S. 2056: Cost Recovery and Expensing Acceleration to Transform the Economy and Jumpstart Opportunities for Businesses and Startups Act

This bill aims to amend the Internal Revenue Code to provide several tax-related changes that would benefit businesses, particularly those investing in property and conducting research. Below are the key provisions of the bill:

Permanent Full Expensing for Qualified Property

The bill proposes that businesses can fully deduct the costs of qualified property at the time of purchase. This means that when a company invests in certain assets, such as machinery, equipment, or other capital expenditures, they can write off the entire cost in the year of purchase rather than spreading the deduction over several years. This provision is aimed at encouraging businesses to invest and stimulate economic growth.

Neutral Cost Recovery Depreciation Adjustment

The legislation introduces a new method for calculating depreciation for residential and nonresidential real estate. This adjustment would use a ratio based on the gross domestic product (GDP) deflator to ensure that depreciation deductions align more closely with inflation and economic conditions. Specifically, businesses would adjust their deductions based on how much the GDP has increased since the property was put into service. This measure seeks to provide businesses with a fairer depreciation deduction that reflects actual economic conditions.

Elimination of Amortization of Research and Experimental Expenditures

The bill would change how businesses treat research and experimental spending for tax purposes. Instead of having to amortize these expenditures over several years, businesses could fully deduct these costs in the year they are incurred. This change is designed to simplify the tax treatment of research spending and incentivize companies to invest more in innovation and development activities.

Effective Dates

The provisions of this act would take effect as if included in previous tax reforms and would apply to expenditures incurred in taxable years following the bill’s enactment. Specifically, the expensing provisions and adjustments would be retroactive, impacting investments and expenses made previously if they fall within the established guidelines.

Election Options

Businesses would have the option to elect out of certain provisions if they choose. For example, they could opt not to apply the neutral cost recovery ratio to their property, providing flexibility depending on their financial situation.

Relevant Companies

• GOOGL: A significant user of research and development, Google may benefit from the elimination of amortization for R&D expenditures, potentially increasing immediate cash flow for investments.
• AAPL: Apple could see benefits from the full expensing of qualified property, allowing immediate deductions on new technology and infrastructure investments.
• MSFT: Microsoft may also benefit from both the tax incentives for property purchases and R&D expenditure deductions, which could fuel further innovation and development activities.
• AMZN: Amazon would likely be affected by the changes in property expensing, enhancing its capability to invest in logistics and technology quickly.