R&D Credit Extension on Horizon?

The Senate Finance Committee is currently weighing whether to include any expired business tax credits in with the payroll tax, including the R&D tax credit. However a vote appears likely on the payroll tax cut on Friday with no inclusion of the R&D credit in that legislation. The Committee is still considering the fate of tax incentives that expired last year, even if this doesn’t make it into the package on Friday.

On Tuesday, Treasury Secretary Timothy Geithner also testified before the Senate Finance Committee and weighed in on the tax extenders such as the extension of the R&D credit, stating that businesses are likely to under invest in R&D because they cannot capture all of the gains from their investment, and further stated that “a substantial portion of the benefits, however, accrues to the broader business community or the public at large.”

In this election year and with talk of a comprehensive corporate tax overhaul, this may not end up occurring until early 2013. Senator Baucus stated this week at a hearing on tax benefits that Congress “should evaluate each and every extender and determine whether it should be allowed to expire or remain permanent.”

As to the R&D credit, there is continued talk on making this credit permanent from both the President and Republican candidates. For example, Rick Santorum’s tax plan includes making the R&D tax credit permanent and increasing the Alternative Simplified Credit (ASC) to 20%, up from 14% currently “to spur on innovation in America.”


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