U.S. House Introduces Bill to Reverse R&D Capitalization Rules

The U.S. House of Representatives introduced the American Innovation and R&D Competitiveness Act of 2025 on March 10. This bill would revive the ability of businesses across the country to fully deduct their research and development (R&D) expenses in the year incurred, reversing a law that became effective in 2022. 

Since 2022, companies have been required to spread their domestic R&D expenses over a five-year period (or in the case of foreign-based R&D, a 15-year period) — an accounting treatment called capitalization and amortization.  

The House bill is a response by lawmakers to the U.S. business community’s consistent opposition to the R&D capitalization and amortization requirement, which substantially increased current tax liabilities for companies with significant R&D activities beginning in the 2022 year. The reintroduction of immediate expensing for R&D activities would bring U.S. tax law back in line with countries that offer generous tax incentives for conducting research within their borders, incentivizing U.S. companies to ramp up their investment in innovation. 

If the House bill passed in both chambers of U.S. Congress, the R&D rule changes would be retroactive to the existing law’s effective date. In other words, companies would be able to amend their 2022–2024 returns to claim full deductions for R&D expenses incurred during those years. Companies would still be allowed to elect to capitalize and amortize their R&D expenses over a period of at least five years. 

While the bill has bipartisan support, there is substantial uncertainty around the successful passage of the legislation given the continued discussions in both chambers of Congress that prioritize a broader tax reform package. 

Smith + Howard: R&D Deduction and Credit Experts 

R&D is an important component of any innovating business and contributes to a thriving economy, which is why the U.S. tax law provides many perks to U.S. businesses conducting research both domestically and abroad.  

However, finding and properly claiming these incentives isn’t always straightforward. The Smith + Howard Specialty Tax Services team is dedicated to helping businesses across industries optimize their R&D tax planning. Advisors identify tax opportunities to help businesses maximize their return on investment.  

If your business conducts or outsources R&D activities, contact a member of the Smith + Howard Specialty Tax Services team to ensure you’re taking advantage of all the incentives available to you.