Where We Are Now
Earlier this week, the U.S. House Ways and Means Committee advanced the tax changes of the FY2025 budget reconciliation package—dubbed “The One Big Beautiful Bill”—by a party-line vote of 26–19. The changes as approved reinstate the immediate expensing of domestic research and development (R&D) investments through 2029. This marks a significant step forward in the push to restore the innovation incentives under Section 174 of the Internal Revenue Code. The changes now head to the House Budget Committee, where they will be consolidated into a broader reconciliation package ahead of a floor vote.
But it is far from a done deal. Several hurdles remain as House leadership prepares to move the entire package forward.
As the process continues to unfold, there is an open opportunity to improve on the House version during the Senate reconciliation process.
What More Must be Done
The Small Software Business Alliance (SSBA) and our members commend the House for taking swift action to address the damaging effects of amortization by restoring immediate expensing of R&D investments. We now call on the Senate to improve upon the House action in three key ways to amp up support for U.S. small businesses:
- Make Full Expensing Permanent
The House bill currently restores immediate R&D expensing only through 2029. While this is a positive start, it falls short of what small businesses need to plan, grow, and innovate with confidence. Temporary tax relief forces small firms to operate under constant uncertainty. Long-term investments in research, workforce development, and new technologies cannot be made under the threat of future tax cliffs. Permanent full expensing provides the stability businesses need to chart multi-year innovation strategies, attract investment, and remain globally competitive. For small firms operating on thin margins, permanency is not a luxury—it’s a necessity.
- Apply Full Expensing Retroactivity to 2022
Since the amortization mandate took effect in 2022, thousands of small businesses have faced dramatically increased tax bills—many by up to five times previous levels. This unexpected burden has drained working capital, stalled hiring, and put promising R&D projects on hold. The 2017 Tax Cuts and Jobs Act (TCJA) amortization provision was never intended to be permanent—it was a budget gimmick. Retroactive relief is essential to correct this unintended harm. Allowing businesses to amend prior returns and reclaim overpaid taxes would provide an immediate cash infusion at a time when many are still recovering from economic shocks. Retroactive restoration addresses the unintended harm that has already occurred, putting money back into the hands of small businesses who urgently needed this.
- The Inclusion of Immediate Foreign Expensing
The House bill excludes foreign R&D expenditures from immediate expensing, leaving them subject to a punitive 15-year amortization schedule. This distinction unnecessarily punishes a subset of American companies’ investments. Even the smallest SSBA members are global and collaborate with international talent, access specialized resources, and develop solutions for a worldwide market. Immediate expensing of foreign R&D is not about outsourcing—it’s about the survival of American small businesses in a global economy. While large corporations can absorb the cost and complexity of amortization, small businesses cannot. Denying immediate expensing for foreign R&D punishes smaller firms for innovating globally and puts them at a disadvantage against foreign competitors operating in more supportive tax regimes. To foster U.S. innovation leadership, Congress must ensure that both domestic and foreign R&D expenditures are eligible for immediate, permanent expensing.
As Senate negotiations unfold, momentum is building. The bipartisan reintroduction of the American Innovation and Jobs Act (S.1636) by Senators Young and Hassan—joined by 34 cosponsors—alongside its House companion (H.R. 1990) with 78 cosponsors, reflects growing recognition that restoring R&D expensing is critical for economic competitiveness.
Call to Action
The road to restoring immediate R&D expensing has been long—and for many small businesses, painful. But with bipartisan support in the House and Senate and the reconciliation process underway, we are at a pivotal moment. SSBA urges the Senate to seize this opportunity to:
- Make full R&D expensing permanent;
- Extend immediate expensing to foreign R&D expenditures; and
- Apply relief retroactively to tax years beginning in 2022.
These provisions aren’t just tax policy—they’re economic lifelines for the innovators building the next generation of American technology. We call on Congress to champion U.S. small businesses and deliver the certainty, flexibility, and fairness that innovation demands. Now is the time to finish the job.
If your small business has been affected by these changes, we encourage you to contact your Senators using our Letter Desk. You can also sign on to our SSBA letter urging Congressional leadership to include these critical provisions in the Senate version of the bill.