Tax Policy: Pharmaceutical Industry's Use of the Research Tax Credit
(Chapter Report, 05/13/94, GAO/GGD-94-139).

In 1991, Congress enacted the research and experimentation tax credit to
encourage businesses to do research. GAO estimates that the
pharmaceutical industry earned $1.24 billion worth of these tax credits
between 1981 and 1990. The industry's credits as a share of the credits
earned by all industries rose from four percent in 1981 to 12 percent in
1990. These credits were earned primarily by large companies--those with
assets of $250 million or more. The biotechnology sector benefitted very
little from the tax credit. The research and experimentation tax credit
is difficult for the Internal Revenue Service (IRS) to administer
because (1) auditors have to distinguish stages of research, (2) audit
issues are often highly technical, and (3) successive proposed
regulations cause uncertainty.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-94-139
     TITLE:  Tax Policy: Pharmaceutical Industry's Use of the Research 
             Tax Credit
      DATE:  05/13/94
   SUBJECT:  Tax credit
             Tax administration
             Pharmaceutical industry
             Corporations
             Tax shelters
             Research and development
             Tax return audits
             Pharmacological research
             Tax law
             Investments
IDENTIFIER:  IRS Industry Specialization Program
             
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