Politico - R&D Tax Credit Spurs Innovation

Op-Ed

By By Senators Chris Coons & Mike Enzi
Start-ups and small businesses all across this country take chances everyday to turn their ideas into innovations and their innovations into products that can be made right here in America. It's time our government takes a chance on them.

These entrepreneurs are critical to our economic growth. Between 1980 and 2005, all net new jobs created in the United States were created by firms five years old or younger.

The bipartisan Startup Innovation Credit Act, which would make the highly successful research and development tax credit available to startup companies, is fundamentally a jobs bill. It would provide access to critical capital at a time when innovative new businesses need it most and would give a vital shot in the arm to American manufacturing.

Nearly 70 percent of America's private-sector research and development and about 90 percent of our patents are in manufacturing -- a sector that creates high-quality jobs but needs the right support to compete in the global economy.

While the private sector will create jobs, Congress can help create an environment that incentivizes innovation and supports entrepreneurs and small businesses -- and that is exactly what our legislation does.

The R&D tax credit is an important part of creating that environment and has helped tens of thousands of American companies succeed and create jobs. The problem is, right now, it isn't available to startups, because they are not yet profitable and don't have an income tax liability against which to take a credit. In fact, more than half the R&D credit in recent years was taken by companies with revenue of more than $1 billion.

The Startup Innovation Credit Act of 2013 would level the playing field. It says that in order to spur research and development, we should allow companies to claim the R&D tax credit against their employment taxes. That would open this credit to new companies that don't yet have an income tax liability.

Our bipartisan legislation has been endorsed by a remarkable list of independent organizations for its potential to unleash innovation and support entrepreneurs, including the Silicon Valley Leadership Group; Revolution, led by AOL founder Steve Case; the Association for Manufacturing Technology; the American Small Manufacturers Coalition, the American Chemical Society; and BIO, a national organization that supports companies doing research and development in the biotechnology space.

Credits just like this have been offered before in states like 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.

This credit is specifically designed for new, risk-taking firms. It does not pick winners and losers but, instead, supports all private-sector judgments and decisions that prioritize investment in research and development.

We are depending on our innovators and our small-business owners to help grow and strengthen our economy and fuel a new generation of job creation. Let's give them the support they deserve at a time when they need it most.

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. We are confident this will prove a wise investment in opening the doors of innovation and job creation for our future.

Sen. Chris Coons is a Democrat from Delaware. Sen. Mike Enzi is a Republican from Wyoming and is a member of the Senate Finance Committee.

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