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Amendment Seeks to Broaden R&D Tax Credit

Posted by Brad MacDougall on Jun 30, 2014 6:49:03 AM

An amendment filed Saturday to a proposed Senate economic development bill would broaden existing tax incentives for companies to conduct research and development in the Bay State.

StateHouse-resized-600The amendment, filed by Senator Michael Rodrigues, D-Westport, would allow employers a credit equal to 10 of any research expenses that exceed a base amount calculated over a period of three years.

Associated Industries of Massachusetts supports the expansion and believes the changes are necessary to reverse a troubling 19.3 percent decline in R&D spending among Massachusetts employers between 2007 and 2011.

“The vast majority of research and development in Massachusetts takes place not in urban innovation districts, but in advanced manufacturing, defense and biopharma companies salted throughout the commonwealth. Expanding the R&D credit helps all of these companies produce the kind of innovation that drives the Massachusetts economy,” said John Regan, Executive Vice President of AIM.

“And we know that R&D credits work. Massachusetts enacted a set of research and development tax incentives in 1991 that were among the most advantageous in the nation. Over the next five years, R&D spending in the commonwealth increased by more than 50 percent.”

The Senate legislation, due to be debated on Tuesday, would also make investments in workforce training, entrepreneur mentorship programs, the redevelopment of polluted sites and marketing efforts designed to lure business and travelers to Massachusetts. It includes roughly $63 million in initiatives, including $10 million for the redevelopment of brownfields and $10 million for a new grant fund to support development and the creation of collaborative workspaces in so-called “Gateway Cities” outside of Boston.

AIM is still reviewing additional amendments filed over the week-end. The final Senate bill will go to a conference committee, where legislators will resolve differences with an earlier measure passed by the House of Representatives.

AIM members with significant research activity have pressed for changes to the existing R&D credit because it measures incremental R&D expenditures against a single benchmark year that is often artificially high. A company that invests a significant amount of money in R&D one year could therefore be penalized if it does not boost spending over that already high level.

A recent report from The Pioneer Institute found that overall R&D spending in Massachusetts fell 10.3 percent in the four years ending in 2011. Massachusetts fell further behind chief R&D rival California, which significantly increased its R&D market share on the strength of one of the strongest R&D credits in the nation – 15 percent.

Topics: Economic Development, Taxes

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