McCaul Pushing To Renew, Expand Research Tax Credit

Press Release

Austin American Statesman

U.S. Rep. Michael McCaul has been pushing an idea around Washington that could save some Austin high-technology companies hundreds of millions of dollars in taxes.

McCaul, R-Austin, has been trying to persuade his colleagues to restore and extend a business tax credit that was allowed to die at the end of last year. If he can stir up enough support, companies would be allowed a credit of 20 percent of the cost of some research and development projects.

The government would collect $87 billion less in taxes from 2011 to 2020 if the measure passes, the White House budget office estimated. But McCaul said he thinks the ultimate economic impact would be more than that amount by the end of decade.

At minimum, McCaul's first priority is to restore a 14 percent tax credit that companies have enjoyed since the 1980s but that lawmakers did not reauthorize last year. He also would like to make it permanent so that it would not have to be renewed each year.

Additionally, McCaul said he wants to boost the tax credit to 20 percent for certain research and development costs.

Advanced Micro Devices Inc., which employs 2,200 people in Austin and spent $1.7 billion on research and development in 2009, has stood behind McCaul since the tax credit expired in December.

Steve Kester, AMD's director of government relations, called the credit an "effective tool" that would allow the U.S. to keep up with foreign governments, such as China and India, that offer similar investment credits.

Al Wargo, CEO of Austin-based Zebra Imaging Inc. , said the credit would allow him to expand his 67-employee company, which makes holographic products, he said.

"As a small company, our growth is driven by the amount of R&D investment," Wargo said. "It's directly related to job growth."

But not everyone supports the measure.

"It's probably mostly a waste of money," said Bob McIntyre, director at Citizens for Tax Justice, a nonpartisan tax policy and advocacy nonprofit group, adding that some companies would probably take the credit for work that is not research.

But McCaul and U.S. Rep. Anna Eshoo, D-Calif. , who co-chair the Congressional High Tech Caucus , have said the credit is crucial. They had collected 125 signatures from supportive colleagues in Congress as of Friday. President Barack Obama, House Speaker Nancy Pelosi and Senate leaders also are on board.

" We will work with the Senate and the administration to seamlessly extend the provision," Nadeam Elshami, a spokesman for Pelosi, said in a statement.

In the Senate, Finance Committee Chairman Max Baucus, D-Mont., and Majority Leader Harry Reid, D-Nev., introduced legislation last week that would, among other things, extend the tax credit through this year and increase it to 20 percent. It also would provide an alternative simplified credit of 14 percent.

Mike Rosen, a spokesman for McCaul, called the Senate's move "a good first step."

But a lot must happen for an idea in Washington to become a reality, Rosen said.

"There's a long road ahead," he said.

Source