Newly introduced legislation would cut business taxes by more than half for companies that manufacture patented products in the U.S.
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While America leads the world in patent-protected products, the current Tax Code fails to reflect the challenges of a competitive global economy, especially as it relates to domestic manufacturing.
Reps. Allyson Schwartz, D-Pa., and Charles Boustany, R-La., are seeking to change this by introducing the Manufacturing American Innovation Act.
The bipartisan legislation reduces business taxes by more than half, to a 10 percent rate, for companies that manufacture patented products in the U.S. The plan would lead to both U.S. and foreign companies bringing jobs back to the United States, as well as the creation of new jobs, Schwartz and Boustany said Thursday.
“It’s time that we think differently about how to ensure America can compete in a challenging 21st century global economy,” Schwartz said. “We should start by mixing the old—America’s might in manufacturing—with the new: America’s might in innovation."
The Act provides a 10 percent tax rate on the sale of qualifying patented products by American businesses. In order for a company to qualify, it must have a patent approved by the U.S. Patent and Trademark Office. To promote exports to other countries, the company must have a similar patent from that foreign country. In addition, a substantial portion of the patents granted to develop the product must be the result of research and development performed in America.
“From its earliest days, America has encouraged and rewarded innovation with success,” Boustany said. “As the global economy continues to grow, the emergence of tools such as ‘patent boxes’ seek to drive domestic research and development while creating cutting-edge technologies. Aimed to retain home-grown innovation, these tools allow for countries to promote domestic talent and incentivize companies to expand. America should look toward engaging in this practice as well. This tax rate reduction will lead to job creation across the country in sectors ranging from life-saving medical technology development, to next-generation energy technologies.”
Companies like biotech pharmaceuticals maker Biogen Idec see advantages in the proposed legislation. “This legislation takes an important step towards making the U.S. corporate tax system globally competitive, and will drive domestic job growth in research and development and high-tech manufacturing,” said Lynne Sullivan, vice president of tax at Biogen Idec. “We look forward to continuing to work with Representatives Schwartz and Boustany, as well as others in Congress, to refine this proposal to ensure corporate tax reform helps drive innovation and U.S. jobs growth.”