WASHINGTON Lawmakers late Thursday (Oct. 28) worked out an agreement to extend a number of expiring tax breaks, including the research and development tax credit.
The U.S. high-tech industry has been pushing for a five-year extension of the tax break, which had expired on June 30, but the measure had been caught up for months in budget haggling.
The deal worked out yesterday by members of the Senate Finance Committee would extend the R&D tax credit along with other tax breaks worth $8.5 billion through Dec. 31, 2000.
Senate Majority Leader Trent Lott (R-Miss.) said Democratic lawmakers had dropped their objections to the measure, which cleared the way for passage.
The extension of the tax credit follows the announcement by the Department of Commerce that U.S. corporate R&D spending jumped nearly 9 percent in 1997, led by large increases in spending for electronics and information technology research, according to figures compiled by Commerce and the National Science Foundation (NSF).
Total 1997 spending on research and development by the top 500 U.S. corporations was $111 billion, a $9 billion increase over 1996.
Electronics and information, the largest of eight R&D sectors examined in the survey, led the way in 1997 with spending totaling $45.8 billion, a 15.2 percent increase. The electronics sector ranked second behind medical R&D for the highest R&D spending-to-sales ratio at 7 percent, a 0.6 percent rise over the previous year.
The government report did not distinguish between different types of research, but did find that the surge in R&D spending is being fueled by technology development efforts that have been rising steadily through the 1990s.
At the same time, spending for basic research continued to drop in 1997, the government survey found, declining substantially by the mid-90s and recovering to only 1991 spending levels in real terms by 1997. The shortfall has prompted Congress to increase government funding for basic research.
More recent figures on U.S. R&D spending compiled by NSF's Division of Science Resource Studies confirm the upward trend in corporate research spending. The agency projected in early October that total annual R&D spending in the United States will rise to $247 billion in 1999, an 8.8. percent increase over the $227 billion estimated for 1998.
"R&D as a proportion of the gross domestic product has risen sharply since 1994," the NSF report found. R&D as a share of GDP is projected to reach 2.79 percent in 1999, a total close to post-war highs recorded in the mid-1960s.
Industry is expected to perform more than 75 percent of U.S. research and development in 1999, NSF said.