Guidance Expected to Unlock Billions in Research Deductions for Large US Corporations
The US Treasury Department is preparing to roll out a significant tax workaround that will possibly reduce corporate tax liabilities for major companies such as Salesforce Inc. and Qualcomm Inc.
According to the people familiar with the matter, the guidance aims to allow businesses to fully leverage lucrative research and development (R&D) deductions included in President Donald Trump’s sweeping tax overhaul. The formal release is expected as early as next week, though timing may still shift as the guidance undergoes final reviews.
New Rules Designed to Ease Friction
At the core of the Treasury’s proposal is a solution to a long-standing conflict between generous R&D tax deductions and former POTUS Biden administration’s 15% corporate minimum tax.
- This minimum tax, enacted in 2022, applies to companies with annual earnings of at least $1 billion and was intended to ensure large MNCs pay a baseline tax rate regardless of their deductions.
- However, the rule has so far prevented corporations from fully claiming their allowable R&D breaks.
- Industry lobbyists, technology firms, pharmaceutical giants and manufacturing companies have for months argued that the minimum tax actually neutralised the benefits Congress had enacted to encourage domestic innovation.
- The new guidance aims to resolve these concerns, allowing firms to claim the full value of their R&D deductions without triggering the minimum tax.
Deductions Worth $67 Billion at Stake
Trump’s tax legislation restored the ability for companies to deduct R&D expenditures retroactively—an incentive estimated to be worth roughly $67 billion across the corporate sector. But this large deduction pool meant that several major corporations would automatically fall under the minimum tax threshold.
Companies including Airbnb Inc., Broadcom Inc. and Applied Materials Inc. have already disclosed in regulatory filings that their substantial deductions could either push them into the 15 percent corporate alternative minimum tax or restrict hundreds of millions of dollars in credits they expected to claim.
- Industry leaders have repeatedly warned that the conflict between the tax systems creates uncertainty that could discourage investment in domestic research.
Part of a Broader Effort to Soften the Corporate Minimum Tax
The upcoming guidance continues a trend of adjustments by the Treasury Department aimed at reducing the restrictive impacts of the minimum tax. In recent months, the administration has rolled out some rather easy interpretations, added options for industries such as shipping, utilities and insurance, and allowed companies to exclude unrealized cryptocurrency gains when calculating their tax obligations.
Tax policy experts note that the Treasury has been able to introduce these changes because Congress granted the department unusually broad authority when approving the corporate minimum tax. As a result, Treasury has significant discretion in defining how the tax applies in practice.
International Tax Concerns Remain Unresolved
Corporations have also raised alarms about how R&D deductions interact with international tax rules established during Trump’s first term, which aim to discourage profit shifting to low-tax jurisdictions.
- It remains uncertain whether the new guidance will address these cross-border tax complications or if Treasury has legal authority to modify those provisions.
- While business groups are likely to welcome the workaround, the announcement is expected to trigger sharp criticism from progressive Democrats.
Helene Elliott is the senior reporter for News Raise. She covers Science news. She also has a keen interest in photojournalism. Helene holds a nomination for the prestigious Red Smith Award. She is married to author Dennis D’Agostino, a former publicist with the New York Mets.
