Pushing for Extension of the R&D and Solar Energy Tax Credits
SEMI is working with Congress to urge action as soon as possible to renew the R&D tax credit and extend the solar energy investment tax credit (ITC). Both of these credits are part of a larger “tax extenders” bill that passed the House of Representatives in May and are now being debated in the Senate. The R&D credit expired at the end of 2007 and the current provisions would renew it through 2008 and apply it retroactively to cover the time that it was lapsed. The solar ITC expires at the end of the year and many seek to extend it through 2016.
Importance of Credits
The R&D tax credit regularly expires every couple of years. This lack of predictability and certainty is challenging for companies when making long-term R&D plans. Also, this is unfortunate because many companies in many industries are faced with increased competition from abroad that offer generous tax breaks.
Other countries have grasped the importance of the R&D tax credits and are trying to lure companies away from the U.S. with more generous R&D programs. In 1981, the United States was the first country to enact a tax credit for R&D. By 2004, the United States had fallen drastically to a rank of 17 out of the 30 member nations of the Organization for Economic Co-operation and Development in an analysis ranking their R&D credits. It is not uncommon to see newspaper advertisements from Canada and other countries that tout their R&D tax incentives to U.S. companies. “Other countries are trying to displace the U.S. as a technology leader by offering huge tax subsidies and tax incentives, and by investing billions of dollars in research,” said Vicki Hadfield, President, SEMI North America.
Several hundred leading companies wrote Congress recently warning that failure to act quickly on the R&D credit could bring investment projects to a standstill. Apple Inc., Boeing Company, General Electric Corporation, and Intel Corporation were some of the companies who wrote that "failure to act this summer on tax extender legislation will have significant negative consequences for the U.S. economy."
The solar investment tax credit is also a key financial incentive for U.S. companies. SEMI strongly supports an extension of the solar energy ITC for businesses. Solar energy is a developing market and many other countries are seizing the opportunity to be the market leaders. The United States will be a user of solar energy. The question is, “Will we also be a producer of it?” The solar energy ITC encourages investment in the technology, which will in turn help generate production in the United States.
SEMI recently met with congressional offices to discuss the importance of the R&D and solar tax credits. The new SEMI Senior Director of North America Photovoltaics, Bettina Weiss, participated in these visits to brief decision-makers on the solar equipment and semiconductor equipment industries. The meetings were with Reps. Maurice Hinchey (D-NY) and Peter Visclosky (D-IN) as well as staff from the offices of Senator Jeff Bingaman (D-NM) and Rep. Gerald McNerney (D-CA). While many on Capitol Hill believe the credits will be extended this year, industry must continue to make the case about why they are important.
The extension of these and other tax credits are caught up in a larger debate over the “pay-as-you-go” rules which require that items with a revenue impact must be offset elsewhere in the budget through increased taxes or decreased spending. The House passed a tax extenders bill earlier this year that included offsets. There has been a sharp disagreement in the Senate whether the pay-go rules should apply to extensions of existing tax credits or to new tax credits only.
July 9 ,2008