R&D lost in fray

R&D lost in fray

As you are probably aware, Congress locked in a battle over what sort of R&D and energy tax credits should be passed by vote. A big part of this battle is the question of whether offshore drilling should go forward or not, and another big part is the question of where the government will get the money for these credits.

It’s bad enough that renewable energy tax credits are now caught up in the battle. R&D tax credits in general are in play, too, wreaking havoc with companies who will be relying on these credits to make their investments plans work. Whether you support offshore drilling or not, it’s easy to see that postponement of these credits could stall what has been steady progress toward the installation of concentrated solar energy plants and wind turbine arrays. Many projects—not just solar and wind—have a long lead time and will only go forward if the credit is in place.

In January of this year, lawmakers simply altered the R&D tax credit allocation from “Dec. 31, 2007” to “Dec. 31, 2008” to extend the R&D tax credit, which can save companies tens or even hundreds of thousands of dollars in taxable earnings.

It’s no surprise Congress has stalled on passing the R&D credits. In the past, tax issues like this one were often postponed until the time or political will was available to get a vote through, and by then the credits were often applied retroactively. Now, however, the election year is putting added pressure on Congress to get this bill done before other issues take over. And unlike previous years, the traditional “Of course I will support R&D” attitude from the legislative branch has been replaced with some large strategic questions.

The continuation process makes sense, as it allows adjustments on the go. But there’s a real danger the big elephants in the room (oil drilling, carbon sequestration) will run roughshod over what has been a valuable credit.

Is the R&D tax credit a worthwhile one? Well, according to some experts, the lack of such a credit can increase the cost of R&D spending by 6%. This is a substantial amount of money to add to the bottom line.

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