Hearing: Hearing On Members Proposals On Tax Issues Introduced In The 109th Congress

Statement

Hearing: Hearing On Members Proposals On Tax Issues Introduced In The 109th Congress

I. The Renewing the Dream Tax Credit Act (H.R. 1549):

This bipartisan legislation, which I introduced with Representative Reynolds, enjoys the support of 197 cosponsors. H.R. 1549 will encourage the construction and rehabilitation of homes for low- and middle-income families in economically distressed areas.

Similar to the Low Income Housing Tax Credit, our bill would provide states with an annual tax credit allocation of $1.80 per capita (with a floor of slightly more than $2 million for states with small populations). State housing finance agencies would then allocate the credits to developers who construct or rehabilitate owner-occupied homes in census tracts with median incomes of 80% or less of the area or state median. Prospective homebuyers generally must be at or below 80% of median income as well in order to qualify.

Studies have shown that homeownership encourages personal responsibility, promotes economic security, and gives families a greater stake in their communities. In addition to spurring home ownership, our legislation would generate an estimated $2 billion of private equity investment, $6 billion of development activity, and 122,000 jobs each year.

H.R. 1549 has the support of a broad coalition of groups with substantial expertise in the housing industry, including the National Association of Home Builders, the National Conference of State Housing Agencies, the National Association of Realtors, Fannie Mae and Freddie Mac, and a number of non-profit organizations, including the Enterprise Foundation, the Local Initiative Support Corporation and Habitat for Humanity International.

Although national homeownership levels have reached historic highs, the dream of homeownership remains out of reach for many families living in economically distressed areas.

Our homeownership tax credit would bridge the gap between the cost of developing homes in these areas and the price at which such homes can be sold to low- and moderate-income buyers. The homeownership tax credit will help an estimated 50,000 low- and moderate-income families in our Nation's urban and rural communities achieve the American dream of homeownership each year.

II. The Investment in America Act (H.R. 1736):

The bipartisan bill, which I introduced with Representative Nancy Johnson, enjoys the support of 127 cosponsors. H.R. 1736 includes permanence for the research & development tax credit, raises the percentage levels of the alternative research and development credit, and creates a third level of alternative simplified credit for qualified research expenses that will allow more companies to take advantage that their R&D work deserves.

Adding an additional level of R&D credit will allow companies that do substantial amounts of research and development to receive the same level of credit. Under present law, many companies performing significant amounts of R&D in the United States are unable to claim the regular research credit because of changing economic circumstances relative to the mechanics of the calculation of the regular credit.

The legislation we are introducing would provide an opportunity for all taxpayers to elect to calculate the R&D credit under new computational rules that will eliminate the present-law distortions that can be caused by linking the credit to gross receipts. The alternative credit is intended to ensure that all companies will have a substantial incentive to perform and increase R&D activities in the United States. The bill would preserve the current two levels of credit - companies that benefit from either level of R&D credit currently available would simply not elect to use the new, third level of credit.

Innovation is the life's blood of a healthy twenty-first century economy. America is the undisputed leader in technological innovation because we have created an economic environment that rewards risk taking and creativity.

These breakthroughs do not happen overnight. They are usually the result of years, sometimes decades, of expensive, labor-intensive work. We believe that Congress can strengthen our position by making the research and development tax permanent.

Research-driven economic activity produces high paying jobs. It is important to remember that most of the dollars spent on R&D are spent on salaries for engineers, researchers and technicians. Moreover, when taken to market as new products, incentives that support R&D translate into new jobs for employees in manufacturing and sales.

Consumers reap the benefits of new and improved products. Advances in polymers, for example, make cars lighter and therefore more fuel efficient without compromising strength and passenger safety.

Unfortunately, the United States continues to send a mixed signal to American businesses. In 2004, the credit expired for over 6 months and while it was restored retroactively, other nations have permanent credits in place thus providing a more attractive and stable place to conduct research. We cannot afford to lose our technological edge to Europe or Japan.

The R&D credit expired, again, at the end of 2005. This is the third time in a decade we have allowed the R&D credit to elapse. Our tax code should work with the companies who are planning R&D projects that bring good jobs to the U.S., not against them. It's time we made this important credit permanent.

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