AeA Releases New Competitiveness Series on the R&D Tax Credit
Congress Needs to Strengthen the Credit and Make It Permanent

Washington, DC (September 5, 2006) – AeA, the nation’s largest trade association with 2,500 member companies representing all segments of the high-tech industry, today released the 10th edition of its ongoing Competitiveness Series. Entitled Strengthen the R&D Tax Credit and Make It Permanent, the report analyzes why the currently-expired U.S. R&D Tax Credit is so critical to American innovation and competitiveness.

This new report highlights how critical R&D has been to the United States, particularly industry funded R&D. Since the creation of the R&D tax credit in 1981, domestic spending on research and development has proportionally shifted away from government and toward private industry. In 1981 government and industry spent roughly the same amount of total dollars on R&D. Since then, the gap has widened significantly. In 2004, U.S. industry spent more than twice that of the U.S government.

But the lack of a consistent U.S. R&D tax credit makes foreign incentives for R&D much more attractive to companies. U.S. affiliates invested $28.8 billion on R&D in foreign countries in 2003, the most recent data available, up 72 percent from 1999.

“While other countries are aggressively courting R&D with lucrative tax benefits, the U.S. R&D tax credit has long since expired,” said William T. Archey, President and CEO, AeA. “When combining this expiration with the constant temporary renewals, companies in the United States are limited in their ability to plan for R&D projects. As a result, some projects do not get the funding they deserve, or they are moved overseas. Congress must add some predictability to the system to help the United States maintain its lead in innovation. R&D creates wealth, intellectual property, and high paying jobs in the United States.”

The report recommends specific legislative reforms that would:

1) Strengthen the Tax Credit to encourage more companies to take advantage of its incentive value;
2) Make the Tax Credit retroactive to 1/1/2006 to ensure seamless extension; and
3) Enact the Tax Credit on a permanent basis to allow companies to make long term plans for conducting R&D in the United States.

Numerous attempts have been made in both the House and Senate to extend the credit, but not to make it permanent. Making the R&D Tax Credit permanent is a core tenet of the President’s American Competitiveness Initiative.

This report, as well as all installments of the AeA Competitiveness Series, can be downloaded for free at: www.aeanet.org/cs.

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About AeA
AeA, the nation’s largest trade association with 2,500 member companies representing all segments of the high-tech industry, is dedicated solely to helping our members’ top line and bottom line. We do this in partnership with our small, medium, and large member companies by lobbying governments at the state, federal, and international levels, providing access to capital and business opportunities, and offering select business services and networking programs. For more information, please visit http://www.aeanet.org.
 

This page was last updated on 09/05/06.