Bush Budget Includes Permanent R&D Tax Credit

President George W. Bush's fiscal year 2002 budget, released yesterday, makes the research and development tax credit permanent, a move that drew praise from industry representatives.

"A permanent research and development tax credit is key to long-term planning and budgeting for every information technology business. [It] will enable companies to continue their rigorous programs of experimentation, and allow the IT industry to continue innovating at warp speed," said Harris Miller, president of the Arlington, Va.-based, Information Technology Association of America.

If it were not made permanent or extended, the R&D credit would expire in 2004. It was first enacted in 1981 and provides companies with a 20 percent credit for incremental R&D expenditures. Extensions of the credit have resulted in three gaps in coverage, two of which were retroactively filled.

The AeA, another IT industry association, also supports making the R&D credit permanent.

"Until the credit is granted a permanent status, its economic benefits will be limited by the simple fact that many companies need more certainty of time than five years to consider the tax credit a sufficient incentive, since most corporate research projects last five to 10 years from conception to completion," said William Archey, president and chief executive of the Santa Clara, Calif., group.

According to the President's Agenda for Tax Relief, issued March 15, "the on-again, off-again nature of the tax credit impedes long-term research in the U.S. Thus, President Bush will make the Research and Experimentation tax credit permanent. This should help spur the sustained, long-term investment in R&D that America needs to develop the next generation of critical technologies."

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