R and D tax credit extension a top priority for US tech groups

The U.S. will lose jobs to other countries if the U.S. Congress fails to quickly resurrect a research and development tax credit that expired in December 2005, a large coalition of technology trade groups said Tuesday.

“We are seeing American R&D going offshore,” said William Archey, president and chief executive of AeA, formerly the American Electronics Association.

AeA joined the Electronics Industries Alliance, the Information Technology Industry Council (ITI) and the Information Technology Association of America (ITAA) called for an immediate extension and an expansion of the R&D tax credit at a Washington, D.C., press conference.

A number of other tech-related trade groups, including the Business Software Alliance, the Semiconductor Industry Association, the Biotechnology Industry Association, and the United States Telecom Association, issued press releases in support of an extension.

The groups asked Congress to act now to extend the credit, during a lame-duck session that could last until late December. New members of Congress elected this month take their seats in January. The lack of the tax credit, which allows U.S. companies to get a tax break of up to 10 percent of R&D spending, is “leaving U.S. companies in a lurch,” said Phillip Bond, ITAA’s president and chief executive.

The trade groups also called for an expansion of the tax credit that would cost an additional $1 billion to $2 billion a year. An expansion of the tax credit would allow U.S. companies to use a new formula when applying for the tax credit.

Congress has extended the R&D tax credit multiple times since 1981, but it has resisted making the program permanent, partly because a cost of about US$7 billion a year. Both the House of Representatives and the Senate passed an extension of the tax credit during the current session of Congress, but it stalled after being attached to two other pieces of legislation.

It’s time to stop using the tax credit as a “political football,” said Rhett Dawson, ITI’s president and chief executive.

“Now the election season is over and it’s time to get it done,” the ITAA’s Bond said. “Innovation means American jobs.”

When Congress passed the first version of the tax credit in 1981, the U.S. ranked first in tax incentives provided for research. Now, it ranks 17th, Dawson said.

It’s important for the U.S. to catch up to countries such as Australia, which offers a 125 percent tax deduction for R&D expenses, the trade groups said. “Today, it’s important we start looking over our shoulder,” said Representative Todd Tiahrt, a Kansas Republican. “The question is where do you want those jobs? Do you want them in Finland, Ireland, China or India. Or do you want them in America?”

In September, the R&D Credit Coalition collected signatures from dozens of trade groups and companies on a letter asking Congress to extend the credit. Among the companies signing that letter were AT&T Inc., CA Inc., Hewlett-Packard Co., Microsoft Corp., Palm Inc., and Sun Microsystems Inc.

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