Recent Happenings in Washington, DC

 IPC Government Relations updates from Washington, DC:

1. Congress has passed their FY 2010 Budget Resolution which maintains the line item for a permanent R&D tax credit in the budget.

2. The Joint House-Senate Committee on Taxation (JCT) released their estimate of the FY 2010 budget request that has a lower estimated cost of a permanent R&D tax credit as compared to previous requests.

3. Sen. Baucus (D-MT) and Sen. Snowe (R-ME) have introduced legislation that would provide Net Operating Loss relief for companies of all sizes for 2008 and 2009.

 1. Congress has passed their FY 2010 Budget Resolution which maintains the line item for a permanent R&D tax credit in the budget.

The budget legislation is a nonbinding spending blueprint that guides later tax and appropriations bills. This is the first hurdle in the legislative procedure to pass a permanent R&D tax credit. Now that the money is set aside for a permanent R&D, an bill authorizing the credit must now be passed. 

2.  The Joint House-Senate Committee on Taxation (JCT) released their estimate of the FY 2010 budget request that has a lower estimated cost of a permanent R&D tax credit as compared to previous requests. 

The JCT estimated budget effects of the revenue provisions contained in the president’s fiscal year 2010 budget proposal of a permanent R&D tax credit is $67.9 billion over 10 years. The lower price tag of the permanent R&D tax credit is a good thing and will assist IPC’s efforts to enact this legislation.

Large priced provisions, such as this one, are usually lumped with other tax provisions in an omnibus bill. When the bill reaches the final stages of debate, Congressional leadership typically attempts to reduce spending by making broad cuts that will only affect a small number of programs. The lower price tag is good because 1) it is not a large priced item that attracts attention to be cut, and 2) a smaller item is easier to insert in to many different types of omnibus bill packages. 

The cost estimates for a permanent R&D tax credit have reduced over the past 3 years.  

Most recent estimate:

JCT:  2010-2019 = $67.9 billion

Obama Budget Proposal 2010-2019 = $74.5 billion

Bush Budget Proposal 2009-2018 = $108 billion

 3. Sen. Baucus (D-MT) and Sen. Snowe (R-ME) have introduced legislation that would provide Net Operating Loss (NOL) relief for companies of all sizes for 2008 and 2009.

The American Recovery and Reinvestment Act for 2009 (Economic Stimulus Bill) extended NOL relief to five years for businesses with gross annual receipts of $15 million or less. Unfortunately, NOL relief is not allowed for businesses over $15 million. Furthermore, the NOL relief is limited to only the 2008 tax year. Net Operating Losses for companies of all sizes for 2009 are projected to be greater than 2008. 

For this reason, Senators Baucus and Snowe have introduced legislation that would provide NOL relief for companies of all sizes for 2008 and 2009.

The NOL provision is a strong tool to provide help to companies in a broad cross-section of industries weather the current economic conditions. Faced with limited access to capital, the ability to transform a future tax benefit into cash today is critical to maintain otherwise viable businesses. The NOL carrybacks will provide cash needed now to fund operations, make needed investments, and in some cases, stay open for business.

Post a Comment

Required fields are marked *

*
*

%d bloggers like this: