Tomorrow, the House will consider legislation (H.R. 4438) to make the research and development tax credit permanent.  The credit expired at the end of 2013.

The Administration issued a Statement of Administration Policy threatening to veto the measure.  The Statement of Administration Policy said, “The Administration supports enhancing, simplifying, and making permanent the Research and Experimentation Credit (“R&D credit”), and offsetting the cost by closing tax loopholes. Making this credit permanent will increase its effectiveness, since it will allow businesses to make investments and create jobs today confident that they will continue to benefit from the credit in the future. Moreover, four-fifths of the R&D credit is attributable to salaries of U.S. workers performing U.S.-based research—meaning that the credit helps create high-skilled jobs, as well as encouraging new innovations and future productivity. However, the Administration strongly opposes House passage of H.R. 4438, which would permanently extend and expand the R&D credit without offsetting the cost, adding to long-run deficits.”

The Administration’s statement continued, “By making the R&D credit permanent without offsets, H.R. 4438 would add $156 billion to the deficit over the next 10 years. Moreover, if this same, unprecedented approach of making major traditional tax extenders permanent without offsets were followed for the other traditional tax extenders, it would add $500 billion or more to deficits, wiping out most of the deficit reduction achieved through the American Taxpayer Relief Act of 2013. Last month, House Republicans themselves passed a budget resolution that required offsetting any tax extenders that were made permanent with other revenue measures.”