AdvaMed Calls on Congress to Reform Tax Code to Support Small Businesses

WASHINGTON, D.C. – Following the introduction of the bipartisan American Innovation and Jobs Act in the U.S. Senate and its House companion the American Innovation and R&D Competitiveness Act, AdvaMed, the MedTech Association, called on lawmakers to quickly pass the legislation which would allow for small companies to deduct their research and development expenses in the year they are incurred. Currently, companies are required to deduct their expenses over the course of five years.

“R&D is critical for medtech companies developing the next generation of innovative treatments and diagnostics, but the R&D phase is also a period of uncertainty and high risk,” said Scott Whitaker, AdvaMed President and CEO. “Recent changes to the R&D amortization policy have exacerbated this risk by subjecting small companies to onerous tax burdens, including on federal grant funds, creating an environment where the most innovative and promising medical technologies could wither on the vine. The bipartisan bills in the House and Senate address this concern by reversing this policy, and we encourage Congress to make this measure a priority to support America’s small businesses, especially those developing the medical technologies that are improving health outcomes every day.”

“Repeal of this R&D tax change is necessary to preserve the ability of many small medical technology companies, the lifeblood of the device innovation ecosystem, to stay in business,” said DeChane Dorsey, Executive Director of AdvaMed Accel. “Changes to the tax code have created challenges for many small companies as they work to limit their tax liability on money given to them by the federal government to innovate technologies that fulfill an unmet need identified by agencies including NIH, NSF, and DoD. The current requirements run counter to the intent of establishing these grant programs and could roll back the clock on researching, developing, and bringing innovations that help patients to market.”

Research and development (R&D) is critical to the development of innovative medical technologies. It represents a major, necessary expense for medical technology companies to develop novel, safe, and effective products to serve patients. Prior to 2022, the tax code recognized the importance of U.S. innovation by allowing medical technology and other industries to deduct their R&D expenses in the year they were incurred. In January 2022 the policy changed requiring a deduction over five years, making it harder for companies to make critical investments in developing the latest in medical technology.

The medtech industry, represented by AdvaMed, is a world leader in developing new and innovative health care technologies, contributing nearly $100 billion to the U.S. economy and employing approximately 400,000 people. AdvaMed Accel represents small and emerging-growth medtech companies, which comprise more than 80 percent of the industry and serve as a key driver of innovation and patient outcomes. These small companies are the hardest hit by the change in tax treatment of R&D expense.

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