Ahead of the Curve: House Passes Tax Relief for American Families and Workers Act
Together MEMA, The Vehicle Suppliers Association and hundreds of other advocacy groups persuaded the House to overwhelmingly pass (357-70) the Bipartisan “Tax Relief for American Families and Workers Act” on January 31, 2024, including restoration of full one year deductibility of R&D expenses. This easily surpassed the 2/3 vote threshold of a measure scheduled under suspension in the House. In fact, 77% percent of Republicans and 88% of Democrats voted yes! It is great to have a bipartisan House affirmation of such an important measure for the future of the country. As Bill Long, President and CEO of MEMA noted in a February 1 release, “This is a significant step forward for MEMA members and the country. The House passed legislation that returns yearly deductibility of R&D expenses and restores the competitiveness of U.S. manufacturers.” Here is the link to the full MEMA Statement on this success: https://www.mema.org/news/mema-statement-tax-relief-american-families-and-workers-act
Now it is on to working on a bipartisan vote in the Senate on the measure, which needs to pass before March 2024. If we can make that happen, the President will sign the bill, and a critical aspect of U.S. competitiveness will be restored. The MEMA Tax Working Group has been working on restoring one year deductibility of R&D expenses for more than three years, and its members now see a path victory.
For more than two years, U.S. law has required five-year amortization of R&D. U.S. R&D has plummeted, and innovative small businesses have been hit by major tax bill increases to the tune of 20-30%. The U.S. has also slipped to 30th out of 37 OECD countries in the effectiveness of its R&D incentives. Companies can choose to do their R&D in Asia, Europe, or the United States and North America. Having the R&D fix in place, will help enable them to pick the U.S.
Strong R&D incentives are necessary for the motor vehicle parts sector as MEMA members move toward a zero-emission future and pursue driverless and other pathbreaking new technologies. As MEMA and four motor vehicle associations noted in a recent letter to Capitol Hill:
“Nearly one in 20 U.S. jobs are supported by the motor vehicle industry. Further, of the yearly $538 billion spent on R&D activities in the United States in 2020, more than $23 billion (4.3 percent) was invested by the motor vehicle industry - the third highest for any manufacturing industry group. About 84 percent, or nearly $21 billion of U.S. R&D investment in motor vehicles comes from the motor vehicle industry.” View the full letter here.
MEMA and the full range of American manufacturing and technology companies support the R&D fix, along with restoration of full interest rate deductibility and restoration of full expensing of plants and equipment. Both measures are also in the bipartisan tax bill.
On January 19, 270 major associations, including MEMA signed a letter to Capitol Hill urging passage of the “Tax Relief for American Families and Workers Act.” The letter noted,
“Now is the time for Congress to prioritize U.S. innovation, manufacturing and economic growth, particularly as strategic competitors like China are offering ever more generous incentives. Congress must act to protect the thousands of small and medium businesses, hundreds of thousands of family-supporting jobs and billions of dollars of pro-growth investments supported by these provisions.” View the full letter here.
Recently, MEMA President Bill Long and North Carolina Chamber CEO Gary Salamido wrote an op ed in three major North Carolina newspapers, urging Congressional action on R&D. Read the full op-ed here.
MEMA will continue a full court press on the vital R&D issue with the objective of getting this over the finish line as soon as possible in 2024.