House Committee Passes Part of “Big, Beautiful Bill” Containing Noteworthy Improvements to Research and Development Incentives for Companies

On May 13, the House Ways and Means Committee passed “The One, Big Beautiful Bill.” This bill includes several provisions that, if enacted, will be important to businesses claiming research and development incentives:

• Immediate Expensing for Domestic Research and Experimentation (“R&E”) under Section 174
  • The bill would suspend the current amortization requirement for domestic R&D expenses and allow companies to fully deduct domestic research costs in the year incurred for tax years beginning January 1, 2025 and ending December 31, 2029.
  • A new section, IRC Section 174A, would govern the temporary rules for domestic R&E expenditures during the suspension period.
• Software Development Included as R&E Expenditure
  • Amounts paid or incurred in connection with software development would be treated as R&E expenditures eligible for immediate expensing during the suspension period.
• Exclusions from Immediate Expensing
  • The bill provides that some expenditures are ineligible for immediate expensing, including expenditures for the acquisition or improvement of land, expenditures for the acquisition or improvement of property subject to depreciation or depletion allowances, and expenditures for locating mineral deposits, including oil and gas.
• Alignment with Section 41 Research Credit
  • The proposed legislation would amend IRC Section 41(d)(1)(A) to include references to domestic R&E expenditures under Section 174A, ensuring consistency in the definition of qualified research expenses.​
• Deduction Limitations
  • IRC Section 280C(c) would be amended to address the treatment of deductions related to domestic R&E expenditures, preventing double benefits.​

Congress’ Next Steps

The tax bill will be combined with other House Committee’s work, and Republican Leadership likely will make further changes to find agreement among the slim House majority before moving the bill through the full House of Representatives. If the bill passes, it will proceed to the Senate where further, extensive changes are expected. The House and Senate will have to reconcile the differences between the two bills, potentially requiring another vote in each chamber. The bill faces significant legislative and political hurdles that may complicate or delay its enactment.

Key Takeaways and Predictions

Companies, especially small and mid-sized firms, will welcome the return of immediate R&E expensing if enacted into law. We expect that R&E expensing will likely survive the reconciliation process due to wide support among the business community and bipartisan backing.

“The One, Big, Beautiful Bill” still has numerous hurdles to overcome, and Congress is under a tight timeline given a mid-July deadline for lifting the debt ceiling and a requirement that the budget reconciliation process must be used by September 30, 2025. Due to this timing, Republican Leadership intends to send the bill to President Trump for signature by July 4^th.