The First Generation of the R&D Tax Credit
The R&D Tax Credit was first codified in 1981. Here are the bills that were ultimately passed by Congress and signed by the President:
- The Economic Recovery Tax Act of 1981 adopted the first federal R&D Tax Credit, which was supposed to remain in effect from 7/1/81 through 12/31/85.
- The Tax Reform Act of 1986 extended the R&D Credit through 12/31/88.
- The Technical and Miscellaneous Revenue Act of 1988 extended the R&D Tax Credits through 12/31/89.
- The Omnibus Budget Reconciliation Act of 1989 extended the R&D Credit to 12/31/90.
- The Revenue Reconciliation Act of 1989 clarified that research expenses are deductible under section 174 only to the extent that they are reasonable under the circumstances.
- Under the Omnibus Budget Reconciliation Act of 1990, Congress extended the R&D Credit through 12/31/91.
- The Tax Extension Act of 1991 extended the R&D Credit to 6/30/92.
In 1992, Congress passed two bills that proposed extended the R&D Tax Credit again. However, the President vetoed both, and the Credit expired on 6/30/92. - Fortunately, the Omnibus Budget Reconciliation Act of 1993 extended the R&D Credit retroactively from 7/1/92 through 6/30/95.
- By 6/30/95, lack of action in Congress let to the R&D Credit expiring yet again.
- Eventually, the Small Business Job Protection Act of 1996 retroactively reinstated the R&D Credit from 7/1/96, to 5/31/97. This left the first permanent one-year gap in the Credit’s availability since its original inception on 7/1/81.
- On 6/1/97, the R&D Credit expired again. However, the Taxpayer Relief Act of 1997 extended the R&D Credit retroactively from 6/1/97 to 6/30/98.
- The Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1998 pushed the Credit’s expiration to 6/30/99.
- In late 1999, the Ticket to Work and Work Incentives Improvement Act of 1999 further extended the R&D Credit retroactively from 7/1/99 to 6/30/04.
