeptical about whether the pursuit of total spending would persuade businesses to “do something they wouldn’t do anyway. “
Wamhoff called for adhering to the cost-cutting articles passed in the $ 1.5 trillion tax cut and jobs law, including moving from allowing full and immediate deductions for R&D costs to progressive deductions over five years.
“Coming back now with individual invoices to defeat them is just ridiculous,” said Wamhoff.
The Tax Foundation, a center-right think tank, has estimated that a proposal to make all spending permanent would cost more than $ 119 billion over 10 years and boost economic growth by about 0.15%. , while creating around 30,600 jobs.
Despite critics’ concerns about the promulgation of Larson’s proposal without income-generating compensation or spending cuts, former Ways and Means member Phil English, co-chair of government relations for Arent Fox LLP, said the proposal would be probably attractive to both parties. He predicted that the plan would be seen as a tool both to fight the virus itself and to accelerate growth as the pandemic recedes.
“We are counting on private sector innovation and national manufacturing to reposition ourselves to face the pandemic. The same companies that are leading this response to the crisis are those that are disadvantaged because of the amortization of the R&D, “English told Law360.
Joe Kennedy, principal investigator at the Information Technology and Innovation Foundation, a non-profit think tank, told Law360 that it was “almost inevitable that research will be stopped” and that savvy projects could be delayed by a year or two, which could mean “promoting a technological downturn and a lower standard of living. In addition to helping tech companies and drug manufacturers, business advocates argue that total ongoing costs are important to companies in sectors such as defense, energy and transport.
Whether or not Congress adopts Larson’s proposal, Kennedy, a former chief economist with the Commerce Department, has said that some companies may need time to cope with financial aftershocks from the new coronavirus. But he said that measures taken by legislators to continue spending fully would likely make research and development projects more attractive.
“If they repeal depreciation,” he said, “then when companies feel comfortable investing again, it would lower the cost of research.”
– Edition by Robert Rudinger and Tim Ruel.
For a reprint of this article, please contact reprints@law360.com.
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