Ongoing Coverage:
Economy
2:40 pm
Thu January 3, 2013

Research Credit Extension A Double-Edged Sword: Brookings

Tuesday’s fiscal cliff package included extensions to a range of business-related tax credits, including one aimed at supporting research and development. Although Rochester, Buffalo and Syracuse have some of the most active R&D economies in the country, experts say the deal could be a double-edged sword for upstate. 

The research credit will cover development already done by companies in 2012, as well as activity this year.

Richard Shearer, policy research analyst at the Brookings Institution in Washington, says the close-ended nature of the extension creates uncertainty for companies investing in long term research projects, and this could result in lower levels of investment over time.

“In 2012, these three upstate economies of Buffalo, Rochester and Syracuse had over a third more scientific research and development research activity than the United States average. Companies there do probably take advantage of the rebate they get from the government.”

Shearer says the one-year extension should still be viewed as a win for the upstate area because it can expand the economic activity already occurring.

There is general bi-partisan support to make the R and D tax credit permanent if the U.S wants to remain a global competitor in the field. It was first introduced in 1981 and has previously been extended 13 times.