[Congressional Record Volume 154, Number 61 (Thursday, April 17, 2008)]
[Senate]
[Page S3155]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. COLLINS (for herself and Mr. Hatch):
  S. 2884. A bill to amend the Internal Revenue Code of 1986 to provide 
incentives to improve America's research competitiveness, and for other 
purposes; to the Committee on Finance.
  Ms. COLLINS. Mr. President, I rise today to introduce the Research & 
Development Tax Credit Improvement Act of 2008, legislation which would 
extend the R&D tax credit for 5 years, phase-out the Basic Credit, and 
raise the rate of the Alternative Simplified Credit from 12 percent to 
20 percent by 2010.
  Those who have followed the ongoing discussions regarding the R&D tax 
credit will recognize that the legislation I am introducing shares the 
framework of a proposal already put forward by the senior Senator from 
the State of Utah, my good friend Orrin Hatch. Senator Hatch has done a 
superb job building a consensus around the need to transition to the 
Alternative Simplified Credit, and to raise that credit to provide a 
real incentive to the many companies that are unable to benefit from 
the Basic Credit structure. I applaud his efforts in this regard, and I 
thank him for lending his support to the bill I am introducing today.
  I also want to note the contribution of the distinguished Chairman of 
the Finance Committee, Senator Baucus, who has worked side-by-side with 
Senator Hatch on the Research and Development tax credit.
  The chief distinction between our two bills is the duration of the 
credit. The Hatch-Baucus bill proposes a permanent credit, while my 
bill would extend the R&D tax credit for five years. I certainly share 
the goal of providing a permanent R&D tax credit, but I fear that the 
cost of doing so puts it beyond our reach. Yet we simply cannot 
continue to play ``stop-and-go'' with this critical research incentive. 
Since the R&D tax credit was first enacted in 1981, Congress has had to 
extend it a dozen times, and it expired again at the end of last year. 
The constant uncertainty about the status of the credit has made it 
impossible for companies to plan their research investments, and has 
seriously diminished the credit's role as an incentive for research and 
development here in the U.S.

  A 5-year extension would give companies enough time to plan their 
research investments with the credit in mind, restoring the incentive-
effect the R&D credit has always been intended to provide. Just as 
important, the time frame I am proposing, coupled with the increase in 
the rate to 20 percent will allow for a smooth transition away from the 
Basic Credit to the Alternative Simplified Credit. The Basic Credit has 
served its purpose, but it has become hopelessly outmoded. Under the 
Basic Credit methodology, companies wishing to calculate their R&D 
credit must measure their current investments against a base that is 
stuck in the past--literally the tax years between 1984 and 1988. This 
period is simply not relevant to today's investment decisions, and 
because of that, fewer and fewer companies get any benefit at all from 
the Basic Credit.
  By contrast, the Alternative Simplified Credit methodology allows 
companies to calculate their credit using a rolling average of their 
domestic investments over their three most-recent tax years.
  The value of doing this is evidenced by the fact that most companies 
have already switched to the Alternative Simplified Credit, even though 
it has been on the books for less than a year-and-a-half, and even 
though the credit rate is only 12 percent compared to the Basic Credit 
rate of 20 percent.
  The five-year extension I am proposing will allow for a smooth 
transition to the Alternative Simplified Credit, and will bring the R&D 
tax credit up-to-date. Companies which still rely on the Basic Credit 
will be allowed to continue that credit for another two years, just as 
is contemplated by the legislation that Senators Hatch and Baucus have 
worked so hard on.
  Investment in research and development is critical to the 
breakthroughs we need to keep our economy competitive, and to create 
the good, high-paying jobs the American people deserve. The R&D tax 
credit provides an important incentive for this investment, but it 
needs to be updated so more companies can benefit from it. While making 
the credit permanent is a worthwhile goal, the 5-year extension I am 
proposing today is ``do-able'', and I urge my colleagues to support it.
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