Tax & Accounting Blog

President’s Budget Proposes Making R&D Credit Permanent

Global Tax Compliance, ONESOURCE, WorkFlow Manager February 22, 2012

This is welcome news for American innovation and manufacturing organizations.  While this credit has been in place since 1981, except from one brief period in the mid-1990’s, making it permanent will boost the confidence of corporations expanding their U.S. investment in research and development activities.   

 Over the past three decades, the corporate R&D tax credit has been included as one of the temporary “tax extenders” like the popular AMT “Patch” and low-income housing credit for individuals.  If the President is successful in getting this part of his budget passed, more predictability in the tax planning process will be another benefit. 

The R&D tax credit typically receives support from both sides of the aisle in Washington as a domestic pro-job creation incentive, so it appears this proposal has a bright future. 

Key Facts For Innovation &  Manufacturing Organizations:

  •  $140.8 billion for R&D overall; increase the level of investment in non-defense R&D by 5 percent from the 2012 level, even as overall budgets decline; maintains the President’s commitment to double the budgets of three key basic research agencies (National Science Foundation, Department of Energy’s Office of Science, and National Institute of Standards and Technology Laboratories); expands and makes permanent the R&D tax credit.
  • $2.2 billion for advanced manufacturing R&D, a 19 percent increase over 2012.
  • Provides tax incentives for manufacturers who create jobs here at home and doubles the deduction for advanced manufacturing; ends tax deductions for shipping jobs overseas; and establishes a Manufacturing Communities Tax Credit to encourage investment in communities affected by job loss.
  • Level funding for biomedical research at NIH ($30.7 billion); and to get more out of the money, proposes new grant management policies to increase the number of new research grants by 7 percent.
  • Supports the goals of: putting one million electric vehicles on the road by 2015; doubling share of electricity from clean energy sources by 2035; and reducing buildings’ energy use by 20 percent by 2020.
  • Elimination of 12 tax breaks to oil, gas, and coal companies will raise $41 billion over 10 years.

Stay tuned for more developments around the R&D tax credit legislation.

Live near Houston? Join us at an upcoming luncheon on 2/28 where we will explore strategies to automate the R&D Tax Credit Process. Click Here to contact us for more information.