October 05, 2004, 1:57 PM — U.S. President George Bush on Monday signed a bill that included an 18 month extension of a research and development (R&D) tax credit sought by many IT groups.
Bush signed the Working Families Tax Relief Act of 2004, a US$146 billion law designed to provide tax cuts to the middle class, at a ceremony in Des Moines, Iowa. The bill included $13 billion in corporate tax cuts, more than half of that for the extension of the R&D tax credit.
Technology organizations such as the Information Technology Association of America (ITAA) and the Computing Technology Industry Association (CompTIA) have long called for a permanent extension of the tax credit, but the bill extends the current tax credit through Dec. 31, 2005.
The R&D tax credit, first passed as a temporary tax credit in 1981, had been extended 10 times before the current extension. It allows U.S. companies conducting research and development activities to get a tax credit of up to 10 percent of R&D spending.
The ITAA praised the extension of the tax credit, but repeated its call for a permanent R&D tax credit. "Sustained research and development in high technology fields is critical to America's ability to compete in a global marketplace," ITAA President Harris Miller said in a statement. "This extension provides some security for companies pushing the technology envelope."
Before Bush signed the Working Families Tax Relief Act, it passed the U.S. Senate and House of Representatives by votes of 92-3 and 339-65, respectively.
CompTIA has argued that one effect of no R&D tax credit would be fewer innovations. More than 50 percent of every R&D dollar goes to salaries, and an expiration of the credit would have caused a decrease in R&D spending on salaries, the group said.
While Bush praised the tax package, Democratic presidential candidate Senator John Kerry questioned whether the tax bill was too focused on corporate tax breaks. Kerry has supported the R&D tax credit "every time it has come up for a vote," noted Robert Atkinson, vice president for the Progressive Policy Institute in Washington, D.C.
But Bruce Mehlman, co-founder of the Mehlman and Vogel Inc. public affairs consultancy and a former assistant secretary for technology policy in the Bush administration Department of Commerce, noted 58 percent of the $13 billion in corporate tax cuts in the bill went for the R&D tax credit.
"Kerry said $13 billion in corporate tax relief was wrong," he said.
