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US House Backs Permanent R&D Tax Credit

by Mike Godfrey, Tax-News.com, Washingont

25 May 2015


The US House of Representatives has passed legislation that would simplify and strengthen the research and development tax credit and permanently enshrine it in the US tax code.

The American Research and Competitiveness Act of 2015 (H.R. 880) was approved by the House by a vote of 274-145 on May 20. The bill's sponsor, Kevin Brady (R - Texas), said of the legislation: "America's future depends on innovation occurring here in the US. Without the right permanent research and development incentive, we will continue to fall behind our global competitors and watch good paying research jobs go overseas. A permanently strong economy requires a permanent research and development tax credit."

The R&D credit has been temporary since 1981. It is one of the largest of the more than 50 tax relief provisions known as tax extenders that expired at the end of last year.

The vote was welcomed by the Biotechnology Industry Organization (BIO), which said that a permanent R&D tax credit is needed to help companies plan their investments more effectively.

"By making this tax credit permanent, companies conducting their development programs will be able to estimate their tax liability and will not be burdened by the constant uncertainty regarding whether or not the R&D Tax Credit will be extended," said Jim Greenwood, BIO's President and CEO.

However, the chances of a permanent fix to the R&D tax credit being enacting in the current congressional session are extremely remote, because the White House insists that the measure should be offset with tax hikes elsewhere in the system.

In a Statement of Administration Policy released on May 19, the Government said that it "strongly opposes House passage of H.R. 880, which would permanently extend and expand the R&D credit without offsetting the cost, adding to long-run deficits. By making the R&D credit permanent without offsets, H.R. 880 would add USD180bn to the deficit over the next 10 years."

"H.R. 880 violates the very standard that House and Senate Republicans approved less than a month ago in their concurrent budget resolution, which requires offsetting the cost of any tax extenders that are made permanent with other revenue measures," the Statement continues. "If the House passes H.R. 880, it will have approved nearly USD600bn in deficit-increasing tax cuts mainly for corporations and wealthy estates this year – none of which are provided for in the Republicans' own budget."

Brady responded to that Statement, asking: "Why does the President want to ship America's research jobs overseas? He knows both parties in Congress have supported this measure on a temporary basis without raising taxes. So stop making excuses and stand up for American jobs and American innovation, Mr. President."

TAGS: tax | budget | corporation tax | legislation | United States | research and development | Tax

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