BY RICHARD RUBIN
(Bloomberg) The U.S. House of Representatives voted to revive the tax credit for corporate research, expand it and make it permanent.
The 274-131 vote today follows calls to restore the credit by a coalition of companies including Texas Instruments Inc. and Eli Lilly & Co. The measure faces significant obstacles before it can become law, including a veto threat from President Barack Obama.
The research credit was first enacted in 1981. Lawmakers said the lapse-and-revive cycle of the past 33 years has prevented companies from relying on it and thwarted its incentive effect.
“Businesses can’t grow and invest when the tax code is riddled with instability and uncertainty,” Ways and Means Committee Chairman Dave Camp, a Michigan Republican, said on the House floor yesterday. “We’ve fallen far behind. Other countries are moving past the United States.”
The bill heads to the Senate, where lawmakers are taking a different approach. The differences between the House and Senate may take months to resolve.
Instead of separate votes to make individual tax benefits permanent, the Senate Finance Committee last month backed a single measure extending the research credit and dozens of other breaks through the end of 2015.
Other tax benefits in the Senate measure include the production tax credit for wind energy and a rule that lets General Electric Co., Citigroup Inc. and other companies defer U.S. taxation on overseas financing income.
That bill is scheduled to reach the Senate floor next week. There’s a “big question mark” about whether it will pass because of a dispute between Democrats and Republicans over which amendments, if any, should be allowed, said Richard Durbin of Illinois, the second-ranking Senate Democrat.
The House vote involves contradictions for each party.
Republicans, who say Democrats’ proposed extension of unemployment insurance must be offset with spending cuts elsewhere, supported the tax bill though it would add $155.5 billion to the budget deficit over the next decade. The lack of offsets was part of the Obama administration’s rationale for the veto threat.
“When you put it on the credit card, at the end of the day somebody is paying for it,” said Representative Chris Van Hollen, a Maryland Democrat. The Senate bill contains no provisions to offset its cost.
Democrats, who had supported extending the tax credit in prior years without covering its costs, voted against the bill today though a number of them cosponsored it.
The bill is H.R. 4438.