Senate passes extension of R&D tax credit

The U.S. Senate has passed a one-year extension to a research and development tax credit program supported by many technology trade groups.

The Senate late Thursday voted to pass the Temporary Tax Relief Act, which the House of Representatives approved Nov. 9. The tax credit, which covers 20 percent of qualified R&D spending, expires on Dec. 31, the 13th time it runs out since first approved by Congress in 1981.

Several tech trade groups have pushed Congress to expand the tax credit and make it permanent, but lawmakers have balked because of the US$9 billion a year cost.

The tax bill now goes to U.S. President George Bush for his signature.

The Senate passage of the bill allows companies to plan for next year's R&D work, said the Telecommunications Industry Association (TIA), a trade group representing telecom technology vendors.

"With these votes, both houses have shown they recognize that research and development are essential to U.S. competitiveness in the communications industry," TIA President Grant Seiffert, said in a statement. "In future years we hope to see the credit made permanent, but this extension is a step in the right direction."

On Tuesday, more than 40 trade groups, including the Business Software Alliance, the Biotechnology Industry Association, the Information Technology Association of America and the Information Technology Industry Council, sent a letter to congressional leaders, pressing lawmakers to pass the extension.

Some lawmakers said a one-year extension isn't long enough, however. Companies need more time to plan investments in R&D, said Representative Bob Goodlatte, a Virginia Republican.

"One year doesn't do that," he said in an interview this week. "If [companies] are expecting to make major investments in technology in the future, you've got to give them a longer lead time than one year."