On August 3, the R&D Credit Coalition, an organization representing thousands of businesses engaged in U.S.-based research and development activities reacted to the Senate's failure to pass the R&D tax credit before ending its session.
"The failure of the Senate to get the 60 votes necessary to pass legislation that contained an extension of the R&D tax credit is extremely problematic for American businesses. This important tax incentive expired over seven months ago. As Congress goes home for its summer recess, American companies endure a tax increase as their costs of doing critical research and development in the U.S. continue to rise."
This statement follows a plea from John Engler, president of the National Association of Manufacturers, to Speaker Dennis Hastert in which he lays out the importance of this credit to manufacturers. "The R&D credit is a proven and essential incentive -- nearly 16,000 companies claimed the credit in 2004 and 25% of the companies were small enterprises with less than $1 million in assets," said Engler.
"Companies already are reporting in their financial statements that they face a higher effective tax rate in 2006 because of the loss of the R&D credit. Until Congress seamlessly extends the R&D tax credit, U.S.-based innovation will be more expensive, potentially depressing research budgets. Moreover, a gap in the R&D tax credit will send the message that Congress is not serious about encouraging U.S.-based innovation. In contrast, other countries-including Canada, Ireland, France, China and India -- have stepped forward to create their own tax-based incentives to lure research activities out of the U.S. and into their countries," he added.
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