[Congressional Record Volume 159, Number 14 (Thursday, January 31, 2013)]
[Senate]
[Pages S439-S440]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. COONS (for himself, Mr. Enzi, Mr. Schumer, Mr. Rubio, Mr. 
        Blunt, Ms. Stabenow, and Mr. Moran):
  S. 193. A bill to amend the Internal Revenue Code of 1986 to provide 
for startup businesses to use a portion of the research and development 
credit to offset payroll taxes; to the Committee on Finance.
  Mr. COONS. Mr. President, each and every day the folks I represent in 
Delaware ask me why doesn't the Senate, why doesn't the Congress focus 
on jobs and focus on getting our economy moving again instead of what 
seem to be endless partisan struggles over secondary issues.
  What I wanted to speak to was a bipartisan bill, which I am 
introducing, which focuses on how to help create innovation-focused 
jobs again in the United States.
  As you know all too well, our economic recovery has been slower than 
we had hoped. Although it has been steady, there are still far too many 
Americans out of work in my home State of Delaware, more than 30,000, 
but we are building our way back.
  The task before us is to think not just about an immediate economic 
crisis but to take a breath and, instead, focus strategically on the 
long-term future, to take account of what kind of an economy we want to 
build for our children and our grandchildren for the America of today 
and tomorrow.
  The engine of our Nation's greatest economic successes has always 
been innovation. From the light bulb to the search engine, American 
inventors and innovators, those who have taken risks and started 
companies, have created jobs by the thousands and changed lives by the 
millions. Before new ideas scaled to market and reach out to change the 
world, they first have to start in a lab or garage.
  I know from my own 8 years in the private sector, my work for a 
materials-based science company in Delaware, the products we take for 
granted that are today household items in the world marketplace, often 
started as just the sliver of an idea, an idea that

[[Page S440]]

needed refining through determined investment in research and 
development.
  If we want to fuel the next generation of innovation, if we want to 
lay a strong foundation for job creation through invention, I think we 
have to start by supporting research and development. Research and 
development is the lifeblood of great American companies and is what 
will allow us to make things in this country and to be a leading 
manufacturer in the world and deserves focused investment.
  If we look at it, nearly 70 percent of America's private sector R&D 
and about 90 percent our patents are actually in manufacturing, a 
sector that deserves particular attention. Revitalizing American 
manufacturing will create high-quality, middle-class jobs for the long 
run, but doing so depends on our ability to take great ideas and turn 
them into marketable products or improvements in manufacturing 
processes that can and will result in things being made right here in 
America. Startups and small businesses all across this country are 
already taking chances to do just that, and I think it is time for all 
of us in Congress to take a chance on them.
  Last year, I worked in a bipartisan way with Senator Enzi, Senator 
Rubio, Senator Schumer, and others to introduce a bill that would make 
startup companies eligible for the existing research and development or 
R&D tax credit. I am proud to reintroduce that legislation as the 
Startup Innovation Credit Act of 2013 with our original cosponsors, as 
well as Senator Blunt, Senator Stabenow, and Senator Moran.
  This broad bipartisan support suggests a bill whose time has come. 
Although we represent, among the cosponsors, very different parts of 
our country, very different backgrounds, all of us know that to 
strengthen our economy we have to support innovation and 
entrepreneurship. Each of us is committed to fostering the kind of 
environment which supports the private sector and which turns ideas 
into innovations, innovations into products, and products into 
companies that help create good jobs.
  Under current policy, one way we do that federally is by supporting 
research and development through the existing R&D tax credit. Companies 
that invest in R&D generate new products, which sparks new industries 
with spillover benefits for all kinds of sectors. That is why there has 
long been strong bipartisan support for the existing R&D tax credit. By 
all accounts it is working. The R&D has helped tens of thousands of 
American companies succeed and create jobs.
  But there is a critical gap in the existing R&D credit. It isn't 
available to startups because they are not yet profitable, and thus 
they don't have an income tax liability against which to take a credit. 
In fact, more than half the R&D credit last year was taken by companies 
with revenue over $1 billion, well-established, profitable companies. 
There is nothing wrong with that; it is just not targeting these tax 
expenditures toward the sector of our economy that is taking the 
greatest risk and in some ways has the greatest potential.
  This gaping hole in our policy around R&D can be fixed with a 
relatively simple tweak. I have been working on finding this solution 
since I first came here. In fact, the very first bill I introduced 
included an expanded version of the R&D credit.
  Today, we take another step toward seeing this solution implemented 
with the reintroduction of this bipartisan Startup Innovation Credit 
Act. It says in order to spur research and development, we should allow 
companies to claim the R&D tax credit against their employment taxes, 
against their W-2 instead of their income tax liability. That opens 
this credit to new companies that don't yet have an income tax 
liability.
  There lots of companies we could choose. Let me pick one example, 
DeNovix, a small company based in my home State of Delaware that is 
developing instrumentation for bioresearch with a team that includes 
molecular biologists and engineering professionals.
  The managing director of DeNovix, Fred Kielhorn, said the legislation 
we are introducing would help that company to offset some of the costs 
of bringing new, innovative, technology-based products to market and 
for that this bill earned his strong support.
  He is just one of many. There is a remarkable list of outside groups, 
companies, and organizations that have supported it. I will mention a 
few: Silicon Valley Leadership Group; Revolution, led by Steve Case of 
AOL; Delaware Chamber of Commerce; the Association for Manufacturing 
Technology Policy; American Small Manufacturers Coalition; and BIO, a 
national organization that supports companies doing research and 
development in the biotechnology space.
  Supporting small innovative companies in critical early stages of 
research and development, in my view could unleash untold innovations 
for growth and create new jobs for America. At its heart, today's 
legislation is a jobs bill.
  Between 1980 and 2005, all net new jobs created in the United States 
were created by firms 5 years old or less, all of them, about 40 
million jobs over those 25 years. This credit is specifically designed 
toward those new, young, risk-taking firms. It does not pick winners 
and losers, it doesn't focus on a specific area of the economy or 
technology, but instead supports all private sector investments, 
judgments, and decisions that prioritize investment in research and 
development. Cash in the pocket of small startup companies, such as 
this tax credit, can make a real difference, especially with financing 
and credit so hard to come by.
  It was once said the States are the laboratory of democracy. In fact, 
that is where this idea has come from. Credits just like this have been 
done before in Iowa, Arizona, New York, Connecticut, Pennsylvania, and 
they have been game changers, helping companies get off the ground and 
keep their doors open during those demanding first years where they 
invest and spend so much on hiring and growth.
  We know this can work. We also know more than half our current 
Fortune 500 companies were launched during a recession or a bear 
market. The next great American company that may redefine whole 
categories that may be known worldwide for its products, its services, 
may be starting right now in a garage or lab somewhere in this great 
country. It is an exciting prospect.
  In fact, we are depending on our inventors, our innovators, and our 
small business owners to help innovate our way to a stronger economy 
and fuel a new generation of job creation. Let's give them the support 
they need and they deserve at a time when they need it the most.
  I am grateful for all the cosponsors of this bipartisan legislation 
in this Chamber and as well to Congressman Gerlach of Pennsylvania and 
Congressman Kind of Wisconsin, who will introduce the House version of 
this legislation next week.
  Rather than shutting our startups out of the R&D tax credit, let's 
open the doors to these innovators and see what they can do. I am 
confident they will surprise us yet again with how high they can reach 
and how far they can go. I think this is a wise investment in opening 
the doors of innovation, invention, and job creation for our future.
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