On Dec. 20, 2022, members of Congress released a bipartisan $1.7 trillion FY 2023 federal government spending bill that increases funding for both defense and non-defense programs. President Biden is expected to sign a final package to fund the government through Sept. 30, 2023. However, businesses may focus on what the bill omitted rather than what lawmakers included.
Absent from this omnibus spending package is a reinstatement of full immediate expensing of research and development, which, as of Jan. 1, 2022, is amortized over five years. Manufacturers and others lobbied lawmakers to reinstate full R&D expensing for 2022 and extend it through 2025 to align with the coming fiscal cliff when other provisions in the GOP-passed Tax Cuts and Jobs Act of 2017 expire.
Democrats pushed for inclusion of an expanded and renewed Child Tax Credit in exchange for fixing the R&D expensing provision, a request too much for Congressional Republicans who saw the R&D credit as bipartisan. Not only did lawmakers fail to fix R&D, they did not address EBITDA Section 163(j), under which as of Jan. 1, 2022, businesses cannot include depreciation or amortization as part of their business loan deductions. Those who plan significant capital expenditures in 2023 are also in for a more costly year as 100% bonus depreciation, or full expensing, falls to 80% on Jan. 1, 2023.
Given the divided Congress starting on Jan. 3, 2023, addressing these tax provisions in the coming year is unlikely.