Congress Restores R&D Tax Credit

By John S. McClenahen Once a tax package passed by Congress on Sept. 23 is signed into law by President George W. Bush, U.S. manufacturers will again be able to get a tax credit for certain R&D expenditures. The credit expired on June 30, and the new legislation restores it retroactively from this past July 1 through Dec. 31, 2005. The Washington, D.C.-based National Association of Manufacturers figures the credit, which applies only to R&D work done within the U.S., is used by nearly 16,000 companies. Not included in the tax package, however, is a substitute for the so-called FSC/ETI (Foreign Sales Corp/Extra Territorial Income), the U.S. corporate tax deferral arrangement on exports ruled illegal by the World Trade Organization. The ruling allows the European Union to impose extra tariffs on certain U.S. exports, with the percentage of extra duties increasing each month. There was talk on Capitol Hill last week of Congress taking up the measure in a lame-duck session after the Nov. 2 presidential and congressional elections.

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