IPC seeks long-term tax credit for electronics manufacturers.October 15, 2008 -
The Association supports the Emergency Economic Stabilization Act 2008, which extends the R&D tax credit to December 31, 2009. This allows businesses to apply for a dollar for dollar reduction of tax for qualified activities and also increases the Alternative Simplified Credit (ASC) to 14% in 2009. However, IPC says that if tax credits were assured, then businesses could extend long-range plans leading to more technology breakthroughs, jobs, and sustained economic growth.
Industry Stands to Benefit Immediately from Research and Development Tax Credit Extension
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IPC-Association Connecting Electronics Industries
3000 Lakeside Drive
Bannockburn, IL, 60015
Press release date: October 6, 2008
IPC Continues to Seek Long-Term Credit for Electronics Manufacturers
BANNOCKBURN, Ill., USA, October 6, 2008 - A long-time and active proponent of continued research and development (R&D) legislation, IPC - Association Connecting Electronics Industries® is celebrating; the Emergency Economic Stabilization Act 2008 (H.R. 1424) was signed into law late Friday night. Most notably, the act extends to December 31, 2009, the Research and Experimentation, also known as R&D, tax credit by allowing businesses to apply for a dollar for dollar reduction of tax for qualified activities and allows companies to apply for credits retroactive to January 1, 2008. Furthermore, enactment of this bill increases the Alternative Simplified Credit (ASC) to 14 percent in 2009. The R&D tax credit is available for qualified research and development expenditures incurred ONLY in the United States.
First established in 1981, R&D tax credits allow companies to simplify their financial accounting, help maintain and create high value-added research jobs in America, and continue to facilitate the innovations necessary to compete in the global economy. Today, the United States' R&D tax plan currently ranks 17th compared to other nations'.
Experienced R&D tax consultant TJ Sponsel II, of McGuire Sponsel LLC, explains, "For many companies, their investment in R&D activities yield returns of up to six and one half percent (6.5%) in the form of a federal tax credit. As an example, if a company spent $750,000 in wages, supplies and contract research developing a new product or improving an existing manufacturing process, their federal tax credit could reach $49,000. Because many states have provided similar tax incentives, benefits could be even greater." In addition to establishing this tax strategy, the law generally allows a business to look back and file amended federal and state income tax returns for the prior three years, thereby possibly entitling substantial refunds.
According to Fern Abrams, director of environmental policy and government relations for IPC, companies in the electronic interconnection industry are leaving money on the table by not taking advantage of this tax credit. "Think about all the money that has been spent by the industry in developing manufacturing processes for lead-free products. Not only can companies continue to receive this credit in 2008-2009 under the extension, but some past expenditures may still be eligible for credit by filing an amended tax return. It's definitely worth a company's time and effort to see if they qualify for the tax credit refund."
Although enactment of this bill reinstates R&D tax credits to the end of 2009, IPC supports a permanent and more robust solution. Research projects have many phases and myriad lengths of time required for experimentation and testing. If R&D tax credits were assured, then businesses could make better, more sophisticated long range plans ultimately leading to more technology breakthroughs, more jobs and sustained economic growth.
"In order for the United States to build its competitive edge and maintain continued excellence in U.S. manufacturing, R&D tax credits must be substantially increased. IPC's work in this arena is not over," explained Abrams.
For more information on the R&D tax credit and IPC's continued efforts or to learn how to join in the campaign for a permanent solution, contact Ron Chamrin, IPC manager of government relations, at RonChamrin@ipc.org or +1 703-522-0225.
IPC (www.IPC.org) is a global trade association based in Bannockburn, Ill., dedicated to the competitive excellence and financial success of its 2,700 member companies which represent all facets of the electronics industry, including design, printed board manufacturing, electronics assembly and test. As a member-driven organization and leading source for industry standards, training, market research and public policy advocacy, IPC supports programs to meet the needs of an estimated $1.5 trillion global electronics industry. IPC maintains additional offices in Taos, N.M.; Arlington, Va.; Garden Grove, Calif.; Stockholm, Sweden; and Shanghai, China.