Navigating the 2025 Tax Landscape: Key Proposed Changes to R&D, Section 174, and Section 179D  

June 2025 | EPSA USA

As the U.S. continues to refine its tax code to foster innovation and sustainability, 2025 has brought significant legislative momentum. The “Big Beautiful Bill,” a sweeping tax reform package, along with proposals from the Senate Finance Committee, introduces pivotal changes to several cornerstone tax incentives. Here’s a breakdown of what’s changing and what it means for businesses. 

Section 174: Reinstating Immediate Expensing for R&D 

One of the most impactful changes is the proposed repeal of the amortization requirement for research and experimental expenditures under Section 174. Originally imposed by the 2017 Tax Cuts and Jobs Act (TCJA), this rule required businesses to amortize domestic research and experimental (R&E) costs over five years (and foreign costs over 15), starting in 2022.  

Furthermore, businesses that invested in domestic R&E between January 1, 2022, and December 31, 2024, would benefit from a flexible new tax election. Under the Senate proposal, companies can choose how to handle the remaining unamortized R&E expenses that were previously capitalized under Section 174(a). 

Taxpayers would have two options: 

• Immediate Deduction: Deduct the full remaining unamortized amount in the first tax year beginning after December 31, 2024. 

• Two-Year Spread: Deduct the remaining amount evenly over the two tax years starting after that same date. 

The change would allow businesses to deduct 100% of their R&E expenses in the year they occurred going forward in addition to the unamortized R&E expenses from 2022-2024. This change is expected to improve cash flow and encourage domestic innovation. 

Section 179D: Energy-Efficient Commercial Buildings Deduction 

The changes made by the Senate Finance Committee include terminating the 179D deduction for new construction 12 months after enactment (if it passes as written). 

As the legislative landscape continues to evolve, we remain committed to keeping you informed about the latest developments in tax policy. The proposed changes to R&D incentives, Section 174, and Section 179D, impose significant implications. Our team is closely monitoring these updates and is available to answer any questions you may have about how these changes could impact your business.