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The Honolulu Advertiser
Posted on: Saturday, November 18, 2006

Tech groups push for tax break

By Erica Werner
Associated Press

WASHINGTON High-tech companies are pushing Congress to act during its lame-duck session to renew a popular federal research and development tax credit that expired last year.

The tax break, offering a 20 percent credit for new activities, was designed to give companies an incentive to increase their research and experimentation.

It has wide support but, along with some other popular tax breaks, bogged down earlier this year when lawmakers tried to attach it to some less-popular legislation.

"This is a priority, and we want it done ASAP," said Phillip Bond, head of the Information Technology Association of America, at a Capitol Hill press conference Tuesday where leading tech industry groups highlighted the issue.

"There are some expenditures by the U.S. government that should really be called investments," said William Archey, head of the American Electronics Association. "The R&D tax credit is unequivocally an investment."

Lawmakers are working to get it done, most likely once Congress reconvenes after Thanksgiving. Senate Finance Committee chairman Charles Grassley, R-Iowa, and top Democrat Max Baucus, D-Mont., met Monday evening with House Ways and Means Committee chairman Bill Thomas, R-Calif., to discuss strategy on passing a package of tax breaks, including the R&D credit.

Among other expired provisions are federal tax deductions for student tuition and expenses and for state and local sales taxes, intended to help residents in states that don't have an income tax.

The package stalled in September when it was attached to a bill that would have cut taxes on multimillion-dollar estates and raised the minimum wage. The bill passed the House but failed in the Senate.

Grassley and Baucus issued statements Tuesday pledging action on the R&D credit.

"We need to give taxpayers the same certainty about tax provisions that affect their bottom line," Grassley said. "I hope the House and Senate use the lame-duck session to redeem themselves from lameness and pass a solid extenders package including the R&D tax credit."

The proposal would make the research and development tax credit retroactive, so research this year would qualify even though the credit had expired. The credit would stay in place through 2007.

The proposal also would give companies a new and simpler method for calculating the credit, which could help more businesses claim the benefit. The Joint Committee on Taxation estimated the plan would be worth $16.5 billion to businesses.

Tech leaders also said Tuesday they welcome the advent of a Democratic-controlled Congress as a chance to move forward other pieces of their agenda, including adding visas for high-tech workers and greater support for innovation. "The Democrats tend to see this as being particularly important," said Archey.