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.
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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.
