AdvaMed Urges Senate Leader to Prioritize R&D Tax Credit in Any Tax Package
Letter to Sen. Schumer: R&D is “critical to the development of innovative medical technologies … a major, necessary expense for companies to develop novel, safe, and effective” devices
WASHINGTON, D.C. – This week, in a letter to Senate Majority Leader Chuck Schumer, AdvaMed President and CEO Scott Whitaker underscored the critical importance of passing a tax provision that allows small businesses to deduct their research and development expenses in the year the expense was incurred. AdvaMed, the world’s largest trade association representing medical technology companies, supports the provision, which until 2022, encouraged small companies and startups to continue investing in R&D, the lifeblood of these primarily pre-commercial companies.
From the letter: “Research and development is critical to the development of innovative medical technologies. It represents a major, necessary expense for companies to develop novel, safe, and effective products to serve patients. Wherever appropriate, the tax code should promote investment in researching and developing the next generation of treatments for 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 medtech. This change imposes a significant, potentially devastating one-time tax burden on research-intensive start-up companies, many of whose primary source of revenue is federal grant funding in pre-commercial stages of product development.”
Read the full letter here.
Earlier this year, Whitaker wrote a letter to House and Senate Leaders urging passage of the bipartisan, bicameral Tax Relief for American Families and Workers Act of 2024, which passed out of a key House committee shortly after introduction.
Under current law, research or experimental costs paid or incurred in tax years beginning after December 31, 2021, are required to be deducted over five years. The new provision delays the date when taxpayers must begin deducting those expenses over five years until after December 31, 2025.
The five-year deduction requirement is especially hard for small and emerging companies, which account for more than 80 percent of the medtech industry and are critical to driving innovation and improving patient outcomes. Research and development funding is expensive and hard for small companies to afford, given their narrow operating margins.
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