The company hired tax lobbyist Joshua Odintz, a former Democratic congressman and veteran of the Obama administration, last month to lobby for the section of tax law that deals with research and development tax deduction, according to a disclosure statement.
And the R&D Coalition – an alliance of companies benefiting from the withdrawal including Amazon, Intel, the National Association of Manufacturers, and others – hired a group of seasoned tax lobbyists at PricewaterhouseCoopers earlier this year. The hired staff included a former senior advisor to the Senate minority leader, Mitch McConnell.
The R&D deduction and associated R&D tax credit are designed to incentivize companies to invest in research and development by providing tax breaks on research spending. According to the tax foundation, the loan was first set up in 1981 and has broad cross-party support. Its use by Amazon and others underscores that asking for more tax from companies can in theory be easier than in practice, as many of the tax breaks that companies take advantage of are popular even when they are not.
It’s hard to say how much the R&D tax credit – which is widespread among both parties – saved Amazon. But Amazon announced in a filing with the Securities and Exchange Commission earlier this year that the tax credits that helped lower its US tax burden were “primarily related to the US federal research and development loan.” (Credit isn’t the only way Amazon is using to reduce its tax burden: it also benefits from tax rules that allow it to deduct the cost of the shares it grants its employees as part of their salary packages, among other things for tax purposes.)
“It’s very likely they’ll get hundreds of millions of dollars a year in R&D tax credits,” said Matthew Gardner, a senior fellow at the Institute on Taxation and Economic Policy who researched the taxation habits of Amazon and other large corporations.
Amazon declined to comment.
The tax breaks themselves aren’t at risk, but the deduction could lose value over the next year if Congress doesn’t act, which may explain why Amazon stepped up its lobbying campaign over it.
The 2017 Republican Tax Act included a provision that would prevent companies from deducting the full amount of research and development expenses starting next year. Instead, they would have to subtract a portion of it every year for five years, reducing its value.
The change was introduced as a means of payment for the legislation, and experts believe it should never become permanent.
“It was kind of a time bomb that should always be circulated,” said Ben Ritz, director of the Progressive Policy Institute’s Center for Funding America’s Future.
But there’s no guarantee the bomb won’t go off in six months, hence the lobbying.
Amazon is far from the only company fighting to save the tax break. A broad coalition of trade groups and companies is campaigning for Congress to abolish the changes that are due to come into effect next year. Sixty lawmakers have signed a House of Representatives bill, while a dozen Senators support an accompanying bill in the House of Lords.
The Tax Foundation estimates that repealing the changes would cost about $ 131 billion in a decade. She also estimated it would increase GDP by 0.1 percent and create nearly 20,000 jobs.
The Biden government has taken no position on this issue. When asked during a Senate Finance Committee hearing last month, Treasury Secretary Janet Yellen said that “promoting innovation is a critical priority for President Biden” and that “enabling companies to continue to spend R&D costs rather than payback, could be a very effective way of doing that. “
Companies have argued that the changes would penalize them for investing in research and development. “While other governments work to significantly increase R&D investment, this change will significantly increase the cost of R&D in the US,” said George Davis, Intel’s chief financial officer, speaking to the Senate Finance Committee earlier this year.
Catherine Schultz, vice president of tax and fiscal policy at the Business Roundtable, said she didn’t know of any companies that were not advocating the issue. The coalition is trying to put the deployment into one of Biden’s infrastructure packages or some other major bill before the end of the year. While the repeal of the changes “has very strong support from both House and Senate members,” she said, it is not certain that companies will get their way.
“I think it’s just a matter of timing and people focusing on it,” she said.