The Great and Beautiful Act permanently changes how companies can offset research and development spending, and Taiwan has a once-in-a-century opportunity.

The latest released U.S. presidential economic report reveals that the large-and-bold for America bill (OBBBA) promoted by the U.S. government in 2025 will permanently allow corporations to deduct their R&D spending in full, officially heralding the arrival of a U.S. “productivity revolution.” This not only ends the long-standing problem of corporations’ R&D funds being tied up, but also has a deeper impact on global technology deployment strategies. For Taiwan’s supply chain, this is not only a change in regulations, but also a once-in-a-century opportunity. Against the backdrop of TSMC leading investment into the U.S., how Taiwanese businesses can leverage this momentum to their advantage has already determined the outcome of the competitiveness battle for the next decade.

The impact brought by the OBBBA’s permanent rule of deducting R&D spending at 100%

The OBBBA permanently provides that R&D spending can be fully and immediately deducted. This reform ensures that companies can deduct 100% of their R&D costs in the same year as their R&D investment, without having to amortize over 5 years (domestically) or 15 years (offshore), as required under IRC Section 174 after 2022, as was the case in the past.

The far-reaching economic and corporate impacts of this shift include:

Lower upfront costs, increase cash flow: Immediate deduction significantly lowers new startups’ initial costs, freeing up capital needed for companies to expand production capacity.

Encourage companies to expand tangible investments: According to estimates by the White House Council of Economic Advisers (CEA), the permanent full deduction of R&D and equipment spending will drive an increase in actual investment of 2.7% to 3.2%.

Boost wages and GDP: It is expected that by the end of 10 years, GDP growth will be increased by 0.4% to 0.5%, enabling average wages to rise from 1,250 to 2,500 U.S. dollars.

Retroactive application: Although the bill was signed on July 4, 2025, the R&D provisions can be applied retroactively to January 21, 2025 (the bill’s first proposed date). This is a major positive for companies that have already invested in R&D during that year.

Opportunities and risks for Taiwan’s industries

For Taiwan’s supply chain, this policy aimed at driving the U.S. “productivity revolution” is both a challenge and a huge opportunity.

Opportunity: Because the bill raises the semiconductor investment tax credit (ITC) to 35%, and combined with the 100% immediate deduction of R&D expenses, taking TSMC and its supply chain as examples, the equipment, materials, and R&D costs of setting up plants in the U.S. will drop significantly. If Taiwanese companies move “R&D” to the United States, they can directly offset high corporate taxes in the U.S., shorten the cost-recovery time, and build closer partnerships with U.S. customers such as Nvidia or Apple.

Taiwan’s software and biotech companies can strengthen “Taiwan-U.S. collaboration.” By establishing an R&D headquarters in the U.S., they can enjoy 100% deductions, use Taiwan’s high-quality talent to deepen their presence in the U.S., and achieve global tax optimization through a reasonable allocation of intellectual property (IP).

Risk: It should be noted that although the OBBBA favors domestic R&D, R&D conducted “outside the United States” will still maintain the longer (15-year) amortization period.

Taiwan can aim to become the “trusted alternative” for the global supply chain

By using tax provisions to secure its leading edge in key technologies, Taiwan—one of the United States’ most trusted strategic partners in artificial intelligence—has the potential to take on a large volume of transferred R&D projects. The permanentization of R&D deductions under the OBBBA is not only a tax advantage; it is also a strategic move for the U.S. to reinforce technological dominance. For Taiwanese companies, the OBBBA’s retroactive applicability to earlier R&D spending can optimize cash flow, greatly reduce costs, and better eliminate uncertainties arising from geopolitical and economic fluctuations.

If Taiwanese companies can flexibly connect with this U.S. “productivity revolution,” they can transform from their previous contract-manufacturing role into an important partner that deeply collaborates with high-tech companies in the U.S., securing a place for themselves in the global supply chain.

This article, “The OBBBA permanently changes how companies deduct R&D spending—Taiwan receives a rare once-in-a-century opportunity,” first appeared on Chain News ABMedia.