Senate Approves Extension To R&D Tax Credit

by Mike Godfrey, Tax-News.com, Washington

05 March 2004

The United States Senate has approved a bill proposing an eighteen month extension to the R&D tax credit, due to expire in June this year.

The bill, sponsored by Senate Finance Committee member Orrin Hatch (R – Utah) has been added to an international tax bill currently awaiting Senate scrutiny, and has been welcomed by many large manufacturing and technology firms such as Ford Motor Co. It is thought that final passage could occur later in the month.

The Senate has also voted to adopt an amendment by Sen. Jeff Bingaman (D – NM) which will enlarge the size of credit that companies can receive, in addition to simplifying the formula used to determine whether firms are eligible for the tax credit.

The measure will cost the federal government just under $10 billion over ten years, although this will be more than offset by the closing of leasing tax shelters which is part of the same bill, and will raise $22 billion over the same time span.

Bingaman’s proposals will also allow firms to receive an 100% R&D tax credit for research activities undertaken by certain subcontractors, increased from the current level of 65%.

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