Senate Fails to Approve RandD Tax Credit

By Roy Mark  |  Posted 2007-12-07

For the 13th time in 26 years, Congress has agreed to a temporary extension of the research and development tax credit. On a vote of 88-5, the Senate approved a one-year extension of the R&D credit. The House agreed to the same measure Nov. 9. [This measure failed during reconciliation between the House and Senate versions. --ed]

Strongly supported by the tech industry, the Temporary Tax Relief Act of 2007 now goes to the White House, where President Bush is expected to sign the legislation.

"With these votes, both houses have shown they recognize that research and development are essential to U.S. competitiveness in the communications industry," Grant Seiffert, president of the Telecommunications Industry Association, said in a statement. "In future years we hope to see the credit made permanent, but this extension is a step in the right direction."

The tech industry's call for a permanent extension of the R&D tax credit has become an event on Capitol Hill. While Congress has continually approved temporary extensions of the credit, which covers 20 percent of qualified R&D spending, lawmakers have refused to make it permanent.

"It would be ridiculous to have a permanent tax increase for a temporary R&D tax credit," Sen. Orrin Hatch, R-Utah, said at a Dec. 5 press conference, telling tech, manufacturing and biotech not to expect a "miracle" from Congress.

"We have to fight for it every year," Hatch said. "It's very hard for companies to do their planning."

When Congress originally passed the R&D tax credit in 1981, the United States put into place one of the most attractive R&D tax incentive programs in the world. Since then, as Congress approved one extension after another, global competitors have passed more generous incentives in hopes of luring U.S. companies. The United States now ranks 17th of the 30 countries in the Organization for Economic Co-operation and Development in offering R&D tax credits.

"If the U.S. does not guarantee similar incentives, we will continue to see R&D activities, innovation and jobs moving offshore," Christopher Hansen, president and CEO of the American Electronics Association, said at the Dec. 5 press conference.

Editor's Note: Contrary to what was originally reported in this article, the Senate killed the R&D tax credit portion of the Temporary Tax Relief Act of 2007. The erroneous statements were based on reports from the TIA and other reliable sources. We regret the error.

Check out's Application Development Center for the latest news, reviews and analysis in programming environments and developer tools.

Rocket Fuel