“Uncertainty” was the buzz word at today’s House Ways and Means Select Revenue Measures Subcommittee hearing on tax extenders. At the hearing, which focused both on provisions that that expired at the end of 2011 and those set to expire at the end of 2012, Democrats and Republicans alike said that repeated expirations of temporary tax provisions breed “uncertainty” for both individual and corporate taxpayers that needs to be addressed. Subcommittee Chairman Pat Tiberi (R-OH) summed it up well in his opening statement: “[W]ith a few exceptions, temporary tax provisions that are worthy should be made permanent.” Manufacturers agree that worthy extenders should be made permanent and we put several provisions in that category including the R&D tax credit, deferral for active financing income and the look-through rules for controlled foreign corporations (CFCs).
There is real world cost to letting these tax provisions lapse. For example, the on-again, off-again U.S. R&D credit encourages companies to look into relocating U.S. R&D projects to countries offering more generous and permanent research incentives. Foreign direct investment in the U.S. takes a hit, too, as the U.S. is less attractive to R&D-intensive foreign-owned companies evaluating where to perform their research activity.
We commend the many members of Congress who are interested in reform our nation’s out-dated tax code. This effort is going to take time and, until it’s done, these proven pro-growth, pro-manufacturing, pro-job tax incentives should be renewed sooner rather than later. We hope taxwriters can build on the bipartisanship evident at today’s hearing and act to restore these sound tax provisions to provided badly needed tax certainty for business taxpayers as soon as possible.