Since it was first enacted in 1981, the research and development tax credit has never been a permanent part of the tax code. Instead, the temporary nature of the credit — a characteristic shared by more than fifty other “tax extenders” — has injected uncertainty into business planning for years since it is constantly expiring and often not extended until months later. The good news is that this on-again, off-again debacle could finally be alleviated for good, if Congress approves a historic tax agreement called the Protecting Americans from Tax Hikes (PATH Act).
The PATH Act, which is expected to first be considered in the House on December 17, would end the cycle of tax code unpredictability for thousands of manufacturers by making several provisions permanent. The PATH Act makes permanent the research and development (R&D) credit, which fuels new product development, increases productivity, and creates domestic, high-wage R&D jobs. The Act would permanently extend enhanced Section 179 expensing, which allows small manufacturers to immediately write-off 100 percent of the cost of capital equipment up to a $500,000 limit. Deferral for active financing income, which enable U.S. manufacturers with overseas financing arms to provide competitive financing for their products, is also made permanent.
Two other pro-growth tax provisions receive multiyear extensions, providing manufacturers with a bridge of certainty until comprehensive tax reform is enacted. Specifically, 50 percent first year expensing, also known as bonus depreciation, is reinstated and extended for several years so that businesses of all sizes can purchase the equipment and machinery necessary to grow their businesses and create jobs. Additionally, the bill includes a multi-year extension of an international provision known as the “look-through” rule that allows domestic manufacturers to redeploy foreign earnings from active overseas business operations without triggering immediate U.S. tax, thus removing a competitive disadvantage faced by U.S. companies in the global marketplace.
After the agreement was release this morning, the NAM’s Vice President of Tax Policy Dorothy Coleman and several manufacturers who serve on the NAM’s Board of Directors as Executive Committee members called on Congress to support the PATH Act.
The NAM thanks the leaders in the House and Senate that came together to introduce this historic tax package, and urges every member of the House to vote in favor of the PATH Act to help manufacturers innovate, compete in a global marketplace and contribute to U.S. economic growth and job creation.
Before joining the NAM, Crooks served as senior manager of government affairs for Financial Executives International, where she advocated on behalf of the association’s membership of senior-level business executives on tax, corporate treasury, pension and benefit issues. Previously, she worked as a legislative assistant to Rep. Michael Castle (R-DE), a senior member of the House Committee on Financial Services. Christina handled financial services issues for the Congressman during consideration of the Dodd-Frank Act, and also worked on small business and judiciary issues. Christina earned a B.A. in Political Science from the University of Delaware and a M.A. in Political Science from American University.
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