Senators Urge Congress To Renew R And D Tax Credit

by Mike Godfrey, Tax-News.com, Washington

16 November 2006

Senators on the tax-writing Finance Committee are urging their Congressional colleagues to end their continuing procrastination on the passage of the Research and Development tax credit, which has left many thousands of US companies in limbo regarding their future investment strategies.

In a statement issued by committee chairman Chuck Grassley (R-Iowa) and ranking Democrat Max Baucus (D-Mon), Grassley remarked that continued "dilly-dallying" on the issue by lawmakers is curtailing the ability of firms to plan for the future, to make hiring decisions, and to make investments that will create jobs.

He also spoke of how his own constituents are growing increasingly frustrated with the Congressional deadlock on the issue.

"A lot of businesses, in good faith, relied on my assurances. They relied on the assurances of the congressional leadership, made in May of this year. These business people were assured that these extenders would be done," he admitted.

"And it’s not just management that cares. Iowa is a manufacturing state and we’re proud of our “R and D.” Thousands of Iowa employees have the right to ask why this popular provision is being delayed. Some of them could ask why something this popular is a hostage to be cavalierly shot," he remarked.

Baucus added:

“Sixteen thousand American businesses use the research and development tax credit – or they would, if Congress would do the right thing and renew it. Already this year, many companies have had to restate their earnings, because the tax cut they depended on to help finance their research and development efforts simply wasn’t there."

"It’s time to stop the annual exercise that threatens the research and development tax credit. It should be updated. It should be streamlined. It should be made permanent.”

The R&D tax credit, which expired last year, was included in the ill-fated 'trifecta' bill which failed to gain approval in the prior Congress. Republicans had included the credit, part of a series of popular tax extenders which enjoyed wide bi-partisan support, in the bill in a bid to force through a roll back in the estate tax, which by contrast was opposed by most Democrats and a few Republicans.

However, with the Democrats now due to be in control of Congress, these extenders are likely to regain momentum, and Charles Rangel, the Democrat in line to take over the powerful House Ways and Means Committee, has said that he is keen to see the R&D credit extended at the earliest opportunity.

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