A bipartisan tech group — which counts among its members Amazon, Apple, Google, and Meta — is urging congressional leadership to take steps to grow the “innovation economy” as it considers extensions to the 2017 Tax Cuts and Jobs Act and other tax reform.
In a March 10 letter, the group identified its priorities, as Republican lawmakers work to nail down what will go into a tax reform bill. TechNet represents companies in a range of tech fields, including artificial intelligence, cybersecurity, e-commerce, the sharing and gig economies, and venture capital.
Among TechNet’s priorities are maintaining the 21% corporate tax rate, reinstating immediate research and development expensing, and extending the Code Sec. 48D Advanced Manufacturing Investment Credit. The group is also calling on Congress to increase the 1099-K reporting threshold and preserve current tax treatment of qualified small business stock.
TechNet CEO Linda Moore explained that the provisions would “support innovation, spur economic growth, and strengthen the global competitiveness of American businesses.”
The asks come after the House passed a budget resolution last month that would, via the reconciliation process, allow for $4.5 trillion in tax cuts over a current law baseline. The cuts are contingent on congressional committees finding $2 trillion in spending cuts. They are also contingent on the Senate agreeing to the budget resolution — that chamber initially planned to take up immigration, defense, and energy first and save tax reform for a second reconciliation effort later this year.
Likely wins.
Some of TechNet’s priorities seem likely in a reconciliation measure. The 21% top corporate rate is a permanent feature of the TCJA, and something that Republicans — who will lead the way in reconciliation — will probably not touch. In fact, a House menu of options circulated earlier this year priced out even further cuts to the corporate rate — including a top rate of 15% at a 10-year cost of $522 billion.
And roll out of the reduced 1099-K reporting threshold, set by the 2021 American Rescue Plan Act at $600 and no minimum transactions, has been slow. Under the old threshold, third-party settlement organizations like PayPal and Venmo only had to issue Forms 1099-K to those with over $20,000 in gross payments and over 200 transactions. The IRS is still working its way down to the reduced threshold, setting a $5,000 threshold for 2024 and $2,500 for 2025.
The House Ways and Means advanced a bill last session that would have restored the higher threshold of 200 transactions and $20,000 in payments. And lead sponsor Representative Carol Miller (R-WV) has just reintroduced that bill, the Saving Gig Economy Taxpayers Act, this session.
Challenges.
Other TechNet asks may face roadblocks. The Advanced Manufacturing Investment Credit, established under the 2022 CHIPS and Science Act, is intended to spur U.S. production of semiconductors and semiconductor manufacturing equipment. It provides 25% credit for construction through December 31, 2026.
But just last week, President Donald Trump told Congress to “get rid of the CHIPS Act.” He further directed House Speaker Mike Johnson (R-LA) to take any “leftover” funds and “use it to reduce debt.”
The president’s remarks calling for an end to the CHIPS Act incentives came a day after he and Taiwan’s TSMC announced the company would be making a $100 billion investment in the U.S. and building five new chip facilities.
While the Biden administration lured TSMC with a $6 billion grant, leading to the company’s initial $65 billion U.S. investment, now TSMC “is coming to America with $100 billion investment,” said Commerce Secretary Howard Lutnick. “And, of course, that is backed by the fact that they can come here because they can avoid paying tariffs,” he added.
Restoring immediate R&D expensing — particularly in the tech sector — has also been called into question recently. For years, Code Sec. 174 allowed businesses to deduct certain R&D expenses from their income in the year the expenses occurred. Qualified expenses include researcher wages, research supply costs, and research facility operating expenses (but not equipment and buildings). However, under the TCJA, businesses have been required to amortize these expenses over a five-year period (or 15 years for foreign research).
While there has been bipartisan support for restoring immediate expensing, some are urging caution. The Institute on Taxation and Economic Policy contends that restoring it would substantially reduce big tech companies’ effective tax rates — and retroactive restoration to 2022 would bring Amazon’s effective rate to -4% and Tesla’s to -22%.
Senator Elizabeth Warren (D-MA) wrote to the CEOs of Amazon, Tesla, Meta, Apple, and Alphabet last week, questioning how ending immediate expensing has limited their investment abilities when their “R&D investments have increased since R&D expensing ended.” She also asks the CEOs whether they would spend funds received via a retroactive tax break on R&D investments.
However, retroactive restoration is exactly what last year’s House-passed Tax Relief for American Families and Workers Act called for. That bill, which stalled in the Senate, would have restored immediate expensing of U.S.-based R&D retroactively for 2022 and 2023, as well as allowed immediate expensing in the 2024 and 2025 tax years.
A TechNet spokesperson told Checkpoint that the group “would welcome retroactive reinstatement,” noting that it had endorsed last year’s House bill.
Moss Adams Principal and R&D expert Travis Riley told Checkpoint that “what most people are hoping is that there’s a full repeal” of the TCJA changes, and “we go back to the old days where you can expense everything,” which was the law “for almost 70 years.”
But reflecting on last year’s tax reform bill, Riley wondered if a similar, limited extension could be included in the reconciliation bill.
“Is it going to be a temporary repeal? Is it going to be a domestic-only repeal? How many years will it cover? If it’s not permanent, is it going to be retroactive?” These are all questions that companies are asking, said Riley.
Additional reporting by Tim Shaw, Checkpoint.
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