WASHINGTON (Reuters) - The research and development tax credit, one of the most ubiquitous U.S. corporate tax breaks, could become permanent for the first time, under a bill expected to be approved next week by the Republican-controlled House of Representatives.
However, analysts said the measure was likely to stall in the Democrat-controlled Senate, where even some Republicans who support the R&D credit’s overall purpose have said that the House legislation should not proceed.
If made permanent, the R&D credit would cost U.S. taxpayers $155.5 billion over 10 years. The House bill does not include a proposal for a new revenue source to offset the credit’s cost, meaning it would increase the federal budget deficit.
The R&D credit is one of many temporary U.S. tax laws, known as “extenders,” that are routinely renewed by Congress. It has been extended 15 times since it was enacted in 1981. It technically expired at the end of 2013.
In an interview on Friday, Republican Senator Charles Grassley said he does not support the House bill because it singles out the R&D credit for special treatment.
“Keep R&D with the other (extenders) for one more year ... It seems to be the locomotive that brings the others along,” said Grassley, who is pushing for an expensive wind energy tax credit to get renewed this year.
With mid-term congressional elections in November, House members are eyeing the R&D credit bill as a chance to win support from the business community, said Chris Krueger, a policy analyst at Guggenheim Partners.
“It probably passes” in the House, Krueger said. But in the Senate, “it’s not really going anywhere.”
Separately on Friday in another tax-related matter, House Republicans called on the U.S. Justice Department to appoint a special counsel to investigate the Internal Revenue Service’s alleged targeting of tax-exempt groups.
Next week, the House is also scheduled to vote on a contempt-of-Congress resolution against Lois Lerner, former IRS director of tax-exempt organizations. She has refused to answer Republicans’ questions about her role in alleged IRS targeting of conservative groups. She has said she did nothing wrong.
Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Diane Craft