IT group says delay on R&D tax credit puts tech jobs in jeopardy

Computerworld - The Information Technology Association of America is running a jobs-in-jeopardy ticker on the home page of its Web site to try to prod Congress into renewing the federal government's R&D tax credit, which expired at the end of last year.

The ITAA estimates that the tax credit, which has been available since 1981 to companies doing research and development work in the U.S., would help create or maintain 141,700 jobs this year. That translates into an average of 388 jobs being lost or forgone per day, according to the ITAA. And, it said in a press release last Thursday, federal laws would require about 86,000 of the jobs to be based in the U.S.

Congress "is putting jobs at risk" by not renewing the tax credit, said Bartlett Cleland, senior director of tax policy at the Arlington, Va.-based trade group, which has issued several statements about the lapsed credit over the past two months.

However, letting the R&D tax credit expire, and then eventually renewing it, is a routine practice for Congress. The credit typically is renewed for one or sometimes two years, primarily to keep it off of the government's books for long-term budget projections, said TJ Sponsel, a director of McGuire Sponsel LLC, a firm in Carmel, Ind., that advises businesses on the R&D credit. Sponsel said his clients aren't worried about the expiration of the credit and are planning on being able to take advantage of it eventually.

There seems to be broad support for the tax credit among federal lawmakers, including presidential contenders John McCain and Barack Obama. But it often is included in other pieces of legislation that can get hung up in one or both chambers of Congress. The credit was once allowed to expire for a full year, from December 2005 to December 2006, before it was reinstated and made retroactive.

Altogether, the R&D credit has been extended 12 times since it was first enacted, according to a study that was released in April by Ernst & Young LLP. The consulting firm said in the study (download PDF) that 17,700 corporations claimed $6.6 billion in R&D credits in 2005 alone. The credit uses a number of formulas, including one that gives corporate taxpayers a 20% credit for their R&D investments.

There has been a long-standing push by businesses and trade groups to make the credit permanent, as well as improve the financial benefits that it offers to companies. That has yet to happen, though.

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