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| December 5th, 2007 |
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Media Contact(s): Jared Whitley (202) 224-5251 |
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Printable Version |
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HATCH: WE NEED TO EXTEND THE R AND D TAX CREDIT
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| Sen. Hatch speaks on the need of extending the R&D tax credit to maintain America's high-tech competitiveness at a press conference hosted by the R&D Research Coalition. |
Washington - Today Sen. Orrin G. Hatch (R-Utah) delivered the following remarks at a press conference hosted by the R&D Credit Coalition
I am grateful to the R&D Credit Coalition for sponsoring this press event to highlight the need to extend the research credit as quickly as possible and for as long a period as possible.
As many of you know, Senator Baucus and I have been partners on legislation to extend and improve the research credit for many years. The fact that we are here again this year represents both our successes and our challenges in efforts to champion the research credit. We have succeeded in getting the credit extended and expanded many times. The fact is that the credit is still here and it is still effective in its objective of increasing U.S. research.
However, the fact that we are here today also demonstrates that we have not succeeded in our long-term goal of making the credit permanent. And while I am not expecting a miracle this year, I am confident that the research credit will be extended once again.
Along with being extended, the research credit is in need of some reform. A growing problem is the fact that the original, or traditional, credit is calculated using a base period from the mid-1980s. This reference period is becoming more distant and less relevant to more companies each year. In short, the traditional credit is rapidly becoming obsolete.
This has been a growing problem for a number of years. To address it, Congress last year included an alternative to the traditional credit called the alternative simplified credit. Instead of referencing the old base period, this credit is based on the company’s most recent three years of research activity. This new credit has provided a meaningful incentive for firms with significant and growing amounts of research that would not otherwise get much, if any, benefit from the traditional credit.
Based on discussions with companies that use the research credit, it appears that the alternative simplified credit is now being used by more companies than is the traditional credit.
Therefore, the bill that Senator Baucus and I introduced this year introduces a change that would phase out the traditional credit, even as we increase the benefits of the alternative simplified credit. We believe this gradual transformation from the traditional credit to a single more relevant and robust credit will create a smooth and generous transition for all companies.
We hope that our colleagues will recognize the need for this change as we extend the credit this year. Congress needs to extend and improve the research credit. The U.S. is in real danger of losing our lead in research to other countries. Many of these nations offer more generous tax incentives than we do. We simply cannot afford to lose the edge in research and development.
I thank all those companies and associations who have worked with us for many years to help ensure a strong and viable research credit, along with the many congressional sponsors who have made this a high priority. With all of us working together, we can get this done.
A House bill was introduced by Congressmen Sander Levin and Dave Camp. This bill is similar to the Hatch-Baucus bill in that it also increases the alternative simplified credit. However, it does not phase out the traditional credit.
The traditional credit, which is at 20 percent, would be continued for two more years (2008 and 2009) at the full amount. Beginning in 2010, it would be repealed.
The alternative simplified credit would increase from the current 12 percent rate to 16 percent for 2008, 18 percent for 2009, and 20 percent for 2010 and thereafter.
There are ongoing negotiations between the leaders about both the AMT patch and the extenders bill. I hope that it will be possible to work out a solution this year that would take care of both of these priorities. However, I do not favor offsetting either the AMT patch or the extenders. I believe it is poor tax policy to offset a temporary tax benefit with a permanent tax increase. Moreover, we should not have to raise taxes to prevent taxes from going up.
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