In the 30+ years that the R&D tax credit has been around, it has only lapsed once. And yet, every other year taxpayers wait in anticipation for it to be extended as it moves at a snail’s pace through our legislative system. Last month, the Senate Finance Committee advanced a bill that included the extension of the R&D tax credit in addition to some major changes. Unfortunately, as always the wheels of our government turn painstakingly slow and as always, the uncertainty that politicians create only hurts taxpayers.
Several companies depend on R&D credit renewal when reporting earnings and making plans for the future. Impax Laboratories Inc., a pharma company, reported on its Monday morning conference call that its effective tax rate for the year was 37.6% which is 1.5% higher than if the credit was still active.
Impax isn’t the only company feeling the pressure of our legislators’ indecisiveness. Super Micro Computer Inc., expects its tax rate to be 34% for the upcoming quarter, 7% higher than if the credit had been renewed.
It is doubtful that lawmakers will feel any pressure to move the process along. While the benefit is there and it is immensely helpful to taxpayers across the country, politicians only see the credit as a tool for popular support and have seen to preserving the status quo. While talks of making the credit a part of our permanent tax code have been a part of the mainstream R&D discuss for a long time, no progress has been made.
Source: WSJ