President Obama Releases Fiscal Year 2011 Budget

President Obama Releases Fiscal Year 2011 Budget

What’s in It for our Industry?

President Barack Obama presented his $3.8 trillion budget proposal for the fiscal year 2011 to Congress on February 1. As in previous budgets, our industry has multiple reasons to be encouraged by the level of funding for some of its top priorities. There are, however, some proposals that warrant further review.

R&D Tax Credit

The President’s budget proposes making the R&D tax credit permanent. This would be a landmark accomplishment adding stability to a policy that is used too often as a sweetener to pass other less palatable legislation and that frequently is allowed to lapse.

The R&D tax credit provides an important financial incentive to locate R&D jobs in the United States and it is used by many SEMI member companies. The credit was allowed to lapse on December 31, 2009. While SEMI shares the President’s goal of making the credit permanent, it is unlikely that the Congress will approve such a measure given the high cost. For this reason, SEMI urges Congress to pass a multi-year extension as soon as possible.

Clean Energy Manufacturing Tax Credit

The budget also includes extension of the clean energy Manufacturing Tax Credit (MTC) that was passed as part of the American Recovery and Reinvestment Act (ARRA), better known as the “stimulus bill.” The budget would add $5 billion (B) to the current cap of $2.3B.

SEMI lobbied intensively for inclusion of the MTC in the stimulus bill and met with many congressional offices to explain its importance. In the Administration’s recent announcement of the allocation of the existing $2.3B in credits, we are pleased to see that several member companies have been approved to receive this valuable credit. However, more needs to be done to promote demand for solar energy as well as a domestic manufacturing base to provide needed infrastructure. At a minimum, SEMI urges lawmakers to approve the Administration’s proposed credit increase. We urge Congress to consider moving beyond this proposal and to shift the MTC from Section 48C to Section 48 so there would no longer be a cap on the credits available.

Tax Measures to Watch

While the budget has some favorable elements, there are also some areas of significant concern as the budget proposes raising taxes on international business. These proposals are projected to raise $122B over 10 years, and include:

  • Deferring Deduction of Interest Expense Related to Deferred Income ($25.6B)
  • Determining Foreign Tax Credits on a Pooling Basis ($32.0B)
  • Preventing Splitting of Foreign Income and Foreign Taxes ($27.4B)
  • Taxing Currently Excess Returns Associated with Transfers of Intangibles Offshore ($15.5B)
  • Limiting Shifting of Income Through Intangible Property Transfers ($1.2B)

These proposals could adversely affect the bottom line for many member companies, so SEMI is monitoring these issues. We are a member of PACE (Promote America’s Competitive Edge), a leading business coalition focused on tax issues. For more information about tax policy, please visit http://www.pace4jobs.org/

Federal R&D Investment

The FY11 budget continues to strengthen federal support for science. The goal of doubling the federal investment in science continues to draw closer with $13.3B total for National Science Foundation (NSF), Department of Energy (DOE) Office of Science, and the National Institute of Standards and Technology (NIST) labs. SEMI supports this doubling goal to ensure that the United States has the necessary infrastructure to fuel continuing advances in microelectronics and other critical technologies. We continue to regularly raise this issue on Capitol Hill.

In addition, President Obama has announced more than $500 million (M) in private-public partnerships for STEM (Science, Technology, Engineering, Math) education under his “Educate to Innovate” campaign. The budget delivers federal resources for the nationwide STEM effort.

The budget also contains excellent news for the Focus Center Research Program, a government-industry partnership that funds semiconductor R&D at U.S. universities. The budget includes the full amount of the government’s funding portion of $20M. Industry also contributes $20M. For more details, please visit the Focus Center webpage at: www.fcrp.org

Investments in Alternative Energy

The President’s budget would increase the Energy Department’s Office of Energy Efficiency and Renewable Energy (EERE) program from $2.23B to $2.36B, a 5% increase. Within this amount, Solar would increase from $247M to $302M. The agency would also see an increase in the program that includes research in LED lighting.

Additionally, a new line item with $9.7M has been added for a “Power Electronics effort to address the development of advanced semiconductor materials and devices that will provide the future power grid with faster switching, more flexible power conversion, and better flow control leading to decreased costs and a higher level of resiliency.”

SEMI strongly supports robust funding for R&D and other efforts to increase domestic demand and production of renewable energy. This remains a top priority for the SEMI public policy program and the SEMI PV Group.

What Happens Now?

The budget debate now shifts from the Administration to Congress. Congress soon will begin debating a budget during a time of great public interest in government spending and the size of the budget deficit. These are likely to become key issues in the congressional campaigns.

Appropriations committees are beginning to look at their areas of funding for FY11. Hearings will begin this spring and deliberations will continue through the summer. The goal is to finalize appropriations before FY11 begins on October 1, 2010.

SEMI will remain actively engaged throughout this process to represent the interests of member companies and to make sure the industry’s voice is heard on Capitol Hill.

Each year SEMI organizes and hosts the Washington Forum, where SEMI and PV Group members lobby on the industry’s behalf. SEMI also works collaboratively with other high-technology advocacy groups.

Maggie Hershey, senior director, NA Public Policy

Jamie Girard, manager, NA Public Policy

The SEMI North America (NA) Public Policy team is based in Washington D.C. so they are close to the action. Maggie Hershey leads our North America advocacy efforts and coordinates the overall agenda with the SEMI North America Advisory Board.

We are also pleased to introduce the newest member of the SEMI public policy team, North America Public Policy manager Jamie Girard. Jamie comes to SEMI armed with six years experience on Capitol Hill as a staffer for the Science and Technology Committee and he has also worked on energy issues.

For more information, please contact SEMI Public Policy Manager Jamie Girard at jgirard@semi.org.

March 2, 2010