Congress Passes R&D Tax Credit

The legislation is designed to boost research and development at technology firms and manufacturers.

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The high-tech industry, trade groups, and other manufacturers are applauding the renewal of a federal tax credit aimed at encouraging research and development  at U.S. firms nearly a year after it expired.

The tax credit, which was passed by Congress last week, covers both 2006 and 2007, while broadening its reach to more businesses.

In the past, some 16,000 companies have claimed the credit, including about 25 percent with assets below $1 million, according to a study by the R&D Credit Coalition, a group representing several thousand businesses that rallied to have the credit renewed after it lapsed at the end of 2005.

According to the Organization of Economic Co-operation and Development, every year the United States spends about 2.5 percent of total gross domestic product on R&D.

The extension "renews and strengthens a critical and effective federal incentive that is both vital to maintaining U.S. competitiveness," Jim Greenwood, the president and CEO of the Biotechnology Industry Association, said in a statement.

George Scalise, the president of the Semiconductor Industry Association, called on the incoming 110th Congress to make the tax credit permanent. He described this year's efforts to renew the credit a "long and arduous political process."

Since being created in 1981, the credit has lapsed no less than 12 times.

In August, the Senate failed to pass legislation to renew the credit after it was bundled into a controversial bill  to boost the minimum wage and cut the estate tax.

"Throughout the process, extension of the R&D tax credit had strong support among Republicans and Democrats, including President Bush and Leader Pelosi," Scalise said. "We hope this spirit of bipartisan cooperation carries over into 2007."