President Obama is proposing to expand and simplify the permanent research and experimentation tax credit, increasing the rate of the simpler form of the credit 17 percent to simplify the process for businesses.

Obama also wants to make the research and experimentation credit permanent, and expand it by about 20 percent, according to a fact sheet provided on the White House Web site.

“This would be the largest increase in the credit in its history,” said the document. “In total, the expanded credit would devote about $100 billion over the next 10 years to leverage additional R&D investment. Like the current credit, eligible research and experimentation needs to be performed in the United States, keeping high-skilled jobs in America.”

Currently, businesses must choose between using a complex formula for calculating their R&E credit that provides a 20 percent credit rate for investments over a certain base and a much simpler one that provides a 14 percent credit in excess of a base amount, the White House pointed out. The outdated and complex formula takes into account the amount of a business’s R&D expenses from 1984 to 1988. The Obama administration wants to increase the rate of the simpler credit to 17 percent, which would make it more attractive and simplify tax filing for businesses. “Simplifying the credit in this manner will increase its salience and impact on encouraging investment in research in the United States,” said the White House.

He is also backing the extension of middle-class tax cuts, but not for couples earning more than $250,000 or individuals earning over $200,000 a year. During a speech Wednesday in Cleveland, Obama defended his decision to let the Bush tax cuts expire for couples earning over $250,000.

"We should not hold middle class tax cuts hostage any longer," he said. "We are ready, this week, to give tax cuts to every American making $250,000 or less. For any income over this amount, the tax rates would go back to what they were under President Clinton. This isn't to punish folks who are better off - it's because we can't afford the $700 billion price tag."

Obama also called Wednesday for jump-starting private investment and job creation by allowing companies to fully deduct qualified capital investments through the end of 2011.

“This measure would provide tax incentives for businesses to invest in the United States when our economy needs it most, which should both help create jobs now and expand the capital stock to support future growth,” said another fact sheet on the White House site. “This unprecedented step would be the largest temporary investment incentive in American history.”

The move would allow businesses to expense 100 percent of their capital investments through the end of 2011. Businesses in 2008 and 2009 were allowed to depreciate 50 percent of qualified investments up-front, and the current small-business bill would extend this through 2010. The Obama administration proposes to expand this benefit for qualified investments to 100 percent expensing through the end of 2011. In order to begin encouraging additional investment immediately and to avoid capital waiting on the sidelines, the benefit would be retroactive to Sept. 8, 2010.

In addition, Obama is calling for infrastructure investment to rebuild 150,000 miles of roads, 4,000 miles of rail and 150 miles of runway. He also wants to make permanent the American Opportunity Tax Credit for college tuition, which provides $10,000 in tuition relief for each child going to four years of college. In his speech, he also called for extending the soon-to-expire Child Tax Credit.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access