Industry Partners Urge Congress to Pass R&D Deductibility Fix

Industry Partners Urge Congress to Pass R&D Deductibility Fix

“Congress must restore this tax provision to enhance U.S. competitiveness, job creation and innovation as soon as possible,” said Ann Wilson, MEMA’s executive vice president of government affairs.

Representing millions of workers, the Alliance for Automotive Innovation; American Automotive Policy Council; Autos Drive America; MEMA, The Vehicle Suppliers Association; and the Truck and Engine Manufacturers Association sent a letter to Congress this week urging lawmakers to pass legislation including the restoration of full, first-year deductibility for research and development (R&D) expenses.

“Congress must restore this tax provision to enhance U.S. competitiveness, job creation and innovation as soon as possible,” said Ann Wilson, MEMA’s executive vice president of government affairs. “As this industry is facing massive transformation, R&D is crucial. Many of our members are smaller, innovation-driven vehicle suppliers and are struggling with the financial burden to remain competitive in the global marketplace. Restoration of yearly deductibility goes a long way in addressing these fundamental challenges.”

“More than 10 percent of U.S. auto jobs are in the R&D space. The auto industry invested $23 billion in R&D activities in recent years – the third highest of any manufacturing sector,” added John Bozzella, president and CEO, Alliance for Automotive Innovation. “By restoring the full deductibility of R&D expenses, Congress can ensure that investment keeps moving in the right direction – supporting U.S. jobs, expanding American innovation and boosting global competitiveness.”

For almost 80 years, motor vehicle and component manufacturers relied on the availability of full first-year deductibility of R&D expenses. A new law implemented in 2022 now forces businesses to spread that deduction over five years, making R&D exponentially more expensive.

This change has been particularly burdensome for the motor vehicle industry. Of the $538 billion spent on R&D activities in the U.S. in 2020, more than $23 billion (4.3 percent) was invested by the motor vehicle industry, according to MEMA.

As this letter is distributed, the motor vehicle and parts sector are mobilizing members and employees to urge members of Congress to immediately pass legislation restoring full, first-year tax deductibility for R&D expenses to protect jobs and preserve the motor vehicle industry’s financial health and competitiveness.

Click here for the full text of the motor vehicle industry’s letter to Congress.

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