As readers of our blog and most small business government contractors likely know by now, the IRS proposed new guidelines for Section 174, the consequences of which will devastate our economy and stop American innovation dead in it's tracks.
To recap: in very basic terms, the enforcement of these guidelines directs all businesses to capitalize any Research and Development expenses over 5 years, including labor. The impact of not being able to claim R&D expenses would create a tremendous tax liability that most small businesses aren’t prepared to cover, by creating hundreds of thousands to millions of dollars of Net Taxable Income out of thin air, for most companies (nearly guaranteeing that thousands of small businesses that won research contracts and grants from the Government in 2022 and 2023, would be forced into bankruptcy).
To give you a sense of how devastating the new guidelines would be for small businesses, ReliAscent® provided the example scenario below (of a company that has a two-year, $1,000,000 award), in the template letter we are offering all small businesses:
...as you can see, the consequences of these new guidelines are absolutely catastrophic for most businesses they impact.
This is a national emergency that will harm tens of thousands of businesses in the US, and would almost certainly spell the end of the SBIR/STTR programs, among many others. If you own or work for a business that recently won an SBIR award, or any other research/development contract from the government, or if your business spends a great deal of resources on R&D (as most companies and startups do in the software development, biopharmaceutical/medical, defense, and technology industries), you need to make your voices heard NOW!
All government contractors and grantees should reach out to their Senators and Representatives and demand they support and pass a bill that would stop this disaster (there are currently two, both of which have been stalled in Congress for several months, of course):
- House Bill - H.R.2673 - American Innovation and R&D Competitiveness Act of 2023
- Senate Bill - S 866 - American Innovation and Jobs Act
Senators can be found and contacted using this page: https://www.senate.gov/senators/senators-contact.htm, and House members using this page: https://www.house.gov/representatives/find-your-representative.
2024 is only 9 weeks away. The time to make your voice heard is now!