Tech groups want R&D tax credit restored in U.S.

The credit expired last December

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 today.

"We are seeing American R&D going offshore," said William Archey, president and CEO 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) in calling today for an immediate extension and an expansion of the R&D tax credit,

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 statements 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% of R&D spending, is "leaving U.S. companies in a lurch," Phillip Bond, the ITAA's president and CEO, said during a Washington news conference.

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

Congress has extended the R&D tax credit multiple times since 1981, but it has resisted making the program permanent, partly because of an annual cost of about $7 billion. 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, the ITI's president and CEO.

"Now the election season is over and it's time to get it done," the 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% tax deduction for R&D expenses, the trade groups said. "Today, it's important we start looking over our shoulder," said Rep. Todd Tiahrt (R-Kan.). "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. 

Copyright © 2006 IDG Communications, Inc.

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