US House, Senate plan new R&D tax credit

Legislation to allow companies to exchange research-related tax benefitsfor a refundable tax credit, for the recapture of refunds in certain circumstances and for other purposes, has been introduced in both the US Senate and the House of Representatives.

The American Breakthrough Research Act of 2001 would amend the Internal Revenue Code referring to the tax credit for research and to the orphan drug credit, to let long-term research companies trade their credits and net operating losses at a discount of 75% in exchange for a refundable tax credit to be used for R&D. To qualify, firms should have no more than $500 million in gross assets and be engaged in or starting an active trade or business, and meet other requirements, says the bill, which has been referred to the Senate committee on Finance and the House Ways and Means Committee.

The legislation says it is critical to the maintenance of US competitiveness internationally that long-term R&D projects be encouraged, including orphan drugs and other treatments which may not result in large sales and profits. High-technology firms typically operate in financially-challenging circumstances and, while conducting their long-term breakthrough research, must often seek to endure without products and little or no earnings.