Laura Lynn Gonzalez expected a tax refund this year, after her two-employee data-visualization company experienced a $30,000 loss. Instead, she said, she is facing a $100,000 federal tax bill that is about as large as her 2022 salary. Ms. Gonzalez’s predicament stems from a piece of the 2017 tax law that is taking effect now. It requires companies to spread deductions for research costs over five years instead of taking them immediately, the Wall Street Journal reported. For many biotech companies, contract manufacturers and software firms, the law means losing the ability to deduct the bulk of their expenses on the tax returns they are about to file. That means some businesses that broke even or lost money in 2022 are considered profitable for tax purposes—and are finding they owe money to the Internal Revenue Service. For large companies, such as Northrop Grumman Corp. and Moderna Inc., the change is a cash-flow challenge, one that gets easier after several years even if Congress doesn’t act. It is a much bigger hurdle for small and medium-size firms that can’t tap reserves or borrow easily.
