Good morning, CFOs. Companies are hoping they can soon deduct research expenses as they used to after a more than two year change to a tax law led to layoffs and reduced research investment. For some U.S. firms, it may be too late to unwind the adjustments they have made. 

Lawmakers this week advanced an agreement that would restore immediate domestic research deductions rather than requiring companies to spread them out over years. But they didn’t enact it ahead of the beginning of tax filing season, and it’s not expected that they will consider the bill before the Senate takes a two-week recess starting Feb. 12. As the law is now, it’s costing large public companies hundreds of millions or billions of dollars up front, and for some small and medium-size enterprises, the personal and financial pain may cut deeper. 

Business owner Jacek Zagorski, founder of healthcare information technology firm Shasta Networks in Ashland, Ore., laid off five people in the past year, in part because of the tax rule, which requires companies to spread deductions for research costs over years rather than taking them immediately to reduce their taxable income. The worker cuts, a roughly 50% head count reduction at the software creation business, are meant to bring down the innovation budget, which has been slashed by around 80%, Zagorski said.

This approach will likely remain even if the law is changed. “If it gets repealed, I don’t know if I’d go back to investing as much money into research and development as I used to,” he said. “Once I move past a certain point, and diversify into other lines of business, development and innovation are difficult.”

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Monday

• Earnings: Caterpillar, Estée Lauder, McDonald’s, Tyson Foods
• The Institute for Supply Management releases its Services Purchasing Managers’ Index for January.

Tuesday

• Earnings: BP, Chipotle Mexican Grill, Ford Motor, Spotify Technology, V.F. Corp

Wednesday

• Earnings: Alibaba Group Holding, CVS Health, Hilton Worldwide Holdings, PayPal Holdings, Uber Technologies

Thursday

• Earnings: Apollo Global Management, Hershey, Philip Morris International, T. Rowe Price Group, Unilever

Friday

• Earnings: Enbridge, PepsiCo
• The Bureau of Labor Statistics releases its annual revisions to the consumer price index.

Federal Reserve Chair Jerome Powell said the central bank has shifted its focus toward deciding when to begin cutting interest rates, but that solid economic growth means officials didn’t have to rush that decision.

Given recent economic strength, “we feel like we can approach the question of when to begin to reduce interest rates carefully,” Powell said during a rare television interview on CBS on Sunday night.

• Week of Whipsawing Treasurys Casts Doubt on Soft-Landing Trade

• Goldman Sachs is shuffling its management committee. 
   
• The collapse of Citigroup’s wealth-management business is one reason why Citi’s stock is stuck in a deep slump and CEO Jane Fraser is under pressure to boost profits.
   
• U.S. executives have lamented weaker demand for some consumer products in China during earnings calls in recent weeks, but a breakup is unlikely soon. Apple, Procter & Gamble and other companies say they are banking on a rebound.
   
• Brookfield Asset Management, the biggest clean-energy investor in private markets, is widening its lead, tapping into rising demand for wind and solar power and a push by big companies to reduce emissions.
   
• Home buyers are shopping again and finding more options.

The Wall Street Journal's CFO Journal offers corporate leaders and professionals CFO analysis, advice and commentary to make informed decisions. We cover topics ranging from corporate tax accounting, regulation, capital markets, management and strategy.

Follow us on X @WSJCFO. The WSJ CFO Journal Team is reporters Kristin Broughton, Mark Maurer and Jennifer Williams-Alvarez, and Bureau Chief Walden Siew.

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