US chems, others press Congress on R&D credit

04 September 2008 22:28  [Source: ICIS news]

WASHINGTON (ICIS news)--US specialty chemical producers and other manufacturers on Thursday urged Congress to renew a key research and development (R&D) tax break before the end of the year, warning that failure to do so will undermine US technology.  

 

The R&D tax credit expired at the end of 2007, and chemical producers along with a wide spectrum of other manufacturers have been pressing Congress to renew the tax break for this year before time runs out.

 

Monica McGuire, spokeswoman for an industry-backed interest group supporting the tax benefit, said that if Congress fails to renew the R&D tax credit this year, it will put US technology advances in jeopardy while European and Asian research moves ahead.

 

Under the tax credit, a US company would have been entitled to a 12% credit against its taxes for that portion of its current year R&D spending that exceeded 50% of the firm’s average research and development expenditures over the three previous years.

 

For example, a company that had spent an average of $10m (€7m) over the three prior years and is spending $12m on R&D in the current year would get a tax credit of 12% on $7m or some $840,000.

 

“If Congress fails to renew the R&D credit, it will have two negative and immediate effects,” McGuire said.  She represents an industry lobby group called R&D Credit Coalition whose members include chemical companies and related trade associations.

 

Without the credit, manufacturers will have less incentive to increase their R&D spending, she said.  Second, the loss of the tax credit could drive some US firms to shift their R&D budgets to foreign locations where such credits are now available.

 

McGuire said that more than 20 other industrialized countries now offer an R&D tax credit.  “That wasn’t the case just ten or 15 years ago,” she said, “and most of those foreign countries now provide a credit for research and development that is much higher than the US credit as it existed last year.”

 

“If the R&D tax credit is not renewed this year, it will accelerate the already negative trend of R&D spending moving overseas,” she said, adding: “Many US companies are being courted by other countries to take their research and development work overseas.”

 

Joe Acker, president of the Synthetic Organic Chemical Manufacturers Association (SOCMA), said he will be pressing members of Congress next week to come to an agreement on renewing the R&D credit.

 

Congress returns from its August recess on Monday, 8 September, but will be in session for only a few weeks before breaking again in advance of the US national elections on 4 November.

 

“I hope they will do something in the next few weeks to renew that important credit,” Acker said.  “But there is not a lot of time left and I’m not real optimistic.”

 

A bill to renew the R&D tax credit has been stalled in Congress by a dispute between Democrats and Republicans on how the credit should be paid for in the budget.

 

($1 = €.69)

 

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By: Joe Kamalick
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