Many in industry certainly wish this would become a reality and feel it’s long overdue. The Research & Development (R&D) Tax Credit (“Credit”) has been extended 14 times since first enacted in 1981. Historically the Credit has been temporary in nature and when extended it has generally been extended for two year periods, often retroactively. This temporary nature has not allowed businesses to plan their R&D expansions with certainty, and is counter to the overall purpose of the credit which is to encourage investment and create jobs in the United States.
Is Congress finally going to act and make the R&D Credit permanent?
President Obama supports making the Credit permanent. President Bush did as well. It is clear that both political parties agree on the need to make the R&D credit permanent. The recently issued Joint Committee on Taxation Report (June 2011) contained support for making the Credit permanent. It also suggested an increase in the rate for the Alternative Simplified Credit (ASC) from 14% to 17%. The proposal would be effective for amounts paid or incurred after December 31, 2011, when the current R&D extension expires.
There are also two legislative options currently in the House Committee on Ways and Means: (1) H.R. 942 (introduced March 8, 2011), which extends the Regular Credit Method through 2012, makes the ASC permanent, and increases the ASC percentage to 20%; and (2) H.R. 1693 (introduced May 3, 2011) which makes both the Regular Method and ASC Method permanent, and increases the ASC Credit from 14% to 17%).
Now is the time to examine your operations and determine if you qualify for the R&D Credit. Contact us today!