Business executives: R&D credit frustrates

In recent weeks, business executives have told the House tax-writing committee that, because the credit has been reauthorized in fits and starts, their companies have been unable to truly plan on using it. In all, the R&D credit has been reupped 14 times since it was created some 30 years ago.

But with that in mind, other top policymakers, including the Obama administration, have pushed for an opposite outcome — making the credit permanent. For their part, a bipartisan group of House lawmakers, including some Ways and Means members, have introduced legislation to make the credit permanent.

At Thursday’s hearings, executives from Nestle and France’s Dassault Falcon Jet, as well as from business interest groups, joined the call for decreasing corporate tax rates.

Nancy McLernon, the chief executive of the Organization for International Investment, also suggested to the subcommittee on Select Revenue Measures that the IRS has become too eager to investigate how companies use the R&D credit.

“I think the IRS has sort of hijacked it,” McLernon said.

Claude Draillard of Dassault added that it is not always clear what the tax break can be used for, noting that his company has at times incorrectly thought it could claim the credit.

“Our main concern is the definition of R&D,” Draillard said. “Development is poorly defined in the US tax code.”

For his part, Alexander Spitzer of Nestle – who said his company relied more on R&D than other food companies – said officials should consider giving government incentives for research and development outside of the tax code.

“It does create a real problem in trying to actually take advantage of the things the government wants to give us to promote businesses,” Spitzer said of the current credit.