SEMI, IPC, and SIA all praised the U.S. Congress for voting to make the federal R&D tax credit permanent. Congress also voted to extend the solar-energy investment tax credit (ITC), which had been set to be reduced to 10% at the end of 2016. Under the legislation passed Friday, the 30% credit will be extended until 2019 and then gradually phased down to 10% at the end of 2021, where it will remain.
“There’s no way to overstate this—the extension of the solar ITC is the most important policy development for U.S. solar in almost a decade,” said MJ Shiao, director of solar research at GTM.
GTM also reports that the legislation includes a production tax credit (PTC) extension for wind, geothermal, landfill gas, marine energy, and incremental hydro.
SEMI, which represents semiconductor equipment and materials suppliers, said it has been working to make the R&D tax incentive a permanent part of the tax code since the R&D credit was first established in 1981. SEMI noted that in the past 34 years, the credit had expired 17 times, and on more than one occasion, was expired for almost an entire tax year before being retroactively reinstated.
“SEMI members invest and average of 15% of their revenues back into R&D activities every year,” said SEMI president and CEO Denny McGuirk. “Being able to count on the R&D tax credit is immensely important to our members, which are some of the most innovative companies in the world.”
McGuirk continued, “Both the R&D credit and the ITC are good examples of why SEMI engages with policymakers in Washington, DC, on behalf of our members. SEMI, our members, and many others in the high-tech community have long advocated for this change. Our collective persistence has resulted in important and meaningful support for innovation.”
The Semiconductor Industry Association (SIA) also on Friday hailed final passage of legislation to permanently extend the R&D tax credit.
“A permanent R&D credit is a huge win for the semiconductor industry,” said John Neuffer, SIA president and CEO. “No industry invests a higher percentage of revenue in research than the U.S. semiconductor industry. Sustained, long-term research and innovation have been the foundations of the U.S. semiconductor industry’s leadership in the world marketplace for semiconductors. By making the credit permanent, this legislation will enhance the ability of the U.S. semiconductor industry to innovate and continue to improve our daily lives.”
The SIA said that in 2014, the U.S. semiconductor industry invested about one-fifth of its revenue into research and development. The organization also said the semiconductor industry directly employs nearly 250,000 people in high-skilled, high-wage jobs across America, and a large number of these jobs are in the areas of research and innovation. Since over 70% of credit dollars are used to pay the salaries of high-skilled R&D workers in the U.S., this legislation will help support research jobs at U.S. semiconductor companies.
The SIA said it also supports the extension of bonus depreciation and the so-called “CFC (controlled foreign corporations) look-through” rule.
“Making the R&D credit permanent is a key step to improve America’s ability to innovate and maintain technological leadership,” Neuffer said. “We look forward to working with Congress to enact comprehensive tax reform that will strengthen research incentives, lower the corporate rate, and move toward a territorial international system that does not discourage U.S. companies from investing overseas income in the U.S.”
IPC-Association Connecting Electronics Industries also applauded Congress for its support of making the R&D tax credit permanent. Before the vote, IPC president and CEO Dr. John W. Mitchell sent a letter to all members of Congress urging them to support the bill. “Despite the U.S. economy’s overall recovery, the U.S. manufacturing sector is facing potentially strong headwinds,” he wrote, adding that U.S. manufacturers need the kind of long-term business incentives the bill provides to encourage companies to innovate and become more competitive in the global economy.
IPC noted that the legislation also includes permanent enhanced expensing for smaller manufacturers, providing annual write-offs of up to $500,000 for investments in equipment and machinery; and a multi-year extension of bonus depreciation (50% first year expensing). IPC member companies employ more than 800,000 workers across the United States in more than 2,200 manufacturing facilities.