Research and Development Tax Credit Extended for 2014

 
 
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HOUSTON - Dec. 17, 2014 - PRLog -- Since its inception in 1981, this year marks the ninth time the Research and Development (R&D) Credit has expired and the sixteenth time it has been extended. Although the last extension expired on December 31, 2013, the newly passed extension retroactively applies through December 31, 2014. Bundled in the Tax Increase Prevention Act of 2014, the R&D Credit is renewed through 2014 along with several other tax incentives, including the Earned Income Tax Credit, the Work Opportunity Tax Credit (WOTC) and the child tax credit.

“Without this extension, the 2015 tax filing season would have been hugely chaotic for the countless businesses that have come to depend on this extremely valuable incentive,” said Saqib Dhanani, Managing Director, Paradigm Partners.

Many businesses have become reliant on this incentive to offset their increases in R&D spending over the years and for good reason. In 2011, US companies claimed over $9.2 billion dollars in credits collectively. The economic effect of this credit should not be overlooked. However, since the credit was created, congress has played a sort of cat-and-mouse game with businesses and the R&D Credit. Although its constant presence since 1981 gives it an almost permanent feel, the truth is, it is not permanent. Unfortunately this means that congress must affirmatively act every few years to continue its operation. And with congress’ recent record of cooperation and passing bills with bipartisan support, it is no wonder that businesses start to get worried when something this valuable to them gets thrown in the lion’s den.

While the R&D Credit has traditionally been well received on both sides of the aisle and truly has few political enemies, finding a permanent place in the tax code has been an elusive endeavor since its inception. The biggest challenge for the R&D Credit has never been itself, but has more to do with the other hot-button incentives it is bundled with, such as the child tax credit and the earned income credit. Because the R&D Credit is never presented in its own bill, it’s never been given carte blanche.

“Businesses need the confidence and stability a permanent credit would bring. Having to gear up for a lapse in the credit every few years is a huge waste of time and money that many small businesses cannot afford,” said Brian Cameron, Vice President – Business Development.

“While we pushed for making the [R&D] credit permanent, it just wasn’t in the cards this time,” lamented Laura Murphy, Director of Government Relations.

For the past few weeks it appeared that a bipartisan deal would finally deliver a permanent credit, but politicians clashed over which credits should be given permanent life.

“While we never had any doubts about the credit being extended, every time we face an extension we hope that congress will do what is right and make this great incentive a permanent part of the tax code,” said Dhanani. H.R. 5771 will become law once enacted by the president, who is expected to sign the bill later this week.

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Malak Mansour
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Tags:R D, Tax Extenders, Tax, Research Development, Congress
Industry:Business, Government
Location:Houston - Texas - United States
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