Corporate R&D tax credit shut out in Senate

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By Jennifer Jones

(IDG) -- Supporters of a measure to make permanent the current corporate R&D (research and development) tax credits were dealt another setback Friday.

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R&D tax credits now have to be renewed periodically, and industry groups argue that many companies are therefore putting off long-term research projects because of uncertainty around the tax credit program.

Senator Gordon Smith (R-Ore.) tried unsuccessfully to attach language that would have made the tax credit less fleeting to the Senate version of the high-profile "Patients Bill of Rights" legislation. His attempt failed by a vote of 57 to 41.

Gordon had tried to attach the measure to the healthcare bill on the principle that it could have helped biotechnology and pharmaceutical companies as well as IT companies involved in significant R&D work. However, an executive at the Information Technology Association of America (ITAA) in Arlington, Va., said industry groups were generally hoping to attach the R&D tax credit amendment to any legislative "vehicles that are moving."

"There is now a high probability that only substantial and large bills will now be moving through. It's like having a boxcar. You've got to look for a train that is moving to hook onto," said the executive.

The permanent R&D tax credit language also failed to make the cut a month ago, when it was dropped at the 11th hour from President Bush's mammoth tax package.