Tax Break

Chemical manufacturers and other U.S. businesses are urging Congress to pass legislation before the end of the year to restore and expand the federal research and development tax credit, which expired at the end of 2005.

"ACC strongly supports bipartisan efforts in Congress to extend and strengthen the R&D tax credit," says American Chemistry Council President Jack N. Gerard. "An expired [credit] will impose financial consequences for American chemistry and may jeopardize research projects that are essential to the American economy."

The 20% credit would again be available for certain R&D expenditures made only in the U.S., primarily spending on employees who perform qualified research activities.

Originally enacted in 1981, the R&D tax credit has been extended 11 times by Congress. Nearly 16,000 companies have used the credit.

The provision has wide support in Congress. But the tax break failed to advance before the elections when it was included in a controversial measure to reduce the estate tax (H.R. 5970). The legislation passed the House but was rejected by the Senate.

"I'm going to work very hard to persuade the Republican and Democratic leadership to pass a seamless extension of the R&D credit," says Senate Finance Committee Chairman Charles E. Grassley (R-Iowa).

"It's time to stop the annual exercise that threatens the R&D tax credit," adds the committee's ranking member Max Baucus (D-Mont.), who will chair the panel when Democrats take over the Senate in January.