R & D tax credit debated in Senate

As we went to press, the passage of HR 3996, “to amend the Internal Revenue Code of 1986 to extend certain expiring provisions and for other purposes” was still up in the air.

The bill includes an AMT [Alternative Minimum Tax] patch providing taxpayers tax relief from AMT by increasing the AMT exemption amount for the 2007 tax year.

But while every middleclass worker bee has his or her eyes on whether or not Congress passes H.R. 3996 there is another amendment in the bill that should be of concern to everyone in high tech.

The amendment among other things extends through next year, December 2008, tax credits for increasing research expenses for U.S.-based research.

The R &D Credit Coalition–formed in part out of the membership in the National Association of Manufacturers–in a statement said this amendment should be signed into law “in order to continue to have a positive impact on jobs and investment in the United States.”

The bill passed the House in early November but is being debated today, December 5, 2007, in the Senate. At the moment there is a “cloture” motion on the Senate floor to close debate and bring the bill to a vote.

In years past the continuation of the tax credit for research and development has always been a nail biter with Congress approving the bill right before its expiration, according to Monica McGuire, senior policy director, Taxation for the National Association of Manufacturers.

However in the 1995/96 tax year, there was a 12 month period in which there was no tax credit issued for R &D.

The coalistion is asking for a multi-year tax credit to assure companies that an R&D project over three to five years will be eligible for a tax credit.

While it is not clear whether or not defeat of the tax credit for R&D would have a chilling effect on research in the U.S., it certainly would buck the worldwide trend of many nations who support R&D with far more than just a tax credit.