The reconciliation bill passed by the House this week includes a fix Life Science Washington and many others in our industry have been advocating for: restoring immediate expensing for R&D costs.
Since the change to Section 174 of the tax code took effect in 2022, companies have been required to amortize R&D expenses over five years instead of deducting them in the year the costs are incurred. For pre-revenue startups, companies backed by grants, or those reinvesting all capital into research, this created a significant and often unexpected tax burden — one that didn’t align with how these businesses actually operate.
Life Science Washington has worked consistently for over two years with Washington’s congressional delegation to help them understand the impact this provision was having on our members. We shared stories from early-stage life science companies across the state that suddenly faced steep tax bills without the revenue or reserves to cover them. Some had to delay hiring or put new research efforts on hold. Others began rethinking whether they could continue accepting federal research grants, funding that’s often essential to early-stage scientific work, because the resulting tax exposure had become too risky.
The bottom line is simple: the amortization requirement penalizes companies for doing R&D, particularly the kinds of companies that are foundational to Washington’s innovation economy. If left in place, the policy would continue to discourage new startups from forming and make it harder for existing ones to grow. That’s not the outcome anyone should want if the goal is to support innovation, job creation, and the development of new technologies.
The House’s decision to reverse this requirement is a step in the right direction. Immediate expensing is a long-standing and widely supported tool that allows companies to reinvest in research and innovation without being hit with tax bills they can’t realistically pay. Fixing this doesn’t solve every challenge facing our industry, but it removes a major and unnecessary barrier to progress.
While the reconciliation bill passed along party lines, this fix has had broad bipartisan support in both chambers of Congress, and the fact that it’s now included in a major tax package is encouraging. It shows that the message is being heard: early-stage R&D needs to be supported, not hindered by unproductive tax policy.
As the bill moves to the Senate, Life Science Washington will stay engaged with our national partners to ensure this provision makes it into the final package. Washington’s life science companies — and the patients, workers, and communities they support — need clarity and certainty around the tax treatment of research investments. Restoring immediate expensing is a key part of that, and we’ll keep pushing until it’s across the finish line.
Have questions, comments, or concerns about these bills or any other pending legislation? Get in touch with LSW’s Public Affairs Manager, Curtis Knapp.
