Obama Administration Opposes R&D Tax Credit Bill

May 6, 2014. The Executive Office of the President's (EOP) Office of Management and Budget (OMB) stated in a release that "the Administration strongly opposes House passage of H.R. 4438", and "If the President were presented with H.R. 4438, his senior advisors would recommend that he veto the bill."

The EOP released this statement the week the House leadership scheduled consideration of HR 4438 [LOC | WW, the "American Research and Competitiveness Act of 2014", a bill to revise and make permanent the research and development tax credit, which is codified at 26 U.S.C. § 41.

President Obama has approached the R&D tax credit as he has the issue of visas for skilled tech workers. That it, he has publicly advocated a position that wins praise from the tech sector, and then when presented with an actual bill that embodies his previously stated positions, he has opposed and worked to prevent the bill from becoming law.

On November 30, 2012, the House passed HR 6429 [LOC | WW], the "STEM Jobs Act of 2012", by a vote of 245-139. See, story titled "House Passes STEM Visas Bill" in TLJ Daily E-Mail Alert No. 2,480, December 1, 2012. That bill would have enabled aliens who obtain advanced degrees in STEM fields from US universities to obtain visas, and therefore remain in the US, and contribute to innovation and economic development. Two days before the House voted on this bill, the EOP released a statement announcing that "the Administration opposes House passage of H.R. 6429". See also, story titled "Obama Opposes STEM Visas Bill" in TLJ Daily E-Mail Alert No. 2,478, November 29, 2012.

On April 29, 2014, the House Ways and Means Committee (HWMC) held a mark up session at which it amended and approved this R&D tax credit bill. See, amendment in the nature of a substitute, and story titled "House Ways and Means Committee Approves Bill to Make R&D Tax Credit Permanent" in TLJ Daily E-Mail Alert No. 2,652, May 2, 2014.

On May 6, the House Rules Committee (HRC) adopted a closed rule for consideration of the bill. That is, no amendments can be offered during floor consideration. Also, debate will be limited to 90 minutes. The House is scheduled to consider this bill on either Wednesday, Thursday, or Friday.

Republican and Democratic Presidents, Representatives and Senators have publicly advocated making the R&D tax credit permanent for decades. Numerous such bills are introduced in each Congress. However, the Congress continues to enact mostly one year extensions. Moreover, it often allows the credit to expire, and retroactively extends it. The last extension of the R&D tax credit expired on December 31, 2013. HR 4438 is retroactive to that date.

There are reasons for this continuous series of short term and retroactive extensions. First, by keeping the credit temporary, administration and Congressional budget staff, in making revenue projections, can pretend that tax revenues will be higher. That is, setting retroactive and temporary extensions of the R&D tax credit is part of the ongoing budgetary smoke and mirrors process.

Second, by keeping the issue on the agenda, candidates for federal office, and especially incumbents, can rely upon a continuous flow of endorsements and campaign contributions from supporters of the credit.

It is highly unlikely that the 113th Congress will enact a permanent extension of the R&D tax credit. The House Republican leadership understands this. Moving this bill at this time may be in part a way to portray President Obama and the Democratic Party as opponents of the credit, economic growth, and maintaining the competitiveness of the US tech sector, going into the November 2014 Congressional elections.

(Published in TLJ Daily E-Mail Alert No. 2,655, May 7, 2014.)