Ending the R&D Tax Credit Stalemate
That the fate of this credit in 2015 remains unknown is not surprising. Since its inception in 1981, it has expired eight times, been extended 16 times, and been modified on several occasions. In recent years, the R&D tax credit was mixed into a package with other one off tax breaks such as equipment deductions for small businesses and specific Medicare reimbursements, all of which expired on a regular basis and prompted political debates over their extensions. Such "tax extenders," as they are sometimes called, can create an impression that the discrete provisions within the package are all minor pieces of legislation. But that impression does no justice to the real economic significance of the R&D tax credit. In fiscal year 2012, U.S. firms received R&D tax credits totaling $11.1 billion, or about 8 percent of the estimated $140.9 billion spent by federal agencies on defense and non defense R&D that year.1 IRS data from 2008 further reveal that firms in the manufacturing sector accounted for nearly 70 percent of total credits claimed, with the computer and electronic products, chemical, and transportation equipment industries benefitting the most.2 SUMMARY