Expand Research and Development Expensing to Include Foreign-Sited Research

The One Big Beautiful Bill Act permanently restored full expensing for domestic research and development (R&D) investment after the Tax Cuts and Jobs Act of 2017 required five-year amortization beginning in 2022. Foreign R&D investment by American companies must still be amortized over 15 years. This status quo disadvantages US multinationals, which ultimately harms domestic employees.

This option extends R&D expensing to foreign-sited R&D. Extending expensing to foreign-sited R&D would indirectly benefit domestic workers, because when American companies expand abroad, it also makes their domestic workforces more productive on the margin. The estimates below do not capture such benefits, and so this option has no measured economic impacts.

On a conventional basis, this option would increase the primary deficit by $41.9 billion over the budget window. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be higher than baseline, reaching 176.1 percent by 2056.

On average, in 2036, taxpayers would see small increases in their after-tax incomes on both a conventional and dynamic basis.