Here is what Minnesota businesses have to say about the Tax Relief for American Families and Workers Act:
Dick J. Salonek, Director of Finance, Ultra Machining Company (Monticello): “UMC employs 220 people in Monticello, MN, providing precision machining services for medical and aerospace companies. Disallowing write-off of R&D expenses in the year incurred, wiped out our funds to invest in growth, jobs will be lost. Passage of the bipartisan tax bill will allow American businesses, including UMC, to write-off R&D expenses in the year incurred, which will give us the stability to invest in the future and grow America’s workforce.”
Brad Smith, President J-Berd (Sauk Rapids): “The current economic slowdown underscores the importance of policies that incentivize domestic innovation and growth. Reviving the research expense deduction, with an emphasis on immediate financial returns, would empower businesses like J-Berd to drive economic activity and create valuable jobs, ultimately benefiting the entire community.”
Lance G. Louis, President and CEO Louis Industries (Paynesville): “In my opinion, the R&D tax credits should be made permanent in the tax code, applied to the tax year the investments were made, and even expanded to allow for more investment. Typically, when investments are made in manufacturing the results last for years. These investments are not only good for the companies, but the impact reaches much further into communities, employees, and competitiveness. Thank you for your consideration in fixing the R&D tax credit issue.”
Patrick Flanangan, CEO Resonant Cavity (Minneapolis): “I run a small software company of a dozen employees and contractors, and current rules that prohibit immediately deducting engineering payroll costs have forced us to cut headcount and borrow $300k just to pay tax. The salaries of software developers constitute a majority of our expenses, and because those salaries must be amortized under Section 174, a majority of our costs in 2022 and 2023 fell to the bottom line as taxable phantom income. For an engineering-heavy business near cash break-even, Section 174 transforms tax on profit into something like a tax on revenue.
I can say for certain that I never would have started this business under the current amortization rules because they make hiring engineers and growing the business prohibitively expensive without access to venture capital. The jobs and the tax revenue created by my company simply would not exist if Section 174 had been in force in 2014 when we started.
If the Smith-Wyden Tax Relief bill passes, we will immediately post job listings for two engineering positions and give current staff raises that we were unable to offer this year because of our tax burden. More generally, we will be in a much stronger position to compete with our international rivals (our biggest competitor is headquartered in Singapore) who have always been able to deduct engineering costs. With Smith-Wyden, we can grow the business again; without it, we will at best muddle through while paying sky-high taxes on income we never really had.”
Jonathan Curry, Executive Director American Council of Engineering Companies of Minnesota: “ACEC/MN represents more than 120 companies and 7500 employees in Minnesota that support the state's consulting engineering industry, and we strongly support including a fix to the R&D tax amortization issue in The Tax Relief for American Families and Workers Act of 2024.
In recent years, our state has seen strong investments in infrastructure from both the state and federal levels while facing unprecedented workforce challenges simultaneously. The five-year amortization mandate on R&D expenses puts enormous financial stress on firms critical to helping Minnesota deliver its infrastructure program; the mandate costs firms real money, which translates to a loss of real jobs for real people”.
Brett Weiss, President and CEO WSB (Minneapolis): “Our industry is committed to finding new ways to deliver projects and services in a manner that spreads infrastructure funding as far as possible. We need to continue to fuel innovation in our industry, not add challenges that will slow us down. Limiting our ability to find new solutions through this punitive tax hurts both our firms and the industry in general.”