Recommendation

Congress should broaden and expand the R&D credit for collaborative research.

Details

The United States provides a 20 percent credit for collaborative R&D, but it only applies to energy research. Congress should eliminate the energy restriction. Research consortia, whether with companies or universities, tend to focus more on more basic and exploratory research, which have big spillovers, with many of the benefits going to other firms and society. Therefore, firms do less of this kind of research than is economically optimal. That is why a number of other countries, including Canada, Denmark, Hungary, Japan, France, Norway, Spain, and the United Kingdom have in the last decade established more generous incentives for this form of research.

Keep reading:

▪ Matthew Stepp and Robert D. Atkinson, “Creating a Collaborative R&D Tax Credit” (ITIF, June 2009), https://itif.org/publications/2011/06/09/creating-collaborative-rd-tax-credit/.