(Bloomberg) -- Major tech companies lobbying to salvage a tax deduction for research and development are warning they may pull back from high-profile pledges of new US investments if Congress doesn’t fully reinstate the break.
Big tech companies have pledged more than $1.6 trillion in investments in the US since Donald Trump took office, promising to build factories and data centers in alignment with Trump’s push to build in America.
But industry representatives are signaling those promises will be imperiled if Congress doesn’t fully reinstate the R&D tax deduction, which was pared back to help offset the massive cost of President Donald Trump’s 2017 bill. At the time, it was estimated that limiting the provision would temporarily raise about $120 billion from 2018 to 2027.
“A lot of those announcements are predicated on an expectation the administration and Congress will partner together on reinstating those R&D provisions,” said Jason Oxman, president of the Information Technology Industry Council, a trade group that includes among its members Amazon.com Inc., Apple Inc., Anthropic, Alphabet Inc., and IBM Corp.
Lobbyists representing tech companies that announced US investments have made similar claims to congressional aides and lawmakers, according to people familiar with the conversations. The companies behind those plans — Apple Inc., Oracle Corp., Microsoft Corp., Meta Platforms Inc., Amazon.com Inc. and TSMC — did not respond to requests for comment on whether their investments are contingent on deducting their research and development expenses.
“Enabling R&D is essential to strengthening U.S. technology leadership, economic competitiveness, and national security,” according to a statement from Intel’s vice president for government affairs Al Thompson. “Restoring the R&D tax deduction will incentivize sustained investments that drive cutting-edge innovation across industries.”
In 2024, Intel invested $16.5 billion in R&D, the vast majority of which was in the US, one of the largest investments by any company.
Tech companies have paired those warnings with marketing pushes targeting lawmakers’ districts, particularly events promoting the potential of artificial intelligence. Venture capital firms are also closely involved in the lobbying campaign.
Excitement over AI’s potential is emerging as an effective tool to make the case for the tax break, according to advocates for the provision. The Trump administration has emphasized AI development as a central prong of its agenda.
In recent months, an education nonprofit affiliated with the tech industry trade group has held meetings attended by Republican and Democratic lawmakers in Florida, Michigan and Illinois to highlight how AI impacts different industries from agriculture to health care.
So far, the campaign appears to be working.
Jason Smith, chair of the House Ways and Means Committee, last week told lobbyists at a fundraiser that he expected R&D expensing would make it into the final package, said Caroline Schellhas, senior director of government affairs for the National Venture Capital Association.
In late April, the venture capital trade group’s board of directors traveled to Washington to argue on behalf of reinstating the full R&D deduction, among other tax priorities, Schellhas said. NVCA’s board includes top executives from firms including Andreessen Horowitz, Bessemer Venture Partners and Benchmark. Alongside members of the House Ways and Means and Senate Finance committees, the board also met with a top lieutenant to Treasury Secretary Scott Bessent.
There’s some evidence US corporations pulled back on research investment once the R&D tax break became less generous in 2022. After previously growing more than 6.5% annually, R&D spending in the U.S. increased only 3.5% over the course of 2022 and decreased in 2023, according to Bloomberg Tax.
Lobbyists are optimistic Congress will restore the full break, allowing companies to write off the entire cost of research and development in the year they incur the expense rather than the pared-down break spreading the value of the deduction over five years.
Charles Crain, managing vice president of public policy at the National Association of Manufacturers, a powerful lobbying group advocating for the research deduction, said he is “very confident” the break will be fully reinstated.
So industry advocates are focusing on getting Congress to make the new break retroactive, effectively reimbursing companies for the money they missed out on while the value of the R&D deduction was curtailed under the Trump tax law.
While estimates vary, the cost would be high. Making R&D expensing retroactive to 2022 and permanently extending it would cost $139 billion over ten years, according to Congress’s Joint Committee on Taxation. The Tax Foundation forecasts much greater revenue losses: $161.4 billion from 2025 through 2034, and that’s assuming the policy isn’t retroactive.
A bipartisan group of two dozen senators, led by Republican Senator Todd Young of Indiana and Democratic Senator Maggie Hassan of New Hampshire, introduced a bill to revive full upfront R&D deductions for businesses. That bill would restore the benefit retroactively — though that ask has been met with some skepticism from members of the House Ways and Means Committee, according to a congressional aide.
“Anything can change at any moment, but we feel good about where we are,” Oxman said. “We’re going to continue pressing forward until it’s done.”
