On July 31, Senator Tom Carper (D-DE) introduced S.2715, the “Competitiveness and Opportunity by Modernizing and Permanently Extending the Tax Credit for Experimentation” (COMPETE) Act of 2014. 

Benefits of the COMPETE Act

  • Make the R&E tax credit permanent;
  • Strengthen credit by increasing the credit rate to 25 percent of qualifying research investments, while also simplifying the credit in order to remove administrative barriers that companies are facing with the current credit;
  • Expand the reach of the credit by allowing firms undertaking groundbreaking contract-funded research projects in collaboration with other companies to claim a portion of the current R&D credit-opening access to research tax incentives to new sectors of the economy, such as clinical research;
  • Direct private capital toward small, profitable start-ups by enabling investors in small research companies to claim the R&D credit; and
  • Provide a targeted, limited bonus R&D credit for transformative research projects that are most likely to boost long-term economic growth.

“We must strengthen and improve incentives to invest in revolutionary, high-value research, if we want our country continue to lead the way in global innovation,” Sen. Carper said. Private investment in R&D is the lifeblood of innovation”.

The benefit to society from research and development is far greater than the return that individual companies receive for their innovations. In fact, some studies have concluded that the average private rate of return on R&D investment is roughly half of the average return to the broader economy. That is why the R&D credit needs to be improved, so that companies have sufficient incentive to undertake research projects. The COMPETE Act will help Congress do its part to foster an environment where the private sector is encouraged to invest in innovative products and services that enhance our daily lives, grow our economy, and create jobs.

The research credit expired at the end of 2013. Earlier this year, the House passed H.R. 4438, the “American Research and Competitiveness Act of 2014,” which would expand the credit and make it permanent. The Administration indicated at the time that it would veto the bill if it was passed without offsets, and the COMPETE Act, in current form, may face a similar challenge.

For questions on this important new initiative, contact a Barnes Dennig representative today.