AIAA Calls for Stable Tax Policy to Protect Aerospace R&D

This article summarizes reporting by Aerospace America.

The American Institute of Aeronautics and Astronautics (AIAA) has called on the U.S. Congress to establish long-term tax policy stability to protect private-sector aerospace innovation, warning that frequent legislative shifts threaten capital-intensive defense and technology development.

In an analysis published on June 15, 2026, by the institute’s publication, Aerospace America, the AIAA highlighted the critical role of Internal Research and Development (IR&D). The organization noted that while the July 2025 passage of the One Big Beautiful Bill Act (OBBBA) resolved immediate concerns by restoring full expensing for domestic research, the broader pattern of unpredictable tax treatment discourages the long-duration investments required for advanced aerospace capabilities.

The role of independent research in aerospace

Aerospace America emphasized that IR&D occupies a unique position in the defense and aerospace sectors, operating outside standard market forces and direct government control. The publication described this independent research as a commitment by private companies to advance technology using their own resources, frequently preceding official government contracts or requirements.

Amid rising geopolitical competition and the high costs of advanced capability development, the U.S. relies heavily on private companies to assume independent research risks, according to the institute’s analysis.

Legislative fixes and remaining uncertainty

The aerospace industry faced a structural disincentive for innovation beginning after December 31, 2021, when the 2017 Tax Cuts and Jobs Act (TCJA) required companies to amortize domestic research and development expenses over five years.

Congress reversed this requirement on July 4, 2025, with the enactment of the OBBBA. The legislation introduced Section 174A to the Internal Revenue Code, permanently restoring immediate expensing for domestic research costs for tax years beginning after December 31, 2024. The Internal Revenue Service (IRS) subsequently released procedural guidance (Rev. Proc. 2025-28) on August 28, 2025, allowing businesses to accelerate deductions for costs previously capitalized under the TCJA rules.

Despite the legislative fix, foreign research and experimental expenditures must still be amortized over a 15-year period. Aerospace America cautioned that the overarching issue remains the volatility of the tax code. The publication noted that frequent policy shifts generate uncertainty, which can deter the sustained financial commitments necessary for complex aerospace programs.

AirPro News analysis

The AIAA’s focus on tax predictability underscores a fundamental tension in aerospace manufacturing: the mismatch between political cycles and aircraft development timelines. A clean-sheet aircraft or next-generation defense system requires a decade or more of sustained capital investment before generating revenue. When tax incentives for research and development fluctuate on two- or four-year legislative cycles, original equipment manufacturers (OEMs) and their supply-chain struggle to forecast long-term capital allocation. We view the permanent restoration of domestic expensing under Section 174A as a necessary baseline, but the AIAA is correct that true innovation requires a tax environment as stable as the engineering programs it aims to support.

Sources: Aerospace America