Movement to Restore R&D Tax Credit Prompts Broadband Interest

Since 2022, companies have had to amortize R&D expenses over a 5-year period.

Movement to Restore R&D Tax Credit Prompts Broadband Interest
Photo of Jonathan Spalter, CEO, US Telecom

WASHINGTON, January 19, 2024 – Lobbyists are calling attention to a growing movement urging Congress to resume the immediate expensing of research and development costs rather than over a five-year period, noting the freed-up cash will aid American competitiveness and investment in emerging technologies such as 6G and OpenRAN.

Starting in 2022, companies have had to amortize research and development expenses over a five-year period as a result of changes in Section 174 of the Tax Cuts and Jobs Act. The changes to the 2018 tax bill stripped the ability for R&D costs to be immediately amortized. 

Critics of the policy change, such as Jonathan Spalter, CEO of lobbyist group US Telecom, and Melissa Newman, vice president of Telecommunications Industry Association, argue that the policy changes make it difficult for broadband companies to pursue innovative technologies.

Spalter issued a letter to Congress on January 16, 2024, asserting that the reinstatement of immediate expensing of R&D research would, “spur more broadband deployment.” Newman issued a separate letter two days later, calling for “critical investments in research and development.”

Amortization costs have had a negative impact on broadband industry, group argues

Newman argued that amortization of costs have had an especially negative impact on the broadband industry. She said that the status quo places America at a competitive disadvantage against China and makes it harder to invest in 6G, a cellular network that utilizes AI tech to reach speeds 100 times faster than 5g, and OpenRAN, a mobile network architecture that allows providers to utilize parts from an array of vendors.

The Center for a New American Security, a Washington-based think tank, points out that China gifts firms with tax breaks and subsidies. 

The TIA VP bemoaned that amortization of costs have made it more expensive to take the risks necessary to pioneer emerging technologies. She underscored that companies are forced to not only amortize their domestic research, but have to do the same for international research over a 15 year period.

Critics of amortization tend to argue that the practice saps American economic competitiveness by disincentivizing companies from developing new technologies. Moreover, R&D costs tend to be concentrated in specific sectors, with information technologies serving as a major consumer in the space. The information sector would see their tax liabilities fall by 23.1 percent with the reimplementation of R&D expensing, according to data provided by Tax Foundation. 

TIA points to potential policy prescriptions to help American broadband regain its competitiveness. The group touts the Broadband Tax Treatment Act, which would exclude grants for broadband deployment from being treated as taxable income. Proponents of this bill argue that it would free up more money for companies to invest in technologies, helping America bridge the gap between itself and China.

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