24 October 2023

Through the years, Research and Development (R&D) has always played an important role in the US economy and its growth, creating millions of jobs, and developing innovative technologies, allowing the country to stay ahead of competing nations. Investments in R&D are central for long-term technological change and innovation, and the private sector has long led the front line in R&D, with several small and medium-sized companies dedicated to developing new products and technologies and bringing even more innovation to the country.

However, recently the amortization of R&D expenses – that requires a slow deduction over 5 or 15 years depending on domestic or offshore expenses, instead of deduct 100 percent in the year which they were incurred – have complicated things to businesses that invest in R&D, and already started to slow the sector’s growth.

Over the next decade, amortization will reduce overall private sector R&D spending by $70 billion, a substantial number when put in the perspective of both competition and national security. According to an Information Technology & Innovation Foundation estimative, it is predicted that by 2032 the national economy will have shrunk by $45 billion, 400,000 jobs will be lost, and billions in anticipated R&D investments will disappear. This change puts the US on a path to handing over the keys to global R&D supremacy, moving in the opposite direction at a time when countries with which it has a tense relationship, such as China, are boosting R&D.

What R&D offers and why it matters

R&D and economic growth often go together, being an essential function for many businesses, launching new offerings or improving existing ones in a way for a business to remain competitive and make profit, often leading to new products or services.

By offering performance that their rivals cannot easily replicate, companies gain a competitive advantage. If R&D efforts lead to an improved type of business process, cutting marginal costs of increasing marginal productivity, it will become easier to overtake competitors.

Investing in R&D can help your businesses achieve long-term success: the benefits extend across entire sectors and have a positive impact on the broader economy. A sector that invests heavily in R&D will develop and achieve more, including real benefits to people.

How can we help you?

FI Group is a global tax consultancy that helps industry obtain tax credits and incentives, with more than 1,700 qualified employees, counting on specialists from different fields, committed to supporting companies of all sizes and in all sectors of activities. With our expertise, FI Group specialists can support your company in identifying qualified activities. We specialize in helping companies finance innovation and secure funding for their R&D activities through the comprehensive management of the R&D Tax Credit.

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