R&D Expensing Restored: A big win for U.S. innovation in the OBBB Act
Congress has officially restored and made permanent full expensing for research and development (R&D) under Section 174 of the U.S. tax code. This change was included in the One Big Beautiful Bill Act (OBBB), which Congress passed on July 3, 2025, and President Trump signed into law on July 4, 2025.
The bipartisan OBBB extends key provisions of the Tax Cuts and Jobs Act and introduces significant tax law updates aimed at bolstering business investment and economic growth. Among its most impactful changes: the long-awaited reform to Section 174.
OhioX, a member of the Technology Councils of North America (TECNA), strongly supported these R&D expensing provisions and joined advocacy efforts to push them over the finish line.
Why it matters for Ohio
This reform reverses the 2022 amortization requirement that forced businesses to spread out their R&D deductions over five years—an unexpected blow that hit small tech startups and innovation-driven firms hard. Under the new provisions:
Full R&D expensing is now permanent, allowing businesses to deduct R&D costs immediately.
Small businesses with less than $31M in receipts will receive retroactive relief, unlocking refunds for previously incurred R&D expenses.
These changes are critical for Ohio’s growing innovation ecosystem, especially as startups and mid-sized tech firms continue to lead advancements in AI, HealthTech, advanced manufacturing, and more. By eliminating financial uncertainty, the new rules empower companies to hire, build, and scale faster.
What they’re saying
TECNA praised the legislation for “strengthening American innovation, small business growth, and long-term economic competitiveness,” emphasizing its importance for early-stage and growth-oriented tech companies.
OhioX, alongside other tech associations nationwide, have advocated for this outcome for more than three years in Washington D.C. with members of Congress and Presidential Administrations.
Looking ahead
With Section 174 reform now law under the OBBB, America’s innovation economy has one less barrier to growth. The restoration of full R&D expensing unlocks new opportunities for startups, scaleups, and established firms to invest in breakthrough technologies.
By reducing financial friction, this change clears the way for more hiring, product development, and bold innovation—strengthening America’s position as the global leader in innovation.