Bill to restore R&D deductibility goes to US Congress

A similar bill was introduced in the Senate in March.

“R&D is the driving force behind semiconductor innovations that have advanced modern technology and made the world smarter, more efficient, and better connected,” said SIA CEO John Neuffer, “U.S. semiconductor companies invest an average of one-fifth of their revenues in R&D annually, among the largest shares of any sector. Restoring the longstanding policy of allowing the immediate, full deduction of R&D investments would help expand U.S.-based R&D and innovation, spur economic growth and job creation, and strengthen America’s tech workforce.”

Since 1954, R&D expenditures were treated as an immediate deduction.

For decades, the immediate deduction for U.S. R&D expenditures provided a longstanding incentive for chip companies to make those investments, helping to maintain U.S. leadership in this technology.

As of 2022, however, U.S. R&D expenses must now be amortized over five years, making it less attractive to perform R&D in the U.S. and harming competitiveness of the domestic semiconductor industry.

Even prior to the amortization requirement, the U.S. R&D incentive trailed those offered by global competitors, and without action to restore immediate deductibility of R&D expenses, the U.S. ranking for incentivizing research is projected to fall to the bottom quarter of OECD countries.

In addition, R&D costs are rising exponentially, with the most advanced semiconductor node costing more than $500 million to design, double the cost to design the previous leading-edge chips. Full and immediate expensing is necessary to spur R&D investments in the U.S. semiconductor industry and allow companies to further innovate and expand the domestic R&D workforce

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