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Rep. Eshoo Introduces Research and Development Tax Credit Expansion

March 9th, 2011

Washington, D.C. – Rep. Anna G. Eshoo (D-Palo Alto) announced the introduction of the bipartisan American Research and Competitiveness Act of 2011 today. The bill expands and permanently extends the research and development (R&D) tax credit, a key economic tool of the last thirty years which directly rewards business investment in R&D.

“The R&D tax credit is a proven policy which encourages businesses to invest in new technologies that create jobs and shape tomorrow’s economy. For decades it has been essential for out-innovating and out-competing the rest of the world, but now other countries have caught up,” Rep. Eshoo said. “This bill will modernize the tax credit—expanding it, making it permanent, and keeping the U.S. as a global leader.”

While the United States was the first nation to offer a tax incentive for research and development in 1981, the U.S. now ranks 24th in the most recent study of the strength of R&D tax incentives by the international Organization for Economic Cooperation and Development (OECD). Meanwhile, the U.S. share of global research and development has fallen, while China’s share has increased fourfold since 1999.

Research and development typically takes years, but the R&D tax credit has always been extended on a short-term basis, requiring 14 extensions in the past thirty years. The American Research and Competitiveness Act of 2011 would make the credit permanent to provide certainty for companies that make long-term investments in R&D. It would also strengthen the credit by increasing it from 14% to 20%. The Information Technology and Innovation Foundation estimates that these enhancements will increase annual GDP by almost a hundred billion dollars and create 162,000 jobs in the short-term alone.

“There are very few easy answers to improving the economic outlook of our nation, but updating the R&D tax credit is one of them,” said Eshoo.

Rep. Eshoo has worked for 18 years to make the R&D tax credit permanent. Last February, she led a bipartisan effort of 120 members of Congress, urging the expansion of the credit. Rep. Eshoo is an original cosponsor of the American Research and Competitiveness Act of 2011, along with Reps. John Larson (D-CT), Erik Paulsen (R-MN), Doris Matsui (D-CA), and Michael McCaul (R-TX). Rep. Kevin Brady (R-TX) is the sponsor of the legislation.

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