Congress extends R&D tax credit as part of bailout

The U.S. House of Representatives has voted to extend a research and development tax credit to U.S. businesses as part of its approval of a giant bailout of the U.S. mortgage industry.

The House on Friday voted 263-171 to pass an amended Emergency Economic Stabilization Act after rejecting the bill earlier this week. President George Bush also signed the US$700 billion bailout plan Friday.

The bill included a two-year extension of a research and development tax credit for U.S. businesses that expired at the end of 2007. Several tech companies, including Microsoft and Texas Instruments, had called on Congress to extend the tax credit, saying it helps U.S. businesses invest in R&D and keeps R&D workers in the country.

The R&D Tax Coalition, representing the tech, manufacturing, chemical, pharmaceutical and other industries, praised Congress for extending the tax credit.

"In today’s challenging economic environment, R&D is a critical catalyst for American innovation, economic growth, and job creation," the coalition said in a statement. "The R&D tax credit motivates U.S.-based companies to keep cutting-edge research projects in the United States while funding high wage and high skilled jobs for American R&D workers across diverse industries such as manufacturing, information technology, biotech, agriculture, aerospace and others."

The U.S. Senate had passed the R&D extension in late September as part of a different bill, but the tax credit was added to the bailout bill in recent days.

The tax credit can cover up to 20 percent of qualified R&D spending. It has expired 13 times since 1981 despite calls by tech, pharmaceutical and manufacturing groups to make the tax credit permanent.

Lawmakers have resisted making the tax break permanent largely because of its price tag of about $7 billion a year. Some critics have called the tax credit a government subsidy for large businesses.

Several tech companies and trade groups also praised Congress for passing the larger bailout bill. "Congressional passage of the financial recovery package is a critically important step to bringing back economic stability in the U.S. and around the globe," Brad Smith, Microsoft's senior vice president and general counsel, said in a statement. "This crisis affects more than just the U.S. financial sector, it affects every corner of the world economy, and today’s vote will help re-instill confidence around the globe."

The IDG News Service is a Network World affiliate.