R&D Tax-Credit Extension Goes Down To The Wire
This article is reprinted from "The Gray Sheet" – December 10, 2007
Device lobbyists are joining a year-end push for an extension of a soon-to-expire tax credit for companies engaged in research and development, but opportunities are running out.
AdvaMed President Steve Ubl signed a letter Dec. 4 along with 40 other trade association chiefs urging congressional leaders to pass by the end of the month a multi-year extension of the credit, which expires Dec. 31.
The House passed an alternative-minimum-tax reform bill (H.R. 3996) last month that included a one-year renewal of the R&D tax credit. However, on Dec. 6, the Senate passed a simplified version of the bill that did not include even the one-year extension.
Ubl and other members of the R&D Credit Coalition say legislation should renew the program for several years, and ultimately they want it to be made permanent. "Extension of the R&D tax credit has unfortunately turned into a biennial event for the Congress, weakening its intent by interrupting ongoing research and creating a sense of uncertainty, particularly for small and emerging growth companies," Ubl said.
The coalition is also pushing for all companies to be eligible for a credit of 20% of qualifying research expenses. Under current law, a company gets the 20% credit only if its research expenses exceed a threshold based on the ratio of research expenses to gross revenues. Otherwise, firms rely on calculations that result in a smaller credit.
The coalition supports legislation (H.R. 2138) introduced earlier in the year by Reps. Sander Levin, D-Mich., and Dave Camp, R-Mich., that would permanently extend the credit and create a more evenly applied 20% credit rate.
But at this stage, it is possible that the credit could expire, at least temporarily. And it would not be the first time. The tax credit, first ratified in 1981, lapsed from July 1995 through June 1996. It was again allowed to expire in 2005, but Congress passed legislation in December 2006 that retroactively extended the credit back to January 2006 through December 2007 (1"The Gray Sheet" Dec. 11, 2006, p. 7).
- David Filmore
© FDC Reports 2007 - All Rights Reserved
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