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The U.S. Congress renewed the R&D tax credit as part of its last-minute tax package of legislation before officially adjourning on Saturday.
The law provides a research tax credit equal to 20 percent of the amount by which a company's qualified research expenses for a taxable year exceed its base amount for that year. The provision extends the research credit for qualified amounts paid or incurred in 2006 and 2007.
The estimated cost is $16.3 billion over five years and $16.5 billion over 10 years.
The R&D tax credit expired 11 months ago despite repeated promises by both Republicans and Democrats to renew the legislation used annually by as many as 16,000 U.S. companies.
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Great news for prescription drug companies! Hopefully we won't have to pay a hundred dollars a pill anytime soon. Seriously though, this is a good measure, since it does help to precipitate research into various fields of research... especially in the medical field.
Not really. It's a myth that tax breaks really have all that much impact on the way people spend money, that's just as true for small individual investors as it is for large corporate research programs. Tax breaks do have an impact on where such companies station themselves geographically, but the US tax burden is hardly overbearing without this, and there are quite a few other reasons corporations like this prefer to do their research here that won't be affected by breaks like this.
The US tax code needs to be simplified, not gaining more exceptions. And the Treasury desperately needs to raise more revenue so that it can get closer to the point of paying down the debt. Measures like this don't help.