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  • Writer's pictureMarie Ambusk

Urgent call to repeal Section 174 “Innovation Tax” 🌱

Updated: Dec 18, 2023



Your ongoing support in our mission to repeal the Innovation Tax is invaluable. On December 4th, the letter signed by over 1,000 small business leaders representing all 50 states was sent to Congress urging immediate attention.


Our collective message will make a difference in keeping this issue front and center as Congress negotiates 2023 year-end legislation. The Innovation Tax jeopardizes the survival of numerous small businesses representing thousands of jobs – the lifeblood of our innovation ecosystem.


Please share this message widely and click here to see how you can help.



BACKGROUND ABOUT THE PROBLEM

The “Innovation Tax” is a result of the 2017 Tax Cuts and Jobs Act (TCJA) and requires amortization of Research and Experimentation (similar to R&D) expenses, starting with tax year 2022. For R&D conducted in the US, only 10% of the costs can be expensed in the year in which they are incurred (year 1), followed by 20% for each of the next four years (years 2-5), and then the final 10% in year 6. While this is a burden for all companies who conduct R&D, it is especially devastating for early-stage, pre-revenue companies, who may have to pay the Innovation Tax before they have any profit or means to pay the tax. According to a 2019 report by Ernst & Young, the Innovation Tax will result in approximately $4 Billion per year in decreased R&D spending, starting in 2022 – for perspective, this is the size of the entire SBIR/STTR program! Unfortunately, early-stage businesses typically do not have the funds to engage in expensive lobbying efforts. Our objective is to provide a central resource for businesses impacted by the Innovation Tax so that we can collectively tell our story to Congress and benefit from our strength in numbers.


Click here for more information, estimated impact by state, and updates.



WHY I CARE

As CEO, Founder, and Principal Investigator of TreesROI™, a Vermont tech startup, I’ve witnessed firsthand the challenges due to the Innovation Tax. Our product, INSIGHT™, is at the forefront of addressing critical issues in young tree root development. TreesROI™ is among the 2023 finalists of the NSF's SBIR grant program however, the financial burden imposed by Section 174 jeopardizes not just our dreams but the entire landscape of government–funded SBIR/STTR innovations. When developed, INSIGHT™ will help us to Grow Better Trees with roots that will not strangle the young trees to death – but we cannot resolve the stranglehold of the Innovation Tax alone.


The momentum in Congress is as strong as ever, with a real possibility of a bipartisan fix. Your continued support is crucial in ensuring our collective voice is heard. Let’s unite to reverse this devastating tax.


Please join our urgent call to action (below)!


Thank you for standing with us.


 

HERE'S HOW YOU CAN HELP!

We are grateful to Eva Garland’s Team for spearheading this effort. Here are some action items found on their website page devoted to this mission.


Please share all your outreach via email with outreach@evagarland.com so they can collate and spread the word on Capitol Hill:

  • Talk to your Members of Congress! Find your Senators (click “contact” on the left) and House Rep (enter your zip code top right) and send a message to urge them to repeal the Innovation Tax.

  • Engage with Media! Be sure to tag your representatives: R: @WaysandMeansGOP | @SenFinance | @RepJasonSmith | @MikeCrapo

  • Share Your Story to add your voice to our Case Studies!

  • Send Your Story to SBIR/STTR Agencies! Include an email subject line “SECTION 174” and explain the harmful impact on your company.

  • All SBIR/STTR recipients: technology@sba.gov

  • NSF SBIR/STTR recipients: sbir@nsf.gov

  • NIH SBIR/STTR recipients: seedinfo@nih.gov

  • DOD SBIR/STTR recipients: susan.r.celis.civ@mail.mil

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