Original Press Release
NAM Tells House Committee R&D Tax Credit Is Vital To Small Manufacturers
Press release date: September 11, 2008
NAM TELLS HOUSE SMALL BUSINESS COMMITTEE R&D TAX CREDIT IS VITAL TO SMALL FIRMS
WASHINGTON, D.C., September 11, 2008 - The National Association of Manufacturers today submitted a statement regarding the importance of the R&D tax credit to small manufacturers to the House Committee on Small Business. A full 40 percent of the NAM's small manufacturer members used the R&D tax credit in 2007. Excerpts of the testimony follow:
The federal R&D credit is a proven incentive for spurring additional R&D activity and investment in the United States. It helps keep high skilled, high wage R&D jobs here and contributes to our nation's world class leadership in developing new products and increasing productivity. Unfortunately, this important tax provision expired for the 13th time at the end of 2007 and has yet to be extended by Congress. The uncertainty associated with the timing of expiration and renewal undermines its incentive value, disrupts company R&D budget planning, and contributes to the evolving exodus of domestic R&D activities and jobs.
A seamless extension of a strengthened R&D tax credit is a top tax priority for the NAM. Manufacturing is the largest user of the credit and its relative value is highest for smaller companies. Nearly 30 percent of companies claiming the credit in 2005 had assets of $1 million or less and another 25 percent had assets of $1 to $5 million.
Based on our most recent survey of our small members, 40 percent said they used the credit in 2007. Of those small manufacturers claiming the R&D credit in 2007, 20 percent of the companies used the new federal R&D tax credit formula, the Alternative Simplified Credit (ASC), which was effective only for calendar year 2007. If this credit is extended, we anticipate that an increasing number of small manufacturers will opt to use this simplified credit, particularly if the credit rate increases above 12 percent.
The credit stimulates job creation. More than 70 percent of credit dollars are attributable to U.S. R&D wages. Moreover, R&D workers themselves appreciate the value of the credit. In recent weeks, the NAM spearheaded an effort to collect the names of more than 3,400 R&D employees from 122 companies in 43 states on a September 10, 2008, letter to Congress urging quick action to restore the R&D tax credit.
The lack of an R&D credit has made the U.S. less competitive because many of our economic competitor nations provide more generous R&D tax incentives. Twenty Organization for Economic Cooperation and Development (OECD) countries currently offer R&D tax incentives, and the majority of those incentives are more generous than the U.S. R&D tax credit that expired in 2007.
We strongly urge Congress to act as quickly as possible to seamlessly extend and strengthen this important pro-growth, pro-competitiveness tax incentive. The longer the R&D tax credit is extended, the more certainty companies will have that the credit will exist for the duration of a manufacturing R&D project, typically five to ten years.
The full text of the NAM testimony is available at: http://www.nam.org/~/media/Files/RandD/Small_Bus_Comm_hrg_091108.ashx
For more on the R&D tax credit: http://www.nam.org/~/media/Files/PDF/2008%2008/238884.ashx
The National Association of Manufacturers is the nation's largest industrial trade association, representing small and large manufacturers in every industrial sector and in all 50 states. Headquartered in Washington, D.C., the NAM has 11 additional offices across the country. Visit the NAM's award-winning web site at www.nam.org for more information about manufacturing and the economy.