Report: R & D Credit Bolsters Jobs And Economy

Over 70 percent of research expenditures under the R&D tax credit went to paying U.S. employee wages in 2005, according to an Ernst & Young report.

WASHINGTON -- The Research & Experimentation (R&D) Credit that expired on December 31, 2007 spurred over $6 billion in innovation-producing investments that funded wages for high-skilled employees across more than 17,700 small and large companies in the U.S., according to a report by Ernst & Young LLP.

In 2005, over 70 percent of the qualifying research expenditures under the credit went to paying U.S. employee wages and salaries, the report said.

“In this time of economic uncertainty, Congress should act now to seamlessly strengthen and restore the R&D Credit,” said Monica McGuire, executive secretary of the R&D Credit Coalition. “Simply put, without this important incentive, our nation risks exporting high-skilled jobs to a wide range of countries all too willing to make up for our lack of R&D investment incentives.”

Additional findings include:

  • 30 percent of R&D Credit claims went to companies with fewer than 1,000 employees.
  • R&D Credit claims increased by 34 percent from 2003 to 2005.
  • 16 percent increase in the number of companies claiming the R&D Credit from 2003 to 2005.
  • On a per capita basis, Connecticut, Delaware, Massachusetts, Michigan, Washington and New Jersey reported the most R&D activity.
  • States with the most companies reporting R&D activity include California, Texas, Massachusetts, Florida, Pennsylvania, New York and Michigan.

To view the report, click here.

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