High-tech tax credit resurrected

An R&D tax credit, which technology industry lobbyists feared was rejected and dead, was resurrected when the Senate approved a $1.35 trillion, 11-year tax cut Wednesday.

The tax credit, which enables companies to take tax deductions for much of the cost of their research and development, has been offered to companies since 1981, but a year or several years at a time. A provision slipped into the tax bill at the last minute would make it permanent.

High-tech companies said the permanent tax credit will save them $47 billion over the next decade. In addition, knowing that research and development will be tax-deductible will encourage more research, they said.

"No single tax measure has done more to help fuel the tremendous innovation that has made our dynamic industry the world's leader and helped drive our economy," said William Archey, president of the American Electronics Association.

"The Senate has demonstrated its vision today, casting a major vote for keeping America No. 1 in world high-tech markets," said Harris Miller, president of the Information Technology Association of America.

The tax credit was included in the $1.6 trillion tax cut proposed by President Bush, but was among the items dropped when the Senate trimmed the tax cut back to $1.35 trillion. As the bill inched toward a vote, technology lobbyists were pessimistic about the likelihood that the tax credit would be restored.

It was, but now they worry about whether the tax credit will survive when a House-Senate conference committee takes up the measure, perhaps this week.