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The R&D Tax Credit Must be Renewed Now

The United States is a world leader in innovation and technology development. In order to maintain that edge, Congress has provided a Research and Development Tax Credit to provide an incentive for companies to perform R&D in the United States. For more than thirty years, this has been an important counterbalance to the tax policies of other nations, which often provide greater tax incentives than the United States offers. This credit has been instrumental in stimulating the amount of innovation financed and maintained in the United States by the private sector. Unfortunately, over the past few years the R&D tax credit has become a hostage to the larger political battles in Washington over tax policy. Congress has now let the tax credit lapse fifteen times, twice in the past three years. The tax credit expired last December and as a result, companies today cannot make R&D investments with any assurance that the tax credit will be renewed before the end of the year.

The uncertainty surrounding this on-and-off tax credit dissuades U. S. companies from investing in high-tech jobs domestically. This is especially true when manufacturers are courted by other countries with larger and permanent R&D tax incentives. When manufacturers see expirations of the credit and retroactive applications, they are unable to perform rational business planning and look elsewhere. This is detrimental to hiring decisions in the United States and leads companies to move jobs overseas.

The R&D tax credit has just expired at the same time aerospace and defense companies are absorbing reductions in federal R&D and procurement spending. In many parts of the industry, aerospace workers are being laid off as a result of federal cutbacks. Renewing the law and making the tax credit retroactive at some point in the future will not help American aerospace workers keep their jobs today. We need to do all we can to support and keep innovation in the United States presently.

Both through the R&D Credit Coalition and independently, AIA is continuing to push Congress to extend the R&D Tax Credit as soon as possible. As part of this effort, AIA has placed a letter on the Second to None website where aerospace and defense employees can express their views directly to Congress on this critical issue.

AIA Source: Rich.efford[at]aia-aerospace.org