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Legislative Action Alert
(1 June 2001)

Support Needed for Permanent Extension of
the Research and Development Tax Credit

The Research and Experimentation (R&D) tax credit enjoys broad, bipartisan congressional support and was among the priority tax items President George W. Bush included in his tax cut plan. However, during negotiations with Congress, the tax credit was removed from the legislation before it was signed into law.

This tax credit provides companies a critical, effective and proven incentive to maintain and increase their investment in U.S.-based research and development. The R&D tax credit directly supports increased jobs, economic security and high standards of living for American workers. The tax credit, in large measure, equals increased jobs and salaries for engineers, researchers and technicians. Just as important, however, are the additional jobs created in manufacturing, administration and sales when research yields new products taken to market.

We have enjoyed the economic benefits of our past investment in technology and innovation. Now we must continue to invest for our future. Continued growth of our economy is inextricably tied to the ability of companies to make a sustained commitment to long-term research. Congress is beginning to realize the important link between basic research, innovation and increasing the number of high-paying jobs and that knowledge-based industries are extremely sensitive to tax policy and tax costs.

IEEE-USA's Position

IEEE-USA supports permanent extension and expansion of the Research and Experimentation Tax Credit to encourage increased private sector R&D investments that promote economic growth, technological competitiveness, and improvements in the quality of life.

Legislative Status

Language authorizing permanent extension of the Research and Development tax credit was contained in initial versions of the Bush Administration $1.6 trillion tax plan. However, during negotiations with House and Senate leaders from both parties, the R&D tax credit was cut from the final version, which was signed into law.

Individual members in both the House and Senate have introduced similar versions of the R&D tax credit. In the House of Representatives, Congresswoman Heather Wilson (R-NM) has introduced H.R. 1137; and Congresswoman Nancy Johnson (R-CT) has introduced H.R.41. In the Senate, Senator Pete Domenici has introduced S.515. Given the broad bipartisan support of these bills in Congress and the enthusiastic support of the business, scientific, and engineering communities, chances are very good that this issue will resurface soon. In fact, The Wall Street Journal reported on May 31, 2001, that legislation extending the tax credit supporting business research is “likely in the coming months.”

However, since the current R&D tax credit does not expire until 2004 and given the large number of competing interests vying for any remaining tax relief, it is important that members of Congress receive a strong message from their constituents who will benefit from the permanent extension of the R&D tax credit.

How You Can Help

Please urge your Congressman and Senators to support inclusion of legislation to permanently extend and expand the R&D Tax Credit. Tell them that the R&D Tax Credit:

• Leads to long-term economic growth;
• Assists and fosters technological innovation;
• Economists credit at least 50 percent of the nation’s economic growth over the past half-century to technological innovation. Information technology alone has accounted for approximately one third of the growth in the U.S. economy since 1992;
• Companies have a five to ten year planning horizon for R&D projects that inhibit their ability to take advantage of the current R&D Tax Credit system;
• Permanently extending and expanding the R&D Tax Credit will strengthen incentives for private companies to undertake research that leads to new processes, services, and products; and
• The output of these investments will also assist in providing the next generation of engineers and scientists that will be the foundation of America’s technological and economic strength for the next century.

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Last Update:  1 June 2001
Staff Contact:  Bill Williams, bill.williams@ieee.org

Copyright © 2001, The Institute of Electrical and Electronics Engineers, Inc.
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