Firms await renewal of R&D tax credit

WASHINGTON — Lincoln Electric Co., a welding equipment maker in Cleveland, has some disappointed engineers these days.

They are coming up with new ideas for welding materials and methods. But they are not getting help this year from the federal research and development tax credit to bring down the costs of experiments.

The credit expired last year, and Congress has not renewed it. For a company that typically qualifies for $1 million to $2 million in research and development credits, that means some projects do not make the cut.

The tax break, offering a 20 percent credit for new activities, was designed to give companies an incentive to increase their research and experimentation.

Stephen Elkins, tax policy director at the American Chemistry Council, said the credit gives companies more “bang for their buck” and has helped keep research activities in the United States.

The credit is the largest on a list of popular tax breaks that expired at the end of last year. Even with bipartisan support, they have not been renewed.

Expired tax cuts for individuals on that list include deductions for college tuition and classroom supplies bought by teachers and a deduction for state and local sales taxes. For businesses, at stake are incentives for hiring welfare recipients and other hard-to-place job seekers.

The proposal stuck in Congress would make the research and development tax credit available retroactively, so research this year would qualify even though the credit had expired. The credit would stay in place through 2007.

The proposal also would give companies a new and simpler method for calculating the credit.