House passes $7B R&D tax credit extension

The U.S. House of Representatives on Wednesday voted to pass a bill containing an extension of a $7 billion research and development tax credit, but supporters of the tax incentive said they were unsure when the U.S. Senate would take action.

The R&D tax credit would expire on Dec. 31, but the House, on a largely party-line vote, approved the Tax Extenders Act, a bill that would temporarily extend $31.1 billion in expiring tax provisions through 2010.

In addition to $7 billion for R&D tax credits, the bill would allow tax breaks for teachers purchasing classroom supplies, tax credits for biodiesel production and a variety of business tax breaks.

The R&D tax credit has been temporarily extended more than a dozen times since it was first approved by Congress in 1981. Supporters of the tax credit, including several technology groups, have called for it to be made permanent, but lawmakers have balked at the price tag.

Supporters of the R&D tax credit say the program supports tens of thousands of high-paying U.S. research jobs. But supporters, during a press conference earlier Wednesday, said there isn't a timetable in the Senate to pass the tax credit. A delay in the extension would slow R&D efforts at many companies, supporters of the tax credit have said.

Republicans in the House complained that the Tax Extenders Act pays for the package of tax breaks through a permanent tax increase of $24.6 billion on capital investment. The tax increases will hurt small businesses and cost small-town jobs, said Representative Kevin Brady, a Texas Republican.

The bill will not pass in the Senate, House Republicans predicted.

But members of the R&D Credit Coalition, a group of tax credit supporters, said they would continue putting pressure on Congress to approve an extension. On Wednesday, the coalition released a letter, signed by more than 5,000 employees of 135 companies, calling for a tax credit extension.

R&D is an important part of creating new jobs during the current economic slowdown in the U.S., said Karen Myers, vice president of global government affairs for CA.

The tax credit supports thousands of jobs, as well as projects important to the U.S. national defense, added Rod Blocksome, principal engineer at Rockwell Collins, maker of communications and aviation electronics.

"R&D is the fuel that powers the technology engine for companies like ours," Blocksome said. "We're heavily dependent on new technology development to lead in our marketplace. The R&D tax credit ... is really the enabler that allows companies to accomplish more with their limited R&D dollars."

Copyright © 2009 IDG Communications, Inc.

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