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A 2017 law comes back to haunt startups in 2024

Kia Kokalitcheva of Axios reports on a 2017 tax provision that is hurting startups in 2024.

The C3 Take
  • Full expensing for R&D costs is set to expire in 2025, which could have a series impact on innovation and economic growth.
  • Starting in 2025, firms will have to amortize their R&D expenses over five years rather than immediately, which adds undue costs to the private sector and disincentivizes investments in clean technology.
  • Immediate expensing is a pro-growth climate solution and should be a permanent fixture in the tax code.

How it used to work: If a company had $1.5 million in revenue and $1 million in expenses (let’s say it was entirely domestic R&D), it would pay taxes on its $500,000 profit.

How it works now: In the same example, the company would have to amortize the $1 million in expenses over five years, so it would deduct only $200,000 (one fifth) and would pay taxes on $1.3 million in profit.”

Read the full article here.

The views and opinions expressed are those of the author’s and do not necessarily reflect the official policy or position of C3.

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