Congress Must Renew Expired R & D Tax Credit, Says NAM

Manufacturers, already invested in R&D for 2006, face increased tax burdens.

The National Association of Manufacturers (NAM) president, John Engler, on Tuesday urged Congress to renew the tax credit that encourages U.S. research and development (R&D), saying it is a necessary tool for maintaining the United States’ economic competitiveness.

Manufacturers have already made investment decisions in 2006 based on expectations that Congress would be renewing the R&D tax credit, said Engler in a speech at the Industrial Research Institute's annual conference.

Engler noted that although the R&D tax credit had expired, companies still invested in R&D because Congress usually renews the credit eventually, as in the past. Manufacturers who invested in R&D this year are planning on the credit to help them recover some of their losses.

Engler is hoping that Congress, when they return after the mid-term elections, will pass legislation that will strengthen the R&D credit, with the ultimate goal being a permanent tax credit that competes with tax-based incentives offered by U.S. global competitors.

"If Congress goes homes without acting, leaving a lump of coal in the stockings of business instead of the promised incentive, it will be a conspicuous betrayal of trust that will undermine the credit’s incentive value,” said Engler.

If allowed to remain, the expired credit would mean a 9 percent increase in the overall manufacturing tax burden, he noted.

The R&D tax credit, originally enacted in 1981, has been extended 11 times but not since its last expiration in December 2005. The credit is offered for certain R&D expenses made only in the U.S., primarily for employees who perform qualified research activities.

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