US Senate Receives Bill to Make R&D Permanent
The COMPETE Act or The Competitiveness and Opportunity by Modernizing and Permanently Extending the Tax Credit for Experimentation according to Carper the act aims to ‘strengthen and improve incentive to invest in revolutionary, high-value research, if the US continues to lead the way in global innovation’.
“Unfortunately, the current R&D credit is too small, too complicated, poorly targeted, and not accessible to some research companies, particularly smaller businesses. The COMPETE Act would update our tax code and help encourage private investment in groundbreaking discoveries that will propel our economy forward.” Tom Carper (D – Delaware)
His legislation would make the R&D credit permanent, and strengthen it by increasing the credit rate to 25 percent of qualifying research investments, while also simplifying the credit in order to remove administrative barriers that companies are facing with the current credit.
It would also allow firms undertaking contract-funded research projects in collaboration with other companies to claim a portion of the current R&D credit, to open access to research tax incentives to new sectors of the economy, such as clinical research, and would direct private capital toward small, profitable start-ups by enabling investors in small research companies to claim the credit.
The Biotechnology Industry Organization (BIO) has encouraged support for the new bill. BIO President and CEO Jim Greenwood stated,
“The R&D tax credit is an important incentive that encourages private investment in medical, agricultural, and industrial biotechnology research. Such research not only produces groundbreaking new discoveries, but also creates millions of well-paying American jobs.” He said,
“The current environment of uncertainty about whether the credit will be extended makes tax planning extremely difficult for companies preparing their development programs,” he added. “Making the credit permanent would better effectuate its vital role in supporting America’s innovation economy while providing certainty for businesses working toward the next generation of medical and biotechnology breakthroughs.”
In May this year, the House of Representatives passed a bill to make the credit permanent – the first of several tax extenders that the House Ways and Means Committee Chairman Dave Camp (R – Michigan) has been intent on renewing. However, his unfunded legislation was criticized by President Barack Obama and the Democratic Party (although 62 Democrats in the House voted for Camp’s bill), as its permanent renewal would cost an estimated USD $155bn over the next 10 years.
This is welcome news to those innovative firms already involved in R&D as well as the new up-and-coming businesses looking to break into competitive markets.
If you are interested in claiming the R&D tax credit in your state, contact a Swanson Reed tax professional for expert advice.