Fragrance Creators urges US Congress to enact R&D tax benefit bill in fear of innovation decline

27 Jun 2023 --- Representative of scent manufacturing and use in North America, Fragrance Creators Association is calling on the US Congress to enact legislation this year to restore annual expensing of R&D. Via an open letter, the association stresses that fragrance research is the “lifeline” of innovation that will also enable the transition to greener manufacturing practices.

“Innovation sits at the heart of the fragrance industry’s ability to deliver safer, greener and increasingly innovative fragrances – scents that support biodiversity and deliver a myriad of well-being and other benefits to consumers every single day,” underscores the organization.

“These R&D investments – from developing new scents to designing manufacturing processes that are more sustainable – also support thousands of jobs, drive US fragrance industry competitiveness and contribute billions of dollars to the US economy.”

The bill in question is called the American Innovation and Jobs Act (S. 866), which “revises and expands the deductibility of research and experimental expenditures to allow immediate expensing of such expenditures.”

Preserving global and domestic competition
Farah K. Ahmed, president & CEO at Fragrance Creators, wrote an open letter to chairman Wyden and ranking member Crapo of the Senate.R&D creates and provides technical job opportunities.

On behalf of the industry, Ahmed argues that the passage of the American Innovation and Jobs Act is “indispensable” to fragrance companies who need full annual expensing to remain competitive domestically and globally.

“Fragrance manufacturers conduct expensive research to develop new fragrance scents, replace ingredients sourced from other countries with ingredients available in the US and design manufacturing processes that are innovative, safer, greener, more efficient and more consumer acceptable,” outlines Ahmed.

R&D also creates and provides technical job opportunities that are at risk without full annual expenses. For consumers, research quickens the development of new products that meet their expectations. “Annual R&D expensing helps keep jobs in the US and rewards companies for taking on the financial risk of innovation,” emphasizes Ahmed.

“Since the Finance Committee has particular expertise and interest in global trade, we hope you will take into account that the loss of annual R&D expensing means that the US will be only one of two countries with such a policy. Our competitors in most OECD countries benefit from a 100% super deduction for R&D costs, while Brazil, Russia, India, and China go one step further and provide R&D deductions of up to almost 150%.”R&D expensing rewards companies for taking on the financial risk of innovation.

Need for urgent tax relief
The bill was introduced in the Senate in March this year and seeks to allow amortization over at least 60 months for certain types of research and experimental expenditures, not treated as expenses.

“The bill increases the maximum amount eligible for the tax credit for new and small businesses and increases to 20% the credit rate for business start-ups,” reads the bill summary.

Fragrance Creators fear the loss of the ability to expense R&D costs within the spending year fully. “The lack of full current year R&D expensing raises the cost of investment for the fragrance industry, discourages innovation and reduces economic output.”

“Restoring full annual R&D expensing will help keep jobs in the US and reward companies for taking on the financial commitments needed to deliver meaningful innovation. Congress must act to preserve US fragrance industry innovation and competition,” states the association.

Edited by Venya Patel

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