Section 174 Innovation Tax Repealed — Thank You for Making It Happen!
We’re thrilled to share the incredible news: the Section 174 “Innovation Tax” has been repealed! This victory is a testament to the dedication, collaboration, and persistence of innovators, entrepreneurs, advocates, and organizations across the country who came together to protect U.S. research and development.
The Innovation Tax, a provision from the 2017 Tax Cuts and Jobs Act (TCJA), required companies to amortize their Research and Experimentation (R&E) expenses over several years rather than deducting them immediately. This policy placed a heavy burden on businesses—especially early-stage and pre-revenue startups—forcing them to pay taxes before earning any profit.
Because of your collective advocacy and the unified voice of the innovation community, Congress has acted to repeal this harmful tax as part of the One Big Beautiful Bill Act (OBBBA) in July 2025. Our collective efforts have helped restore critical R&D tax provisions, ensuring that American innovation can continue to thrive.
Read dozens of heartbreaking stories about how the Innovation Tax has impacted many of the most innovative businesses in our nation.
- July 2025 – Section 174 Innovation Tax is repealed as part of the One Big Beautiful Bill Act (OBBBA)!
- May 2025 – After a year of waiting, Congress is once again proposing legislation that would REPEAL the Section 174 Innovation Tax!
The Ways and Means proposed legislation would restore the full value of the Section 174 deduction for research and development conducted domestically for five years (after Dec. 31, 2024 and before Jan. 1, 2030). Companies will once again be able to deduct 100% of expenses in the first year. - April 2024 – A bill that would fix the Innovation Tax stalled in the Senate, and the with the fall 2024 elections, there won’t be another opportunity to repeal the Innovation Tax until 2025.
- January 31, 2024 – THE HOUSE APPROVES The Tax Relief for American Families and Workers Act that retroactively repeals the Innovation Tax by a vote of 357-70!
- January 23, 2024: OpEd “R&D Firms to Congress: Don’t Hang Us Out to Dry With Apocalyptic Taxes!” in Real Clear Energy
- January 19, 2024: A bipartisan bill has been introduced called the Tax Relief for American Families and Workers Act of 2024 that would repeal the Innovation Tax through 2025! NOW is the time to reach out to Congress to urge their support of this bill that is critical for the future of US Innovation!
- January 17, 2023: Charlotte Business Alliance sends letter to Senator Tillis, urging his support for the “Tax Relief for American Families and Workers Act of 2024“. The letter states, “Being able to expense R&D expenditures in the year they are incurred under Section 174 of the Internal Revenue Code is critical to many businesses’ continued viability.”
- January 16, 2023: Senate Finance Chair Ron Wyden (D-Ore.) and House Ways and Means Chair Jason Smith (R-Mo.) announce a bipartisan deal to defer the Innovation Tax on US R&D, retroactive to the 2022 tax year!
- December 11, 2023: News & Observer publishes an article on the impact of the Innovation Tax. The article quotes 2 Congressional Leaders (a Republican and a Democrat), who express bipartisan support for repealing the tax:
A spokesperson for Republican Senator Thom Tillis stated, “restoring full expensing under Section 174 is one of Senator Tillis’ top priorities.”
A spokesperson for Democratic Rep. Valerie Foushee said “local businesses and innovators who have earned and receive support through government funding and federally funded research grants should not be subjected to crippling tax bills that are based on the grants awarded to them.” Read More. - December 4, 2023: Over 1,000 small business leaders representing all 50 states have sent a letter to Congress urging immediate deferment of the Innovation Tax.
- November 30, 2023: North Carolina’s Secretary of Commerce, Machelle Sanders, Urges Congress to Defer Innovation Tax. According to Secretary Sanders, “Section 174 could dramatically reduce the ability of North Carolina entrepreneurs to develop novel products and processes that create new jobs.”
- November 29, 2023: Congressman Yakim leads nearly 150 Republicans in sending a letter to House Speaker Mike Johnson encouraging immediate reversal of the Innovation Tax.
Thank you to everyone who emailed, called, and visited their legislators! Your outreach was instrumental in educating Congress on the dire impact of the Section 174 Tax on Innovation.
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- R&D Firms to Congress: Don’t Hang Us Out to Dry With Apocalyptic Taxes!, Real Clear Energy (January 23, 2024)
- The bipartisan deal that’s gaining momentum, Politico (January 19, 2024).
- Fix for innovation tax in sight? Startups feeling ‘cautious optimism’, Triangle Business Journal (January 19, 2024)
- Congress Explores Curbing Pandemic Tax Break in Bid for Last-Ditch Deal, Wall Street Journal (January 16, 2024)
- Tax breaks for parents, businesses possible in last-minute deal, Politico (January 16, 2024)
- Why is this startup slashing its R&D budget?, ROI-NJ (January 10, 2024)
- ‘This is so crazy.’ Tax spike pushes NC researchers to the brink of bankruptcy”, News & Observer (December 11, 2023)
- Triangle Entrepreneurs Scramble to Survive “Innovation Tax”, TBJ (December 6, 2023)
- “End of key tax break could spell doom – and surprise bills – for some businesses”, BizJournals (November 17, 2023)
- “Shifting Tax Code is “Crushing” for Corporate R&D Viability”, Bloomberg Industry Group: Daily Tax Report (Nov. 14, 2023)
“It’s the most un-American thing I’ve ever heard of, to tax innovation”
– Melissa DeRosier, CEO, 3C Institute and 3C Family Services