Automakers, Parts Manufacturers Urge Congress to Restore R&D Deduction

Trade Associations Urge Congress to Restore R&D Tax Deduction

A change to the U.S. tax code has been “particularly burdensome for the auto industry, threatening thousands of jobs.”

Trade associations for the major automakers and parts manufacturers recently sent a letter to Congress urging lawmakers to pass legislation including the restoration of full first-year deductibility for research-and-development (R&D) expenses.

Co-signing the letter were the Alliance for Automotive Innovation; American Automotive Policy Council; Autos Drive America; MEMA, The Vehicle Suppliers Association; and the Truck and Engine Manufacturers Association, which collectively represent millions of workers in the auto industry.

“Congress must restore this tax provision to enhance U.S. competitiveness, job creation and innovation as soon as possible,” said Ann Wilson, MEMA’s executive vice president of government affairs. “As this industry is facing massive transformation, R&D is crucial. Many of our members are smaller, innovation-driven vehicle suppliers and are struggling with the financial burden to remain competitive in the global marketplace. Restoration of yearly deductibility goes a long way in addressing these fundamental challenges.”

For almost 80 years, motor vehicle and component manufacturers relied on the availability of full first-year deductibility of R&D expenses. A new law implemented in 2022 now forces businesses to spread that deduction over five years, making R&D exponentially more expensive, the associations assert.

The trade associations lament that the change has been “particularly burdensome for the auto industry, threatening thousands of jobs.” Of the $538 billion spent on R&D activities in the U.S. in 2020, more than $23 billion (4.3%) was invested by the motor vehicle industry, according to the associations.

“More than 10% of U.S. auto jobs are in the R&D space,” said John Bozzella, president and CEO of the Alliance for Automotive Innovation. “The auto industry invested $23 billion in R&D activities in recent years – the third highest of any manufacturing sector. By restoring the full deductibility of R&D expenses, Congress can ensure that investment keeps moving in the right direction – supporting U.S. jobs, expanding American innovation and boosting global competitiveness.”

As the letter is distributed, the trade associations are mobilizing members and employees to urge members of Congress to immediately pass legislation restoring full first-year tax deductibility for R&D expenses to protect jobs and preserve the motor vehicle industry’s financial health and competitiveness.

“American Automakers Ford Motor Company, General Motors Company and Stellantis invest heavily in R&D,” said Gov. Matt Blunt, president of American Automakers Policy Council. “These critical investments are vital if American automakers are going to lead the transportation revolution and offer customers the most innovative products in the world. The ability to deduct R&D expenses is needed to ensure our domestic auto production continues to be competitive in the global market.”

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