Research & development tax credit

Company information

HP strongly supports legislation that would enhance and extend the research and development (R&D) tax credit.  R&D is the lifeblood of the U.S. economy. The R&D tax credit has a proven history of encouraging investments in research and promoting U.S.-based high-wage job growth. Billions of dollars are spent on R&D in the U.S. each year, including over $3 billion by HP, and it is essential for companies to know if there will be a tax credit for the investment they make.

Economists estimate that 50 percent of productivity growth comes from innovation. However, federal support for research has declined, from 1.25 percent of GDP in 1985 to just 0.75 percent today.  Foreign-based R&D spending has grown significantly faster and as a result, powerful global economic rivals have emerged.

• Competing countries with permanent tax credits are drawing an increasing share of Research & Development spending.  According to Science magazine, over 100 global companies have established R&D centers in India in the past 5 years where they can receive a 100 percent deduction of R&D costs for 10 years.
• Global competition for R&D investment is increasing. Companies that spend on R&D in China can receive a 150 percent deduction if R&D spending increases 10 percent over the previous year.
• The R&D tax credit is limited to U.S. based R&D research, and 90 percent of the benefits of the credit are attributable to salaries of workers performing U.S. based research.

Enactment of an enhanced R&D tax credit, such as the Alternative Simplified Credit, would provide a significant incentive to HP to make additional R&D investments and support American innovation.

In April 2008, HP welcomed the introduction of Senator Susan Collin’s bill which extends the R&D tax credit allowing companies to institute plans on investing in research. The strengthening of the R&D tax credit will make the United States a significantly more attractive market for R&D spending, keeping America more competitive in comparison to other countries.

	Additional information