Today, the U.S. innovation economy is being reshaped by two parallel forces: a retrenchment of federal R&D support and a surge of aggressive state-level incentive programs. The result is a fragmented, rapidly evolving map of opportunity, one that Upsite helps companies navigate with real-time data, benchmarking, and location intelligence.
For decades, U.S. companies could immediately deduct research and development (R&D) expenses from their taxable income. That changed under the 2017 Tax Cuts and Jobs Act, which included a delayed provision requiring companies to amortize R&D costs over five years, a change that quietly took effect in 2022.
This shift increased taxable income and reduced near-term cash flows, especially for startups and growth-stage companies. As Futurism and Gizmodo reported, many firms — especially in tech — are now facing unexpected tax bills, triggering budget cuts, project deferrals, and layoffs.
This isn’t just a tax issue; it’s a policy misalignment. While Congress passed the CHIPS and Science Act to boost domestic innovation, the amortization requirement undercuts the very R&D investment that fuels breakthroughs and investment.
As federal support wavers, U.S. states are racing to fill the vacuum. Over the past two years, we’ve seen an unprecedented wave of state-led incentive packages designed to attract high-tech R&D operations.
Here are just a few examples:
Beyond megadeals, states are enhancing broad-based R&D tax credits to support local startups and research ecosystems:
Research from MIT and Columbia shows that states offering targeted R&D credits see a 20% increase in high-quality new firm formation over a decade (MIT News). The gains are particularly pronounced among high-growth, innovative startups, exactly the kind of companies Upsite helps to expand and find the best locations.
These incentives don’t just draw capital. They attract talent and intellectual property. Studies by the National Bureau of Economic Research found that biotech tax incentives boosted the migration of “star scientists” to states offering R&D support, often leading to new startup activity and follow-on investment (NBER Working Paper).
There’s ongoing debate among economists about whether state-level incentives create net new innovation or simply redistribute it geographically. A study by the Federal Reserve Bank of San Francisco suggested that while R&D spending does increase within incentivized states, it often comes at the expense of neighboring ones.
However, from a state’s perspective, winning a high-wage, IP-rich industry is a major victory, and as Upsite’s real-time incentive mapping shows, regions that align policy with innovation potential are rapidly becoming the new frontier of economic growth.
The U.S. isn’t only in competition with itself. Globally, it’s lagging behind in R&D tax incentive generosity:
By contrast, the U.S. federal R&D credit typically subsidizes just 6–10% of spending and is not refundable for early-stage companies. As ITIF notes, “China’s tax support for R&D is nearly 3x more generous than America’s.”
At Upsite, we believe that innovation follows incentives. That’s why we’ve built a dynamic platform to:
As government incentives become a defining driver of where and how R&D happens, Upsite gives teams the data and clarity to stay ahead of the curve. Incentives aren’t fluff — they’re infrastructure. They determine whether a startup can hire engineers, whether a biotech can run trials, whether a chip plant chooses Texas or Taiwan; and increasingly, they’re what separate growth regions from stagnating ones.