STEM Education Trends and the R&D Tax Credit

By and


The Great Recession has shifted growing areas our economy towards science, technology, engineering and mathematics (STEM). With this shift comes new opportunities for companies to invest in research and development activities and take advantage of the Research and Development Tax Credit.

The R&D Tax Credit

The Research and Experimentation Tax Credit, or the R&D Tax Credit, enacted in 1981 and part of Internal Revenue Code Section 41 - allows a credit of 13% of eligible spending for new and improved products and processes. Although the credit expired December 31, 2013 the consensus is that it will most likely either be extended or made permanent.¹

"The Skills Gap"

The skills gap is an employment and prosperity problem that strongly suggests that America currently struggles to fill top positions in science, technology, engineering, and mathematics. It is reported that the U.S. has over 4 million unfilled jobs due to lacking desired skill-levels in STEM-related fields - a number partly supported by the Brookings Institute's often-cited findings from a study of aggregated lists of job openings.

The result has been a strong push towards reforming education in the 21st century; with universities, multiple levels of U.S. government and commercial businesses, and foundations pushing forward to change education.

STEM R&D Opportunities

The White House and the Department of Education have already begun initiatives to address the problem from the public end:

  • STEM Innovation Networks - $150 million for local educational agencies.
  • Effective Teaching and Learning: STEM - $150 million for funding partnerships between local educational agency and institutions of higher learning.
  • STEM Teacher Pathways - $80 million for recruiting and training 100,000 excellent STEM teachers.
  • STEM Master Teacher Corps - $35 million for the creation of a corps of leaders and educators to improve STEM education.
  • STEM Virtual Learning Network - $5 million: for creating a primarily online professional learning community.

Many state universities have created or subscribe to a multitude of STEM initiatives. For example, State University of New York at Stony Brook has 22 STEM-related programs to help develop the quality and diversity of STEM programs. Many programs form partnerships between high schools and colleges to enrich the education of young people to drive them towards and support them in achieving more in STEM fields. They also provide services like scholarships, academic and career advisement, and research and internship opportunities.

These programs include S-STEM, which provides scholarships to students in engineering and applied sciences; STEP, which provides funding for underrepresented and income-eligible high school students for entry into STEM programs; and C-STEP, a collegiate program which provides funding to increase the number of underrepresented minorities and income eligible students pursuing degrees in STEM fields;  These programs are funded from different levels of government programs as well as commercial programs.

STEM programs that foster diversity and access to collegiate STEM programs while providing greater access to resources and tools for education have proven successful at increasing enrollment, grade-point averages, and access to graduate programs in STEM fields. Through advancing access and increasing performance in these fields, innovation at the university and commercial level are both expected to increase, driving new products, markets, and advancements.

Over time - the increased focus on STEM education should result in an educated population that is better prepared for innovation and will make greater use of the R&D Tax Credit.

¹ On December 18, 2015, President Obama signed the PATH Act, making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax for companies with revenue below $50MM and, startup businesses can obtain up to $250,000 per year in payroll tax cash rebates.

Article Citation List