In Support of Senate Bill 9

Before the Ohio House Ways and Means Committee

Date: February 11, 2026

Chairman, Vice-Chairman, and Members of the Committee:

Thank you for the opportunity to provide testimony today. My name is Rick Kleban, and I am testifying on behalf of Sycamore Growth Group and the Ohio Manufacturers’ Association in strong support of Senate Bill 9, Ohio's tax conformity bill that aligns our state tax code with the federal provisions enacted in the One Big Beautiful Bill Act (OBBBA), passed in July 2025.

Overview of Support for Section 174 R&E Provision

Sycamore is a founder-led advisory accounting firm specializing in research and development (R&D) tax credits since 2011. Our firm works with numerous manufacturers, engineers, and innovators across the state, employing hundreds of Ohioans and supporting local economies.

As a firm, we are 1 inch wide and 10 miles deep—this enables us to invest a large amount of resources into understanding the R&D tax rules at the DNA level. When the passage of the Tax Cuts and Jobs Act (TCJA) eliminated the immediate expensing under Section 174 for research and experimental (R&E) expenditures at the end of 2017, we applied our expertise to help taxpayers and legislators understand the scope and impact of mandatory amortization, as well as navigate the resulting accounting complexities.

These issues were resolved with the passage of the OBBBA, which restores the immediate deduction of R&E expenditures under Section 174.

We commend the Ohio Senate for advancing Senate Bill 9, in particular, the provision to conform with changes to Section 174, and urge this committee to swiftly pass this critical legislation. Penalizing R&E activities with mandatory amortization has far-reaching economic consequences. It stifles innovation and harms businesses, including critical defense and infrastructure contractors, making it harder to leave the next generation with a better economy than they have now.

Section 174 History & Changes

The path to Section 174 began with the Tax Act of 1954. This act granted start-ups a path to deduct Research & Experimentation (a.k.a. R&D) like established taxpayers to promote new industries and national defense through innovation. Section 174, therefore, accommodated taxpayers without a clear path to deducting R&D activities as ordinary and necessary expenses paid or incurred in carrying on a trade or business. Congress believed this new law would grant start-ups and small businesses the same economic benefit that the tax code allowed taxpayers with established R&D departments.

The removal of immediate deduction under Section 174 in the TCJA required these expenses to be amortized over five years for domestic research and 15 years for foreign research. This change created significant cash flow challenges due to the burdensome additional taxes, reducing companies' incentive and ability to invest in innovation at precisely the time when American competitiveness depends on technological leadership.

The One Big Beautiful Bill's restoration of immediate R&E expensing under Section 174 reverses this harmful policy and returns to a system that encourages innovation, instead of making it harder for companies to invest in our future.

Business Impacts for Ohio Taxpayers

As previously mentioned, Section 174 was written to accommodate taxpayers without a clear path to deducting R&D activities as ordinary and necessary expenses paid or incurred in carrying on a trade or business. Congress believed this new law would grant start-ups, small companies, and new inventors the same economic benefits that the tax code provided to taxpayers with established R&D departments.

For this reason, mandatory amortization has had the greatest impact on start-ups and small-to mid-size businesses whose activities fall within the broad umbrella of “Research & Experimentation”. These taxpayers include many of the manufacturers, custom toolers, and engineering firms that support a robust regional economy and provide stable, well-paying jobs, especially in the state’s rural areas. 

Over the past four decades, these firms have emerged as the de facto innovation arm of large corporations, reflecting the growing specialization of the modern economy. Ford, for instance, now outsources much of its manufacturing-equipment development to specialized engineering firms in Ohio. This pattern highlights a broader trend: large companies tend to acquire new technologies rather than invent them, leaving most technological creation to smaller, more agile firms.

Additionally, Ohio is home to a significant number of government researchers and contractors that have established businesses around the State’s universities and aerospace sector. Mandatory amortization has been similarly detrimental to these taxpayers. In particular, this affected our aerospace and defense industry, which is prominent in the Dayton area.

One group of taxpayers that has been relatively unaffected by mandatory amortization is large corporations. Not only do these businesses have greater access to liquidity to address cash flow needs, but many multinational corporations also benefit from mandatory amortization when foreign taxes are taken into account.

The restoration of immediate R&E expensing will have a profound positive impact on the taxpayers that Section 174 was originally established to benefit. Supporting a diverse group of innovators is necessary for long-term economic growth and security. It also ensures that innovation in the state is not carried out only by a small group of large corporations that can afford the negative impact of amortization.

Innovation increases real wages and the tax base. It helps create the economy that we want to leave for our children.

Risks of Decoupling

Ohio already lags behind other states and countries in rewarding R&E. 

On paper, Ohio’s R&D credit appears substantial, but closer examination reveals it doesn’t actually benefit the taxpayers who are driving innovation. In Ohio, the only way to monetize the credit is to offset their Commercial Activity Tax. Taxpayers with truly innovative technology sell to customers around the globe and rarely have significant sales activity within the state. The result has been that many highly specialized engineers and tooling companies that sell to automakers and defense agencies worldwide receive no benefit from the Ohio credit. This has had a particularly negative impact on the Dayton area, as Ohio is increasingly competing with states such as Washington, Texas, Michigan, Arizona, and Colorado.

Decoupling from Section 174 and requiring amortization would further discourage innovators from starting businesses in Ohio, at a time when other parts of the country are actively moving in the opposite direction to ensure their economies are built for the future. Solutions being posed in other states and countries range from making their credits transferable to offering up to 200% deductions on eligible R&E expenses to refundable credits.

For these reasons, we consider the amendment to conform to changes to Section 174 an absolute necessity and would recommend that the state take further steps to bolster economic innovation. 

Conclusion and Request for Support

Sycamore Growth Group strongly supports the restoration of immediate R&E expensing under Section 174 and urges this committee to advance Senate Bill 9 without delay.

We appreciate the committee's consideration of this testimony and stand ready to answer any questions or provide additional information about the importance of Senate Bill 9 to Ohio's economy.

Thank you for your time and attention to this critical matter.

Respectfully submitted,

Rick Kleban, Sycamore Growth Group

Author Information

Jenna Tugaoen is a tax attorney at Sycamore Growth Group, an Ohio-based tax advisory firm specializing in assisting businesses to attain and substantiate public economic incentives such as R&D and energy credits.

Rick Kleban is the founder and president of Sycamore Growth Group, an Ohio-based firm specializing in securing economic incentives that maximize cash flow and minimize risk.

James Bean, CPA, is a senior researcher and R&D tax controversy specialist at Sycamore Growth Group.