Companies ask Congress to make R&D tax credit permanent

More than 5,000 employees who rely on the U.S. research and development tax credit signed a letter to Congress asking for a long-term extention of the credit, which will expire Dec. 31.

The House is expected to vote on extending the R&D tax credit today. Senate action is less certain as the chamber wrangles over the healthcare bill. A coalition of manufacturers, scientists, engineers, drug makers and other companies that rely on the tax credit are asking lawmakers to make it permanant as a way to create new jobs and provide some stability for industries hit hard by the recession. 

The R&D Credit Coaltion says 70 percent of the tax credit's benefits go toward paying the salaries of workers involved in research and development activities. TechAmerica said in a report that letting the credit lapse would risk the loss of 120,000 jobs in the U.S. The credit has been extended 13 times since it was enacted in 1981.

Coalition members say the typical R&D project spans five to 10 years. So extending the credit by only one or two years does not give companies the incentive to do long-term planning for new products. If new products are not released, retail sales will slump and more jobs could be at risk.

Rod Blocksome, principal engineer with Rockwell Collins, based in Iowa, said 20 percent of the company's sales is re-invested in R&D. R&D funding enabled the company to produce the first GPS receiver over two decades ago. "It was the size of two refrigerators," he said on a conference call with reporters. "R&D is the fuel that powers technology companies."

President Obama expressed support for extending the tax credit for a more meaningful time period. But the current fiscal pressure on the administration could get in the way of a long-term extension.

A copy of the letter can be found here.