05.15.03

Cantwell's Research & Development Tax Credit Proposal Rejected by the Senate

Cantwell proposal would have expanded and extended successful economic development program

(WASHINGTON, D.C.) – U.S. Senator Maria Cantwell (D-WA)’s amendment to extend the research and development tax credit through June 2013was defeated by the Senate today in a vote of 49-50. The R&D tax credit is a powerful and effective incentive for businesses to increase research spending which leads to more jobs and a stronger economy.

Under current law, the R&D tax credit provides businesses a 20 percent credit for research spending that exceeds its predicted R&D spending for that year. The R&D tax credit was enacted in 1981 and has been extended ten times. The current R&D tax credit is due to expire on June 30, 2004.

"Every great economic increase in our nation’s history has been built on research and development," Cantwell said. "The R&D tax credit works. It creates jobs and strengthens the economy. And more R&D is a key long-term answer to today’s economic problems."

The R&D tax credit lowers the cost of doing research in the United States by encouraging companies to increase their investments in critical research and development. And, it gives businesses the predictability that they need to do research and development.

Two years ago, Federal Reserve Board Chairman Alan Greenspan told the Senate Budget Committee, "Had the innovations of recent decades, especially in information technologies, not come to fruition, productivity growth during the past five to seven years, arguably, would have continued to languish at the rate of the preceding twenty years."

Cantwell’s amendment is cosponsored by Senators Bill Nelson (D-FL) and Max Baucus (D-MT).

Cantwell’s R&D tax credit amendment:

o Provides businesses that depend on the R&D tax credit more certainty by extending the tax credit through 2013.

o Increases the amount of tax credits to provide businesses an even greater tax credit to invest in technological and scientific innovation.

o Creates a new alternative simplified credit for qualified research expenses. This will provide a meaningful incentive for these companies to perform R & D activities in the United States as opposed to other countries that provide more substantial incentives for such activities

o Is funded by eliminating the dividend tax credit.

o Is identical to S. 664, the R&D tax credit bill introduced by Senator Orin Hatch (UT), which was cosponsored by 27 bipartisan senators.

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