Atlanta tech companies worry that tax bill undermines research

Congress still needs to meld different editions of a proposed tax overhaul, but one version is causing worry among metro Atlanta’s technology companies.

A combination of clauses in the bill passed by the Senate virtually eliminate much of the current tax incentives for research.

The bill sets a new, lower tax rate — and then does not permit companies to reduce it by claiming tax breaks. The bill also would force companies to deduct research spending over five years, instead of one.

“All of these provisions are creating a disincentive to companies doing research and development,” said Mitchell Kopelman, partner with Aprio, an Atlanta-based accounting firm.

It’s too early to say if a final tax law will include the changes, but that chance is high enough to snag the attention of people in Atlanta’s tech sector.

Anything that undermines research is a problem, said Larry Williams, chief executive of the Technology Association of Georgia. “Research and development, whether it’s in-house or in partnership with other institutions, is one of the greatest generators of innovation. And innovation is one of the greatest generators of jobs.”

Metro Atlanta’s tech sector has surged in the past decade, adding companies in cyber-security, financial tech, health tech and mobile communications.

That growth is nurtured by research in the area’s universities, as well as by private companies, Williams said. “Research and development has helped start and build industries here in Georgia. These things don’t happen in a vacuum.”

The research and development tax credit is among the largest tax breaks, worth more than $100 million over the next decade, according to the Treasury Department. That credit, created in 1981, is used by companies to lower their tax payment.

The ceiling for corporate taxes is currently 35 percent. But there’s also a floor, which is set at 20 percent. The Senate bill would lower the top corporate tax to 20 percent. A tax break for research and development could not be used to lower a company’s taxes beyond that.

If the bill is not rewritten to include incentives to research, the result could be less innovation – and potentially less profit.

“I think most small business owners would like to see tax cuts, but they would like to see it done responsibly,” said Andy Murphy, a partner at GENCapital, an Atlanta-based investment adviser.

“If it does affect what the company’s margins are, that potentially could hurt shareholder value.”

While many business interests supported lower taxes, the elimination of the research and development incentive seemed to come as a surprise. Over the weekend, some of the largest tech companies sent their lobbyists into action, hoping to undo the damage – without getting in the way of tax cuts.

Leading the charge, according to The Wall Street Journal, was the Information Technology Industry Council, whose members include Amazon, Apple and Alphabet – the parent company of Google.


AJC Business reporter Michael E. Kanell keeps you updated on the latest news about jobs, housing and consumer issues in metro Atlanta and beyond. You'll find more on, including these stories:

Never miss a minute of what's happening in local business news. Subscribe to 

Reader Comments ...

Next Up in Business

Sears files for Chapter 11 bankruptcy protection
Sears files for Chapter 11 bankruptcy protection

Sears Holdings has filed for Chapter 11 bankruptcy protection in White Plains, New York, multiple news outlets are reporting. The iconic company, which owns Sears and Kmart, said early Monday that it will shutter 142 of its stores “near the end of the year” in addition to 46 closures announced this summer. A list of the affected locations...
Sudden fires: Center seeks recall of 2.9 million Kia, Hyundai vehicles
Sudden fires: Center seeks recall of 2.9 million Kia, Hyundai vehicles

A consumer watchdog group is calling for Kia and Hyundai to recall nearly three million vehicles, including some made in Georgia, over persistent concerns about sudden fires. The push Friday by the Center for Auto Safety goes beyond its earlier request for a broader federal investigation into the fires. “The number and severity of these...
Gov. Deal announces plans for aviation academy at Paulding airport
Gov. Deal announces plans for aviation academy at Paulding airport

Gov. Nathan Deal unveiled plans on Friday for a $35 million aviation academy to train aircraft mechanics at the Paulding County airport, a plan that could effectively block efforts to commercialize a second airport in metro Atlanta. Deal descended in a state patrol helicopter on Friday morning and landed at the tiny airport to announce the 60...
Atlanta gas prices were rising even before Hurricane Michael
Atlanta gas prices were rising even before Hurricane Michael

Atlanta drivers are not getting the usual autumn discount on gas prices and that hurricane whipping through the Southeast helped insure that they won’t see that seasonal drop anytime soon. The average price of regular gasoline was $2.85 a gallon in metro Atlanta mid-week, 37 cents higher than the same time a year ago, according to AtlantaGasPrices...
APS project shows good use of public, private money, Carstarphen says
APS project shows good use of public, private money, Carstarphen says

Plans to build a new Atlanta school and community health center using public and private dollars received a $3.5 million boost from corporate donors. The project in northwest Atlanta has been hailed by the Atlanta Public Schools superintendent as an example of the kind of development that should attract public investment as a tool to spark neighborhood...
More Stories