US Business Groups Call For Extension Of R&D Tax Credit

by Mike Godfrey, Tax-News.com, Washington

26 April 2004

The R&D Credit Coalition, a group of US companies including Microsoft and Electronic Data Systems (EDS) have released a new study to support their campaign for the R&D tax credit to be made permanent.

The study found that between 14,000 and 16,000 firms in the United States were benefiting from the tax credit, particularly small and mid-sized firms, ranging from retailers to manufacturers.

The system allows corporate taxpayers to claim a 20% tax credit on certain R&D spending, but it is due to expire on June 30.

For small firms with asset values of less than $99,000, the R&D tax credit consisted of 9.4% of average assets, according to the report. For larger businesses with assets worth between $250,000 and $500,000, the credit also represented 9.4% of average assets.

Of the firms claiming the tax credit, just under two-thirds reported assets worth between $500,000 and $50 million, the study revealed.

The extension of the R&D tax credit is also supported by the National Manufacturers Association, which has pointed out that the credit also has an indirect benefit for US firms.

“Though my aerospace parts company doesn’t benefit directly from the R&D credit, our big customers do and their innovation and growth helps keep us growing,” explained Gary Johnson, president of Ace Clearwater Enterprises near Los Angeles, whilst addressing a Capitol Hill news conference.

“We know that a strengthened R&D credit will encourage more American companies to engage in important research while making the US a more attractive place to do business,” he added.

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