New Study Confirms Widespread Benefits of R&D Tax Credit; R&D Credit Coalition Urges Congress to Extend and Strengthen the Credit

4/22/2004

From: Bill Baker or Leonard Greenberger, 202-466-7391, both for R&D Credit Coalition

WASHINGTON, April 22 -- Citing a new study that demonstrates the widespread benefits of the R&D tax credit, the R&D Credit Coalition called on Congress today to extend and strengthen the credit before it expires on June 30, 2004.

The study, conducted by Cathy Koch, Ph.D. at Washington Council Ernst & Young, confirms that the R&D tax credit benefits companies of all sizes in a wide range of industries that perform research in all 50 states. Specific findings of the study show that in 2000 (the most recent year for which data is available):

-- Nearly 16,000 companies claimed the credit, including firms in every industrial sector. The manufacturing, services, retail and wholesale trade, construction, and real estate sectors each represent a significant percentage of the firms claiming the credit.

-- Firms in every state reported R&D activity and claimed the credit, including 15 states that were each home to more than 1,000 R&D tax credit recipients.

-- Smaller firms benefited most from the credit. Over 4,500 firms with assets of less than $1 million claimed the credit. The relative value of the R&D credit was greatest for small firms (between $1,000 and $99,000 in assets), for which the credit represented as much as 9.4 percent of firm value.

"The R&D Credit Coalition wants to underscore what this study clearly shows: the R&D tax credit is an incentive for businesses of all sizes and in all types of industry to locate their research projects in the United States. U.S. employers continue to communicate to Congress the critical importance of the R&D credit and we strongly urge the Congress to act on legislation to ensure that the credit does not expire," said R&D Credit Coalition Chairman Bill Sample.

The credit can be claimed only for R&D activities in the United States. Expenses eligible for the credit include in-house wages and supplies attributable to qualified research; certain time-sharing costs for computer use in qualified research; and certain amounts of research conducted by outside contractors.

As a result, the credit helps U.S. companies preserve and create new jobs.

"Given that the wages paid to employees performing research in the United States comprises the bulk of the expenses for which the R&D credit is claimed, this data clearly shows that the credit helps firms of all sizes create additional U.S.-based jobs," noted Coalition Government Affairs Committee co-chair Karen Myers of EDS.

For a copy of the study, visit the R&D Credit Coalition Web site at http://www.nam.org/RnDCredit.