Resource
Engineers design the infrastructure that enhances our daily lives. Whether it’s the water coming from your tap or the six-lane highway bringing you across the country, advancements in American infrastructure stems from engineers utilizing research and development (R&D). Leading Gannett Fleming, a civil engineering firm in Camp Hill, Pa., I know firsthand the challenges we face.
The forces of change shaping our world, such as climate change and the dire need for sustainable and resilient solutions, necessitate that we innovate how we deliver projects to our local community and throughout North America.
Dating back decades, our nation’s tax law incentivized investments in R&D by allowing companies to deduct qualifying costs in the same year they occur. However, a recent tax change forces firms to spread R&D deductions over five years. While this shift may seem insignificant, it produces a much higher tax obligation that in turn discourages companies from investing in R&D and drastically reduces the momentum engineering firms have built as they pursue essential innovation. The engineering industry urgently needs Congress to fix this tax now.
Particularly for smaller and mid-sized firms, the change will not only increase the cost of R&D investments but will also limit funds for internal growth, by reducing the investments firms can make in employee recruitment and personnel development.
As the tax provision continues to harm engineering companies, our communities will start to feel the impact.
If the tax change persists, engineers won’t be able to continue the R&D we shape to improve our community’s infrastructure – infrastructure that goes beyond roads and bridges. For instance, renewable energy technology is more pivotal than ever if we want to reach our climate goals, we must create buildings that can better withstand extreme weather, and we must pioneer advancements in preserving our natural resources. And nearly all these projects require R&D that we can no longer pursue.
If nothing is done to reverse this tax provision by the year’s end, our firms will face a daunting tax liability. On behalf of engineers here in Pennsylvania and throughout the nation, we are urging our leaders to pass legislation that restores R&D deductibility and incentivizes essential innovation.
Engineers are indispensable to designing the cutting-edge infrastructure that improves our neighborhoods, states, and country, and we can’t do it without Congress fixing the R&D tax. We need action now.
—
This piece originally appeared in Penn Live and the The Patriot-News on January 11, 2024. Bob Scaer is the CEO of Gannett Fleming, a civil engineering firm in Camp Hill, Pennsylvania. He is also part of the American Council of Engineering Companies (ACEC), American Society of Civil Engineers (ASCE), Construction Industry Round Table, Design Professionals Coalition, and the Pennsylvania Chamber of Business and Industry.