Bipartisan House members make push for R&D tax credit

A bipartisan group of House members is hoping now is the time to expand and permanently extend a tax credit for research and development.

At a Wednesday news conference in the Capitol, six lawmakers said they believed legislation they were backing would offer companies more certainty and help the United States stop losing ground to global competitors when it comes to innovation.

“This is an issue that cuts to the core of who we are as a nation,” said Rep. John Larson (D-Conn.), the chair of the House Democratic Caucus. “Manufacturing is part of our DNA. In order to make things in America, you have to be innovative. In order to be innovative, you have to make the investment in research and development.”

The lawmakers’ bill would bump the so-called "alternative simplified credit" from 14 percent to 20 percent while also making it permanent. The measure comes as America’s share of global research and development is dropping: from 39 percent in 1999 to 33 percent in 2007, according to a report last year from the Organization for Economic Cooperation and Development.

The traditional R&D credit currently stands at 20 percent and was extended through 2011 in the compromise over the Bush-era tax cuts late last year. According to a House aide, the new legislation would phase out the traditional credit, while giving users of that incentive a one-year bridge to transition to the alternative simplified credit. 

The bill also would cost roughly $100 billion over a decade, said Rep. Kevin Brady (R-Texas), who argued that figure was more of a case of truth in budgeting than anything else.

“The truth is, we’re making annual installments on this R&D vehicle. We just don’t let it drive as far and fast as it can,” said Brady, a senior member of the House Ways and Means Committee. “Making it permanent and simplifying it unleashes the R&D tax credit to create these jobs.”

According to the National Association of Manufacturers, the research and development credit has been renewed 14 times since it was enacted roughly three decades ago. 

At the news conference, business representatives and lawmakers said making the tax credit permanent would help companies better plan their research and development operations. 

Rep. Michael McCaul (R-Texas), who co-chairs the congressional High Tech Caucus with Rep. Doris Matsui (D-Calif.), said companies he spoke with have called expanding R&D incentives their top priority. 

“If we can make this permanent, the market uncertainty that we hear so much about today becomes more certain for companies that need to project in the future years in advance,” said McCaul. 

Lawmakers have made pushes in the past to make research and development incentives more permanent. But Brady and other lawmakers repeatedly called the issue truly bipartisan at the Wednesday event and expressed confidence that a breakthrough could be in the making. 

President Obama has also backed research and development, including in his fiscal 2012 budget that was released last month. 

“I think it’s always been easier, perhaps, to take those short-term extensions. And, at times, those extensions have brought other pieces of legislation along with it,” said Brady, who said the chairman of the House Ways and Means Committee, Rep. Dave Camp (R-Mich.), and its ranking member, Rep. Sandy Levin (D-Mich.), were supporters of the measure. “We really think the time is right.”

Matsui and Reps. Anna Eshoo (D-Calif.) and Erik Paulsen (R-Minn.) have also signed on to the legislation.