Tag: R&D Tax Credit

Make R&D Tax Credit Permanent, Even in Revamped Tax Code

Bloomberg, “Treasury Department Supports Permanent Research Tax Break Even in Overhaul,” reporting on Treasury’s support for a more robust, permanent R&D Tax Credit as part of a revamped tax code.

Michael Mundaca, assistant Treasury secretary for tax policy, said that the economic benefits and high-wage jobs generated by the research credit make it worth preserving, even in a tax system with fewer targeted tax incentives.

“In a reformed system, you’d still want some incentives to be provided for research activity, and we think this is a good incentive to provide,” Mark Mazur, the department’s chief tax economist, said at a briefing with reporters in Washington yesterday.

The briefing accompanied the advance release of a new report, as reported by Reuters, “Obama tax credit will support 1 mln workers-report.”

Treasury Secretary Geithner will highlight the jobs connection when he visits a high-tech manufacturer in Northwest Arkansas today. From ArkansasBusiness.com, “NanoMech Ready for Appointment with Geithner“:

NanoMech Inc. chairman and CEO Jim Phillips grasps firmly the significance of U.S. Treasury Secretary Tim Geithner’s Friday visit to northwest Arkansas.

“He could’ve gone to the Silicon Valley, he could’ve gone to the Research Triangle,” Phillips said Thursday morning, “but he’s coming here.”

Geithner’s visit is multi-pronged. He will meet with a group of regional business leaders at the Arkansas World Trade Center and also is expected to address the release of a report detailing the economic benefits of President Obama’s Fiscal Year 2012 Budget proposal to enhance the Research & Experimentation tax credit.

NanoMech anticipates Secretary Geithner’s visit in a news release, “U.S. Treasury Secretary Timothy Geithner Makes Historic Visit to NanoMech Plant in Springdale.”

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Time for a Permanent R&D Tax Credit (Long Past Due, Actually)

From The Hill (blog), “Bipartisan House members make push for R&D tax credit“:

A bipartisan group of House members is hoping now is the time to expand and permanently extend a tax credit for research and development.

At a Wednesday news conference in the Capitol, six lawmakers said they believed legislation they were backing would offer companies more certainty and help the United States stop losing ground to global competitors when it comes to innovation.

“This is an issue that cuts to the core of who we are as a nation,” said Rep. John Larson (D-Conn.), the chair of the House Democratic Caucus. “Manufacturing is part of our DNA. In order to make things in America, you have to be innovative. In order to be innovative, you have to make the investment in research and development.”

The bill is H.R. 942. The Hill’s technology blog, Hillicon Valley, reports support from the tech industry.

Rep. Kevin Brady (R-TX), chief sponsor of the bill, issued a news release marking its introduction. Excerpt:

“Innovation drives America’s future,” said U.S. Congressman Kevin Brady (R-Texas), a senior member of the House Ways and Means Committee and the author of The American Research and Competitiveness Act of 2011. “To keep from falling behind our global competitors and to make sure America is the first choice for R & D jobs we need to modernize the tax credit, strengthen it to encourage companies to make greater investment in research and jobs and make the credit permanent so businesses have the confidence to make long-term investment decisions here in the United States.”

The National Association of Manufacturers praised the bill.

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From the R&D Credit Coalition, a Letter to the President

The R&D Credit Coalition has sent a letter to President Obama calling on him to include a permanent R&D tax credit in his Fiscal Year 2012 budget. The argument:

On behalf of the hundreds of thousands of employees represented by the companies and related trade organizations, which comprise the R&D Credit Coalition, thank you for your strong and continued support for the research and development (R&D) tax credit. We urge you to include a strengthened, permanent R&D tax credit in your fiscal 2012 budget request to Congress. Your fiscal 2011 budget contained a proposal to permanently extend the current R&D credit.

