In my 40-plus years as a public servant for Missouri, promoting economic development and creating an environment where Missouri businesses could thrive were always among my chief policy goals. Unfortunately, a recent report that listed Missouri as only the 31st best state for American businesses proves we have more work to do.
Missourians are resilient, hardworking and innovative; by working together on the right policy solutions and by utilizing the tools currently available to our businesses, we can create a more vibrant economy.
One tool Missouri businesses can use now to make their companies more competitive is a powerful, wage-based federal incentive that is already in place to reward you for not only keeping and creating jobs in the state, but also in the United States. This government incentive delivers real results, as one Missouri-based system integration company that received more than $669,000 in federal tax credits for conducting their daily activities found. These savings allowed the company to reinvest significantly in their business, purchase new equipment, enhance their services and increase their workforce.
While the Research & Development Tax Credit is poorly named, the federal government has set aside $10 billion in annual tax savings for U.S. businesses to claim this incentive. Think of it more as a development credit put in place to strengthen the U.S. economy and help companies keep employees in house, remain competitive against foreign competition, and finance their investments in technology and innovation.
If companies have looked into this before, but were unsure if they qualified, there have been numerous steps taken in recent years to expand the credit. For example, in December, Congress passed a bill that not only made the credit permanent but expanded it to scores of small and mid-sized businesses and made it available to startups for the first time.
The goal of the federal R&D Tax Credit is to reward companies for making technical improvements to their products or processes, meaning it can potentially be claimed by businesses as diverse as manufacturers, software developers, technology firms, aerospace companies and food processors to name a few. If any Missouri business has taken steps to enhance its products or processes, through work done on the factory floor or behind a computer, the research credit can offer a significant opportunity for reinvestment. Even though the R&D Tax Credit is among the most valuable tax incentives available to U.S. businesses, it is greatly under-utilized, with only an estimated 5 percent to 10 percent of eligible companies actually claiming this incentive.
Additionally, if enough state businesses claim the federal credit, that could create more momentum to spur Missouri policymakers to look at similar tax incentives other states have used to encourage innovation and to help companies attract technically skilled workers. Implementing tax incentive programs such as California or Indiana’s state R&D tax credits, or New York’s QETC tax incentive programs, could allow companies to employ more STEM workers and further technological advancement.
For example, a California software development firm received not only $54,676 in federal R&D credits, but also $81,872 in state R&D credits; giving this company an additional $136,548 to attract new employees and reinvest in their innovative software services.
The tools are already available for Missourians to create a better and more competitive economy, but it is up to Missouri business owners to take advantage of these opportunities. The R&D Tax Credit would be an excellent place to start.
About the Author
Kit Bond is a former Missouri Governor (1973-77, 1981-85), U.S. Senator (1985-2011) and a Senior Advisor for alliantgroup. During his tenure in the Senate, he served as Chairman for the Committee on Small Businesses and Entrepreneurship and as Vice Chairman of the Senate Intelligence Committee. Bond has earned a reputation as a skilled statesman able to build coalitions and work across party lines to achieve results. He has long been a leader in the effort to expand economic opportunities for American companies and institutions in the global economy. Born and raised in Missouri, Bond graduated Cum Laude from the Woodrow Wilson School of Public and International Affairs at Princeton University and received his law degree from the University of Virginia.