Bipartisan Bill Aims To Permanently Extend US R&D Tax Credit

by Mike Godfrey, Tax-News.com, Washington

22 April 2005

US Reps. Benjamin L. Cardin, (D-Maryland), and Nancy Johnson, (R-Connecticut), on Wednesday introduced bipartisan legislation to extend and make permanent the research and development (R&D) tax credit.

Under the proposed bill, which has 40 co-sponsors, the credit will be expanded by raising the percentage levels of the alternative research and development credit, and creating a third level of alternative simplified credit for qualified research expenses to encourage more companies to invest in R&D projects.

According to Cardin, US companies in the manufacturing sector continue to conduct the bulk of private-sector R&D, estimated to be $127 billion in 2002. This investment represents nearly two-thirds of total private R&D in the United States.

The R&D Tax Credit was originally enacted in 1981. Since then, it has been extended 11 times, the last time being in 2004, when it was extended through December 2005.

Studies show that nearly 16,000 US companies claimed the R&D credit in 2000.

Cardin, a member of the Ways & Means Committee and Ranking Member of the Trade Subcommittee, observed that:

"Since its enactment in 1981, the R&D Tax Credit has led to the development of life-saving drugs and medical treatments, cutting-edge computers and software, technologies that make transportation safer and more energy efficient, and technologies that enable our military to carry out their mission more effectively and safely."

He went on to add that:

"Permanency will enhance the incentive value of the R&D credit because companies will be able to plan more long-term R&D projects, which in turn will lead to important new products and good paying jobs for Americans."

Recommended