The credit is set to expire again on December 31, 2011, and the Coalition is actively working to permanently extend and strengthen the credit by increasing the rate for the Alternative Simplified Credit. We believe that a strengthened, permanent credit will help maintain the United States as a world leader in R&D – a vital engine for the creation of high quality jobs that will support economic recovery in our nation. A recent OECD report on research tax incentives ranked the United States 24th in terms of competitiveness.

The letter is signed the coalition’s leadership: Janet C. Boyd of The Dow Chemical Company, Ann Taylor of sanofi-aventis U.S. Inc., Catherine T. Porter of Agilent Technologies, Inc., and Monica M. McGuire of the National Association of Manufacturers. Monica is executive secretary of the coalition.

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Senate Approves Tax Package by 81-19 Vote

The vote on H.R. 4853 (or more precisely, the motion to concur in the House amendment to the Senate amendment with Amdt. No. 4753 to H.R. 4853) was 81-19 in support. The margin of victory should provide momentum for passage as the House takes up the bill Thursday.

This is good legislation, a compromise with many more plusses than minuses in terms of jobs and economic growth. As the National Association of Manufacturers’ “Key Vote” letter in support of the bill summarized:

Manufacturers strongly support extending the 2001/03 tax relief to all Americans. Over 70 percent of U.S. manufacturers file as S-corporations or other pass-through entities; most would be significantly and adversely impacted by the higher tax rates that will take effect without congressional action. The non-partisan Congressional Budget Office estimates that fully extending the 2001/03 rates would add between 600,000 and 1.4 million jobs in 2011 and between 900,000 and 2.7 million jobs in 2012. Moreover, lower tax rates on capital gains and dividends will boost capital investment and economic growth.

The NAM has consistently called for repeal or significant reform of the estate tax. For small and medium-sized manufacturers (SMMs), business owners and families, the estate tax is more than a one-time tax. In a 2009 survey of our SMM members, respondents said they spent, on average, $94,000 annually on fees and estate-planning costs in preparation for their estate tax bill. This is money that could have been used to grow businesses and add jobs.

Renewal of the research and development (R&D) credit and other business extenders is critical to manufacturing competitiveness and should be extended. Manufacturers claim nearly 70 percent of the R&D credit, and R&D fuels innovation that translates into new products, increased productivity and jobs. Similarly, extension of deferral for active financing and the look-through rules will help U.S. competitiveness. Other extenders promote energy efficiency and make permanent important employer-provided education assistance. Moreover, the 100-percent expensing provision will create a positive ripple effect in the economy by encouraging investment and creating demand for machinery and equipment.

Update: From The Business Journals, “U.S. Senate approves Obama tax-cut deal“:

“The bill is a good first step to eliminate much of the uncertainty that has been holding back investment and job creation by manufacturers and the broader business community,” said Jay Timmons, executive vice president of the National Association of Manufacturers.

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New York Times: ‘Tax Breaks Bring Hope for Hiring’

The New York Times reports on manufacturers’ reaction to the tax compromise moved forward by the Senate on Monday. The story is, “Tax Breaks Bring Hope for Hiring“:

To many manufacturing companies, the tax cut proposal now being considered in Washington may be just enough to spur additional spending and hiring.

At Yushin America, a Rhode Island company that makes and maintains robotic manufacturing equipment, executives say that the business tax breaks would allow them to invest in new machinery, new employees and even a new roof.

“It’s a chance for us to put it back in the business and grow,” said Michael Greenhalgh, operations manager of the company in Cranston, which employs 60 people and has annual sales of about $21 million.

The story quotes the NAM’s Monica McGuire and uses Bison Gear and Engineering in Illinois as a case study of how the tax treatment can spur investment.

Because Bison is organized as a subchapter S corporation, and its income is taxed at its owners’ individual rate, it will benefit if Congress extends the tax break for the wealthy. The company, which has $50 million in sales and 225 employees, will also reap tax savings from the changes in depreciation and research policies.

Ron Bullock, company chairman, said three positions in the research and development staff had been vacant for months as he tried to gauge the strength of the economic recovery and the prospects of a double-dip recession. With the tax savings, Mr. Bullock said, he expects to hire as well as replace aging equipment.

