It Takes R&D to Spell Innovation

5,300 Workers Stand Up for R&D

It’s pretty rare that 5,000 people agree on anything, but that’s what happened today as thousands of R&D professionals from 135 companies and 44 states sent a letter to Congress urging lawmakers to immediately extend and make permanent the research and development tax credit before it expires on December 31.

The credit goes to support American innovation efforts that help keep the country competitive.  And, failure to extend the credit would pull the rug out from under an economy that is struggling to regain its footing.

With 70 percent of the credit going to pay R&D employee salaries and wages, letting the credit expire would put 120,000 U.S. jobs at risk and cost $45 million in lost economic activity, according to a report released last month by TechAmerica.

“Research and development keeps our companies on the cutting edge of global competitiveness. R&D brought us smart phones, airplanes, vaccines, hybrid cars, the artificial hip and much more,” the employees wrote. “U.S. companies employ high-skilled, high-wage workers across America that depend on the R&D tax credit for maintaining the nation’s leadership in biotechnology, manufacturing, technology, and other business sectors in the U.S.  If the credit expires on December 31, it will place America’s innovation economy at risk.”

The U.S. House is scheduled to vote on a tax extenders package today that would extend the R&D tax credit for one year, but the credit’s future remains terribly uncertain.    

As President Obama noted earlier this year, “This is a tax credit that returns $2 to the economy for every dollar we spend. Yet over the years we’ve allowed this credit to lapse or we’ve extended it year to year—even just a few months at a time. Under my budget, this tax credit will no longer fall prey to the whims of politics and partisanship. It will be far more effective when businesses like yours can count on it, when you’ve got some stability and reliability.”

While R&D is part of American DNA, it is not something that comes cheap. R&D is expensive, and it takes planning to bring those ideas to the marketplace. Our ability to pay for R&D, to map out the future of the products it creates, and to keep those Americans involved in one of our most important enterprises are threatened by congressional inaction over the R&D tax credit.

It’s important to remember that United States isn’t the only nation that gives R&D incentives. While Congress is slow to renew the credit, other nations are not. When the R&D Credit was first created, the U.S. had the distinction of providing the most generous tax treatment for research among all OECD nations. Today, that is not the case because the credit has been whittled away over the years due to our global competitors such as Canada, China, Japan and others that offer more aggressive R&D incentives. In fact, the U.S. has fallen out of the top 10 globally when measuring government incentives for private sector R&D and now measures 17th.

Congress needs to heed the call of the 5,300 R&D men and women across this great nation.  The employees who signed onto the letter represent thousands more who toil everyday in labs, research facilities, machine shops and other facilities across the country, who help America invent its way to a brighter future.  

 

Congress Should Grant R&D Wish

As of today there are only 20 shopping days left before Christmas. But as important as holiday spending is for the economy, there are only 27 days left before the research and development (R&D) tax credit expires.

Congress could give the economy a Christmas present and extend the R&D tax credit, or it could put a lump of coal in the stockings of the thousands of workers across the nation that depend on the credit for good, high-paying jobs.  

The credit isn’t just some bit of tinsel: it spurs the creation of U.S.-based innovation and economic activity. It fosters private-sector R&D investment by companies of all sizes and brings new, improved products and services to market.

The list of these is nearly endless: energy-efficient appliances, new vaccines, faster Internet and communications capabilities, safer transportation, and improved national security, to name just a few. Innovative ideas become reality when American companies make a strong commitment to invest in our future national prosperity. 

But most importantly, the provision is really a “jobs credit” since 70 percent or more of its benefits are attributable to salaries of workers performing U.S.-based research. Only R&D performed in the United States may qualify for the R&D credit.  The credit stimulates innovation-producing R&D investments in all 50 states across nearly 18,000 small, medium and large companies, according to a 2008 report by Ernst & Young for the R&D Credit Coalition. 

The credit’s renewal is important because these businesses cannot make important R&D decisions without it. R&D projects take a long time and require big investments up front. Without the credit, many critical projects across the nation simply won’t get started, will end, or will get shipped overseas where even more generous incentives await. While time is running short, it’s not over.

The White House supports a permanent R&D credit, and more than 400 companies recently sent a letter to Congress asking them to extend and strengthen the credit as a way to spur investment.

Also, 34 technology company CEOs sent a letter to Obama asking for his intervention on saving the credit. “To remove the uncertainty that is deterring businesses from making investment and hiring decisions, action is needed both in the immediate and long term,” the CEOs wrote. “Before the end of this year, we encourage enactment of a permanent extension of a strengthened research and development tax credit and other key business tax incentives set to expire at the end of this year.”

Still, Congress seems to have its sled stuck at the North Pole. Lawmakers don’t seem willing to make the holiday season a little brighter for all those workers who depend on the R&D credit. They might get in the spirit a little faster if people picked up the phone and let them know that the R&D tax credit is more than just some hypothetical item on the wish list.