Survey Shows Tax and Financial Executives Favor R&D Credit Simplification Proposed by Senate.

Four out of five would consider changing to alternative simplified method if Congress enacts pending Senate legislation

CHICAGO -- A majority of companies (at least 60%) would either use or consider using the alternative simplified method to claim their research credit if Congress enacts legislation passed by the Senate on September 23, according to a national survey of the companies' tax and financial executives conducted by Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations.

Sens. Max Baucus, D-Mont., and Chuck Grassley, R-Iowa, authored the bipartisan legislation now approved by the full Senate that would raise the rate for the alternative simplified credit to 14 percent. The alternative simplified credit method currently allows taxpayers to forego the traditional research credit in favor of a simplified version equal to 12 percent of qualified research expenses exceeding half of their average qualified research expenses over last 3 years.

"The Senate proposal would represent one of the more significant recent changes to the research credit", said Mark Andrus, a Grant Thornton Tax partner and partner-in-charge of R&D credit issues. "The numbers show there's a lot of support for it."

If the legislation is enacted, 35 percent of respondents said they would definitely switch to the simplified method. Only 17 percent would rule it out. If the simplified credit was raised to 16 percent, which was proposed in earlier Grassley and Baucus bills, then over 46 percent of respondents would switch and less than 9 percent would rule it out.

Those surveyed indicated they were most interested in the simplified version for its simplicity rather than its potential for more tax savings or audit protection. Over 86 percent said they had moderate or heavy interest in a simpler method for determining the credit.

Do you use an alternative method for calculating the R&D credit?

Alternative incremental credit method  >        >
11.1
%






Alternative simplified credit method   >        >
28.1
%






Don't use                              >        >
41.7
%






Don't know                             >        >
19.1
%

If you do not use an alternative method, would you consider switching to the alternative simplified credit (ASC) method if it were expanded? (The current ASC percentage is 12%. There are legislative proposals to change the ASC percentage to 14% or 16 %) Would you switch if:

                               >        >  Ye                No  >        >
Don't know



The credit percentage was 14%  >        >  34     %              >  17.0  >
%

48.4
%
The credit percentage was 16%  >        >  46     %              >   8.7  >
%

45.0
%

Considering potential drivers of your interest in an expanded alternative simplified credit (ASC)- please rate your interest level in the following:

Belief that expanded ASC would provide you a larger credit?

No interest        >        >
8.5
%






Little interest    >        >
8.5
%






Moderate interest  >        >
46.0
%






Heavy interest     >        >
37.0
%

Desire for a simpler method of determining the credit?

No interest        >        >
5.8
%






Little interest    >        >
7.6
%






Moderate interest  >        >
30.6
%






Heavy interest     >        >
56.0
%

Concerns about the effect Tier 1 examination techniques may have on your base year calculations?

No interest        >        >
11.0
%






Little interest    >        >
17.8
%






Moderate interest  >        >
39.6
%






Heavy interest     >        >
31.6
%

About the survey

Grant Thornton LLP conducted the national survey from July 10 through August 31, 2008, with 314 CEOs, CFOs, comptrollers, tax executives, or other tax staff.

About Grant Thornton LLP

The people in the independent firms of Grant Thornton International Ltd provide personalized attention and the highest quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity.

In the U.S., visit Grant Thornton LLP at www.GrantThornton.com.