Making R&D Tax Credit Permanent the Right Move

Posted on September 14, 2010. Filed under: Uncategorized |

Moving to create jobs and increase American competitiveness, President Obama is calling on Congress to make permanent the research and development tax credit that it allowed to expire last year.

Unveiled during a recent speech in Ohio, the president’s proposal will expand the tax credit about 20 percent, from about $7 billion to nearly $10 billion a year, over the next decade. It will raise the tax credit to companies for research and development to 17 percent (up from 14 percent) and simplify the tax filing for businesses.

“Instead of tax loopholes that incentivize investment in overseas jobs, I’m proposing a more generous, permanent extension of the tax credit that goes to companies for all the research and innovation they do right here in Ohio, right here in the United States of America,” said Obama in announcing his plan. In total the expanded credit would devote about $100 billion over the 10 years to leverage additional R&D investment.

The President argues that by making the tax credit permanent “businesses could make investments and create jobs today confident that they will continue to benefit from the credit in the future.”

According to a White House release, the R&D credit has been extended 13 times since its creation in 1981 and has a history of bi-partisan support in Congress. However, despite a track record of support in the past, Republicans “are now blocking legislation that would renew this credit.”

The reality of today’s politics probably means that this important piece of legislation will not be acted upon until after the midterm elections.

That is a shame.

Research and development incentives are key to growing American business and putting the country at the forefront of science and technology innovation.

Further, investment in research and development creates jobs now and into the future. Companies working on cutting edge technology will be able to hire engineers, scientists, and technicians to unlock and perfect new technologies. In turn these new technologies will become the foundations of future industries—in areas such as energy, medicine and IT—that will hire future generations of American workers.

Even the Chamber of Commerce, which has not been supportive of the president’s agenda, praises his R&D tax credit proposal. “The R&D tax credit creates high-wage, American jobs…Extensions and expansion of the R&D credit will encourage investment in R&D in the United States that will enhance high-wage job growth and contribute to the revitalization of the American economy.”

An article in the Huffington Post on the R&D tax credit proposal noted: “Besides contributing to global competitiveness, the return on investment is substantial. The (R&D) credit currently costs an estimated $7 billion a year…A permanent credit coupled with just a 25 percent increase could boost real GDP by $206.3 billion, generate 270,000 manufacturing jobs and raise total employment by 510,000 within a decade.”

The president’s research and development tax credit proposal, simply put, is smart policy.

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One Response to “Making R&D Tax Credit Permanent the Right Move”

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There are two significant issues with the existing R&D Tax Credit regs. First, it’s a Tier 1 Issue, which means higher chance of audit. Second, the IRS requires contemporaneous documentation to support a claim for Credit. To address these issues, we built Titan Armor – a low-cost software solution that meets the IRS requirements for the R&D Tax Credit. We work with CPA firms to enhance their client services. You can get more information at

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