8/8/2019 R&D Tax Credit Legislation for Business and Manufacturers

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ManuFACTS: R&D Tax Credit

Seamlessly Extended in 2010!

• The President signed into law H.R. 4853, the Tax Relief, Unemployment

Insurance Reauthorization and Job Creation Act, which includes a two-yearretroactive extension of the research and development (R&D) tax credit fromJanuary 1, 2010 through December 31, 2011. The Alternative SimplifiedCredit (ASC) rate remains at 14 percent for 2010 and 2011; the traditionalcredit was extended for two years. H.R. 4853 represents the bipartisan taxdeal negotiated by President Obama and congressional Republican leader-ship and announced December 6, 2010.

• The R&D tax credit was renewed for the 14th time since it was created in1981. Nearly 18,000 companies of all sizes use the credit, and some 70

percent of credit dollars are used for salaries of workers engaged in R&D,encouraging the creation of more high-paying U.S. jobs.

• Only R&D performed in the United States qualifies for the credit. For morethan 25 years, the credit has driven incremental R&D in the United States.

• R&D fuels innovation that translates into new products and increased pro-ductivity. Manufacturing productivity increased by 60 percent between 1994and 2004. These technological innovations spur economic growth and resultin spillover benefits to American workers in terms of higher wages and ahigher standard of living.

• Congress approved a new credit formula – the ASC – in 2007, which makesit easier for companies of all sizes to use the R&D credit.

• Manufacturers claimed nearly 70 percent of R&D credit amounts in 2007.The credit is needed to keep the U.S. competitive in the global race for R&Dinvestment dollars. In 2009, the United States ranked number 24 among 38 indus-trialized countries offering R&D tax incentives.

• R&D activities by manufacturers typically span 5-10 years. A strengthenedand permanent credit would assure U.S. companies that the credit will be

available during the life of the R&D project.

1331 Pennsylvania Ave NW, Suite 600, Washington, DC 20004 P 202•637•3000   F 202•637•3182 www.nam.org

How Congress Can Help

• Cosponsor the bipartisan Brady (R-TX)/Larson (D-CT) bill H.R. 942, the American Research and Competi-

tiveness Act of 2011.

8/8/2019 R&D Tax Credit Legislation for Business and Manufacturers

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Competitiveness: The Global Race for R&DInvestment Dollars

• In 2009, the United States ranked number 24 among 38 indus-trialized countries (OECD and advanced developing countries)offering R&D tax incentives.1

• In 2009, 21 OECD countries offered R&D tax incentives,compared to just 12 in 1996. This 75 percent increase over 15years reflects fierce competition by countries vying to becomeworld leaders in research, the driver of innovation.2

• The U.S. share of global R&D fell from 39 percent in 1999 to 33percent in 2007, while China’s share increased fourfold.3

• China’s increase in R&D spending accounted for nearly one-third of the global increase in R&D between 2001 and 2006.4

• The “2010 Global Survey of R&D Tax Incentives” by Deloitte isavailable on the NAM website at www.nam.org/Deloitte_RD_Survey.

More Information

• Manufacturers claimed nearly 70 percent of R&D credit amountsin tax year 2007.5

• In 2008, manufacturers performed $190 billion in R&D, whichaccounted for nearly 70 percent of all business R&D performedin the United States.6

• Small companies (less than 500 employees) perform 19 percentof U.S. total business R&D.7

Bottom LineThe R&D credit should be strengthened and made permanent.

More InformationFor more information on the R&D Tax Credit, please visit the NAM at www.nam.org/tax, 

the R&D Credit Coalition at www.investinamericasfuture.org, orthe Deloitte “2010 Global Survey of R&D Tax Incentives” at www.nam.org/Deloitte_RD_Survey.

E-mail: tax@nam.org

March 11, 2011

1 Organization for Economic Co-operation and Development. “Science, Technology and Industry 2009 Scoreboard,” December 2009.

2 The Information Technology & Innovation Foundation. “U.S. Continues to Tread Water in Global R&D Tax Incentives,” by Robert Atkinson and Scott Andes, August 12, 2009, p.1.

3 Organization for Economic Co-operation and Development. “Ministerial Report on the OECD Innovation Strategy,” May 2010, p. 8.

4 Organization for Economic Co-operation and Development. “Ministerial Report on the OECD Innovation Strategy,” May 2010, p. 8.5 IRS Statistics of Income. Tax Stats Dispatch, Issue Number: Tax Stats 2010-07, “Corporate Research Credit, Tax Year 2007,” Table 1, April 1, 2010.

6 National Science Foundation. “U.S. Businesses Report 2008 Worldwide R&D Expense of $330 Billion: Findings from New NSF Survey.” NSF-10-322, by Raymond M. Wolfe, May 2010.

7 National Science Board. 2010. Science and Engineering Indicators 2010 . Arlington, VA: National Science Foundation (NSB 10-01), January 15, 2010, p. 4-4.