Sen. Coons calls for making R&D tax credit permanent, open to start-ups

Democratic Sen. Chris Coons on Thursday called for making the research and development (R&D) tax credit permanent and extending its benefits to start-ups to spur innovation and boost job growth.

The Delaware lawmaker called allowing the tax credit to expire and then be renewed, sometimes retroactively, an example of "perfectly bad tax policy” at a forum sponsored by the Information Technology and Innovation Foundation.

Coons said he feared the current credit might be lost in the shuffle of tax policy reform because many businesses see it as unreliable and because it doesn't incentivize R&D "the way it should."

The problem with the R&D credit as it stands today is that it's not accessible to start-ups, which are responsible for a great deal of American R&D, said Coons. More than half of the credit's benefits go to companies with more than $1 billion in sales, he noted.

Coons said lawmakers need to craft a compromise to make the credit permanent and transform it into a "start-up innovation credit."

He said the fact that many businesses would benefit as the credit was not “technology specific” in any way but “technology neutral,” meaning it was not tied to any single political constituency.

Coons also told The Hill that Congress needed to push legislation to protect trade secrets, which he said have much less protection than other forms of intellectual property — a difference he called a "significant risk." Coons said he's working with Sen. Herb Kohl (D-Wis.) on language that would shore up protection for trade secrets.

The freshman senator said while he has been disappointed at the "glacial" pace of his first year and a half in the Senate, he has seen some successes such as the America Competes Act, the JOBS Act, and the America Invents Act, all bills that have "real value."

But the policy that needs most work and has the most potential is the R&D tax credit, which Coons called one of the best ways to "harness the American people." Changes to the R&D credit would spur American innovation, an area in which the country had “uniquely excelled” in the past and could remain “highly competitive.” 

But Coons cautioned that businesses needed lawmakers to act quickly to create a "foundation for long-term innovation" by making the credit a permanent feature.

In addition to the R&D tax credit, Coons cited several other cited several policy concepts as especially innovation-friendly, including a "patent box" concept that has been successful in other countries.

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