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INDUSTRY WELCOMES STOPGAP MEASURE TO AID DOMESTIC R&D

 INDUSTRY WELCOMES STOPGAP MEASURE TO AID DOMESTIC R&D
 WASHINGTON, Nov. 26 /PRNewswire/ -- Following yesterday evening's


House and Senate action to extend the Research and Development Tax Credit and moratorium on Section 861-8 of the tax code, John L. Pickitt, president of the Computer and Business Equipment Manufacturers Association (CBEMA) stated: "The extension is a very welcome measure, albeit a stopgap. Truly meaningful R&D tax policies are not temporary, such as the current Credit, they are on-going. We seek a permanent Tax Credit, which would acknowledge that R&D undertakings generally are multi-year projects linked to enormous risks for a company; such a Credit would be structured to offer long-term incentives."
 The House Ways and Means and Senate Finance Committees voted to extend the current R&D Tax Credit and the moratorium on Section 861 for six months beyond their year-end expiration. The current Credit is designed to encourage annual increases in corporate R&D spending. The moratorium, an action taken repeatedly by Congress over the past decade, blocks imposition of a rule requiring international companies to attribute part of their U.S. R&D to their foreign source income.
 Since the Section 861 regulation only applies to foreign source income it only penalizes companies that export their products from the United States into foreign markets. Companies that export their products and still accomplish their R&D and keep their high technology jobs in the United States are therefore faced with the following conditions:
 -- Foreign countries do not permit U.S. companies to deduct U.S. expenses from the foreign country's tax bill. Thus, the allocation forced by the U.S. government is worthless for tax purposes overseas. But, if the U.S. company moves its R&D overseas, it can deduct those R&D expenses from its foreign tax bill, therefore, foreign countries provide an incentive for U.S. firms to accomplish their R&D overseas.
 To counter the situation, U.S. tax regulations should provide a positive incentive to perform more R&D in the United States the way tax laws of our major trading partners draw industry to accomplish R&D in their countries.
 "The bottom-line effect," noted Pickitt, "is that Section 861 encourages multi-national companies to move R&D sites out of the U.S. to other countries where they can claim their expenses as business deductions."
 Both the House and Senate voted to finance the extension of the Credit and moratorium by requiring companies to increase payments of their estimated income tax over the next five years up to 95 percent -- rather than the current 90 percent.
 -0- 11/26/91
 /CONTACT: Maryann Karinch of the Computer and Business Equipment Manufacturers Association, 202-626-5725/ CO: Computer and Business Equipment Manufacturers Association ST: District of Columbia IN: CPR SU:


DC -- DC006 -- 7212 11/26/91 10:33 EST
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Publication:PR Newswire
Date:Nov 26, 1991
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