“Other businesses will use their tax incentives to order products from us, which will allow us to hire and, hopefully, expand,” he said. “That’s the way you turn an economy around, and allay the fears people have about whether this economy is a good place to invest.”

Ron is an NAM board member.

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The Tax Compromise is a Good Compromise for Manufacturers

The House Democratic caucus is fuming, but …

From NationalJournal.com, “The Rupture Between House Democrats and the White House“:

Still, the current thinking is that the Senate passes it without amendment, and the House receives it next week  when the U.S. Chamber of Commerce and others, possibly the Business Roundtable and National Association of Manufacturers, weigh in.

If they’re in favor, the pressure will be too great for the Blue Dogs, New Democrats, and wobbly Republicans to resist. But this is a strategy and a chalkboard play that lacks one key ingredient — the football. The lack of a bill makes all of this theoretical.

The NAM already weighed in! Here’s our news release, “Manufacturers: Proposed Compromise on Tax Relief Is a Positive Step for Jobs and Economy.”

And since the article was written, there does appear to be a bill. The Senate Democratic caucus has released the text of legislative language, “The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.”

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Rep. Lee (R-NY): Innovation, Manufacturers Need R&D Tax Credit

Rep. Christopher Lee (R-NY) speaks from his experience as a manufacturer in this excellent column in today’s Politico,U.S. may risk losing race for R&D incentives,” to call for the retroactive extension of the Research and Development Tax Credit.

Before I ran for Congress in 2008, I helped run a business in Western New York. We manufactured motion control components — including motors, actuators, vibration isolators and industrial shock absorbers. Our products are used in the Tomahawk cruise missile, in medical equipment, on rail cars (including the subway system in the Capitol building) and in aircraft.

This gave me experience with the daily challenges U.S. manufacturers face to stay on the cutting edge, create jobs and compete successfully against global competitors. Research and development on innovative new products is critical. It’s no surprise, then, that manufacturers perform half of all R&D in the U.S., according to the National Association of Manufacturers.

So our economic recovery and the future of U.S. manufacturing depend on firms having the right incentives to make vital investments in R&D.

The NAM has prepared a ManuFact fact sheet on the credit, “R&D Tax Credit: Keep Manufacturers Competitive in the Global Race for R&D Investment Dollars.”

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Get Out of Here, You Millionaires, You and Your Jobs! But Leave Your Taxes

Sen. Claire McCaskill (D-MO) and Sen. Lindsey Graham (R-SC) appeared on Fox News Sunday today. Chris Wallace asked both about extending the current tax rates. Sen. McCaskill indicated the Senate Democratic position was shifting from the original proposal — raise tax rates on joint taxpayers earning $250,000 or more — to raising tax rates on joint taxpayers earning $1 million or more.

To drive home the point, she managed to include “millionaire” as a quasi-epithet four times in her first 99 words.

WALLACE: Senator McCaskill, would you support a temporary extension for several years of the Bush tax cuts both for the middle class and for those making more than $250,000 a year?

MCCASKILL: Well, I think we should draw the line in the sand for millionaires. Honestly, with all the talk and the righteous indignation about the deficit, are we really going to hold up tax cuts for all of America just for the millionaires? And I think that’s where we should draw the line.

Our deficit is serious. Anybody who believes that that small tax differential for millionaires is going to make a big difference on job creation hasn’t been paying attention. There’s many things we can do that’s much more stimulative to the economy than taking care of the millionaires.

Class warfare proved such an effective political message in the 2010 campaigns, let’s redouble the rhetoric!

The Wall Street Journal on Saturday published a timely letter from Louis B. Mendelsohn reacting to an op-ed on tax rates by John Engler, president of the National Association of Manufacturers, and Jerry Howard of the National Association of Home Builders, “Tax Hikes and the Small Business Job Machine.”

