Senate Bill Contains Incentive for R&D

 - September 28, 2006, 4:18 AM

Before leaving for the Thanksgiving break, the Senate passed a bill with tax credits to encourage innovation in aerospace and defense research and development. Earlier, the House Ways and Means Committee approved a similar tax measure; at press time it was awaiting a floor vote.

The Senate voted 64-33 to approve a comprehensive tax bill that includes an extension of a basic R&D tax credit and includes an alternative simplified credit designed to increase incentives for high-risk defense and aerospace research.

The Aerospace Industries Association (AIA), which advocated the alternative simplified credit (ASC), sent to all 100 Senate offices an “R&D Tax Credit Alert” that summarized the technological and economic benefits the basic and simplified credits generate in the government-contracting sector. The ASC will permit aerospace companies to claim a potential 12-percent benefit on qualified research expenditures. Under current law, the maximum claim could be less than 4 percent.

“Congress recognizes that private-sector aerospace R&D makes an irreplaceable contribution to the modernization of the country’s military, space and air transportation systems,” said AIA president and CEO John Douglass. He explained that aerospace R&D fuels a competitive U.S. manufacturing base. Aerospace companies employ nearly 5 percent of the American manufacturing workforce, and 75 percent of all benefits claimed under the R&D credit go directly to wages and salaries.