The chip bill is being debated in the U.S. Senate, with a bipartisan group of lawmakers fighting to extend the tax credit for corporate research and development in the countdown to a vote.
Senator Todd Young, an Indiana Republican who is leading the Republican negotiations, said on Tuesday (19th) that lawmakers are discussing extending the tax credit for research and development expenses, which is due to expire at the end of this year, by one year. This allows companies to deduct the R&D expenses in the year in which they are incurred, instead of having to deduct them over multiple years.
If the R&D tax concession can be extended, it will be good news for the technology industry, pharmaceutical companies and manufacturers. If no adjustment is made, starting from this year, the domestic research and development expenses of enterprises must be offset in five years, and the foreign research and development expenses will be divided into 15 years.
Businesses that support the extension say passing the law is important because they are taking on research and development costs that don’t qualify for tax concessions.
The measure to extend the R&D tax credit has broad support from senators from both parties, including Democrat Mark Warner of Virginia, Jon Tester of Montana, and Republican Shelley Moore Capito of West Virginia . The measure was approved by the House of Representatives last year in the Biden administration’s “Rebuild for a Better Future” plan.
Young said the R&D tax credit, worth an estimated $2 billion, may not ultimately be included, despite bipartisan support, as the Senate also wrestles over whether to include other provisions.
Senate Democratic leader Chuck Schumer is pushing for a slimmer version of the anti-China bill to be voted on this week, focusing on $52 billion in semiconductor subsidies and tax breaks. The Senate and House of Representatives had previously passed similar versions of the bill, but the chip bill has been stuck so far because of the inability to reach a consensus.
Senator Tim Kaine, Democrat of Virginia, said in the event that the R&D tax credit is not included in the chip bill in time, other mechanisms, such as a government funding bill later this year, could still be used.