With the US Congress having completed its work for 2007 without reauthorizing the R&D tax credit, thousands of companies can expect tax increases in 2008. The R&D Credit Coalition estimates that the credit is equal to an average of six cents for every R&D dollar. Eleven thousand companies currently claim the credit, which saved businesses approximately $8.1 billion in taxes over the last five years, according to the Joint Committee on Taxation. Although members of Congress have stated that they will address the tax credit this year, some observers suspect that election-year politics may stymie efforts to get the credit passed. As a result, companies cannot assume the credit will be in place for financial reporting purposes, which could affect companies’ earnings as early as the first-quarter reporting period.

Source: Bloomberg