In his letter, “Create Jobs? I Know How It’s Done,” Mendelsohn relates how he built his software development company founded in 1979 into a multi-million-dollar operation with more than 50 highly compensated employees and customers in more than 125 countries. Indeed, Mendelsohn is President and CEO of Market Technologies, renowned as a pioneer in the application of personal computers and trading software to the global financial markets. He observes: (continue reading…)

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No Budget, No Appropriations, No Action on Tax Increases

John Engler, president and CEO of the National Associaton of Manufacturers, spoke to the NAM’s Board of Directors on Wednesday, assessing the political and economic consequences of the just-recessed 111th Congress. He observed:

You think about elections as sort of a performance review. Congress is going to have a pretty hard time arguing that they deserve to keep their jobs.

Think about this: They didn’t pass a budget. They failed to enact a single appropriations bill. Not one. We’ve got the return to the killer 2001 tax rates – that’s looming. The estate tax is poised to go back up to 55 percent, and we’ve got no R&D tax credit. Other than that …

Judging from his Washington Post column today, Charles Krauthammer must have been in the audience and been inspired by Engler. In “The Colbert Democrats,” Krauthammer notes Congress’ failure to enact budgets and appropriations bills and elaborates:

Congress adjourned without even a vote — nay, without even a Democratic bill — on the expiring Bush tax cuts. This is the ultimate in incompetence. After 20 months of control of the White House and Congress — during which they passed an elaborate, 1,000-page micromanagement of every detail of American health care — the Democrats adjourned without being able to tell the country what its tax rates will be on Jan. 1.

It’s not just income taxes. It’s capital gains and dividends, too. And the estate tax, which will careen insanely from 0 to 55 percent when the ball drops on Times Square on New Year’s Eve.

Nor is this harmless incompetence. To do this at a time when $2 trillion of capital is sitting on the sidelines because of rising uncertainty — and there is no greater uncertainty than next year’s tax rates — is staggeringly irresponsible.

No, Krauthammer really wasn’t in attendance — he’d be welcome at the NAM, to be sure — and really, Krauthammer and Engler are only stating the obvious. The really obvious. The outrageously obvious: Congress failed to act on taxes.

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Global Competition, ‘Outsourcing’ and How Jobs are Really Created

In today’s Wall Street Journal, Craig Barrett and James Moore cut through the heated political rhetoric about “outsourcing” and get right to the heart of the problem—a misunderstanding among some Congressional leaders on how jobs actually are created. In fact, they say, if the Creating American Jobs and Ending Offshoring Act rejected by the Senate this week ever became law, job losses would accelerate and even more companies would relocate jobs overseas.

In their column, “Outsourcing and the 21st-Century Economy” (subscription), Mssrs. Barrett and Moore explain that companies outsource for two reasons:

The first centers on the nature of the global. In today’s world, outsourcing can save companies money, reduce the time it takes to deliver products and services to customers, and provide access to skilled employees unavailable in the U.S. Outsourcing also allows companies to capitalize on incentives offered by foreign governments to attract investment…

The second reason U.S. companies outsource is that our own government pursues policies that drive investment and job creation offshore: excessive taxes, needless regulations, lengthy permit processes, a decreasing supply of U.S. citizens with technical and engineering degrees, and a general governmental misunderstanding of how to support private-sector jobs. For example, taxing new U.S. corporate investment at 35%—when the world average is just over 18%—pushes U.S. companies to invest offshore to increase return to shareholders.

They go on to argue, “Politicians who accuse the business community of being solely responsible for the loss of U.S. jobs are disingenuous at best and urge legislators to “recognize the competitive nature of the 21-st century world economy.”

Manufacturers could not agree more. In fact, NAM’s Manufacturing Strategy for Jobs and Competitive America sets out a roadmap for policymakers. On tax policy, rather than looking at ways to punish worldwide American companies, lawmakers should lower the corporate tax rate, provide a permanent and strengthened R&D credit and advance fair and competitive rules for taxing foreign income of U.S. companies, all changes that will make the U.S. a better place to do manufacturing.

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