Treasury: Make R&D credit permanent

In a report released March 25, the Treasury Department said the Obama Administration's proposal to expand, simplify and make the research-and-development tax credit permanent would pour roughly $106 billion into the private sector over a decade.

The credit would support nearly 1 million domestic jobs and that it should survive any overhaul of the corporate tax code. The study also asserted that the R&D credit currently creates a dollar-for-dollar boost in research spending, and that making the credit permanent would have at least that same effect. “Research shows that the R&D credit is a cost-effective way to encourage research,” the report says. “However, uncertainty about the future availability of the credit diminishes its incentive effect because it is difficult for taxpayers to factor the credit into decisions to invest in research projects that will not be initiated and completed prior to the credit’s scheduled expiration.” The R&D credit is scheduled to run through this year, after being retroactively extended during last year’s tax-cut compromise. In all, it has been extended 14 times in its roughly three decades.