Statements on Introduced Bills and Joint Resolutionsby Senator Christopher A. Coons
Posted on 2013-01-31
COONS (for himself, Mr. Enzi, Mr. Schumer, Mr. Rubio, Mr.
Blunt, Ms. Stabenow, and Mr. Moran):
S. 193. A bill to amend the Internal Revenue Code of 1986 to provide
for startup businesses to use a portion of the research and development
credit to offset payroll taxes; to the Committee on Finance.
Mr. COONS. Mr. President, each and every day the folks I represent in Delaware ask me why doesn't the Senate, why doesn't the Congress focus on jobs and focus on getting our economy moving again instead of what seem to be endless partisan struggles over secondary issues.
What I wanted to speak to was a bipartisan bill, which I am introducing, which focuses on how to help create innovation-focused jobs again in the United States.
As you know all too well, our economic recovery has been slower than we had hoped. Although it has been steady, there are still far too many Americans out of work in my home State of Delaware, more than 30,000, but we are building our way back.
The task before us is to think not just about an immediate economic crisis but to take a breath and, instead, focus strategically on the long-term future, to take account of what kind of an economy we want to build for our children and our grandchildren for the America of today and tomorrow.
The engine of our Nation's greatest economic successes has always been innovation. From the light bulb to the search engine, American inventors and innovators, those who have taken risks and started companies, have created jobs by the thousands and changed lives by the millions. Before new ideas scaled to market and reach out to change the world, they first have to start in a lab or garage.
I know from my own 8 years in the private sector, my work for a materials-based science company in Delaware, the products we take for granted that are today household items in the world marketplace, often started as just the sliver of an idea, an idea that [[Page S440]] needed refining through determined investment in research and development.
If we want to fuel the next generation of innovation, if we want to lay a strong foundation for job creation through invention, I think we have to start by supporting research and development. Research and development is the lifeblood of great American companies and is what will allow us to make things in this country and to be a leading manufacturer in the world and deserves focused investment.
If we look at it, nearly 70 percent of America's private sector R&D and about 90 percent our patents are actually in manufacturing, a sector that deserves particular attention. Revitalizing American manufacturing will create high-quality, middle-class jobs for the long run, but doing so depends on our ability to take great ideas and turn them into marketable products or improvements in manufacturing processes that can and will result in things being made right here in America. Startups and small businesses all across this country are already taking chances to do just that, and I think it is time for all of us in Congress to take a chance on them.
Last year, I worked in a bipartisan way with Senator Enzi, Senator Rubio, Senator Schumer, and others to introduce a bill that would make startup companies eligible for the existing research and development or R&D tax credit. I am proud to reintroduce that legislation as the Startup Innovation Credit Act of 2013 with our original cosponsors, as well as Senator Blunt, Senator Stabenow, and Senator Moran.
This broad bipartisan support suggests a bill whose time has come. Although we represent, among the cosponsors, very different parts of our country, very different backgrounds, all of us know that to strengthen our economy we have to support innovation and entrepreneurship. Each of us is committed to fostering the kind of environment which supports the private sector and which turns ideas into innovations, innovations into products, and products into companies that help create good jobs.
Under current policy, one way we do that federally is by supporting research and development through the existing R&D tax credit. Companies that invest in R&D generate new products, which sparks new industries with spillover benefits for all kinds of sectors. That is why there has long been strong bipartisan support for the existing R&D tax credit. By all accounts it is working. The R&D has helped tens of thousands of American companies succeed and create jobs.
But there is a critical gap in the existing R&D credit. It isn't available to startups because they are not yet profitable, and thus they don't have an income tax liability against which to take a credit. In fact, more than half the R&D credit last year was taken by companies with revenue over $1 billion, well-established, profitable companies. There is nothing wrong with that; it is just not targeting these tax expenditures toward the sector of our economy that is taking the greatest risk and in some ways has the greatest potential.
This gaping hole in our policy around R&D can be fixed with a relatively simple tweak. I have been working on finding this solution since I first came here. In fact, the very first bill I introduced included an expanded version of the R&D credit.
Today, we take another step toward seeing this solution implemented with the reintroduction of this bipartisan Startup Innovation Credit Act. It says in order to spur research and development, we should allow companies to claim the R&D tax credit against their employment taxes, against their W-2 instead of their income tax liability. That opens this credit to new companies that don't yet have an income tax liability.
There lots of companies we could choose. Let me pick one example, DeNovix, a small company based in my home State of Delaware that is developing instrumentation for bioresearch with a team that includes molecular biologists and engineering professionals.
The managing director of DeNovix, Fred Kielhorn, said the legislation we are introducing would help that company to offset some of the costs of bringing new, innovative, technology-based products to market and for that this bill earned his strong support.
He is just one of many. There is a remarkable list of outside groups, companies, and organizations that have supported it. I will mention a few: Silicon Valley Leadership Group; Revolution, led by Steve Case of AOL; Delaware Chamber of Commerce; the Association for Manufacturing Technology Policy; American Small Manufacturers Coalition; and BIO, a national organization that supports companies doing research and development in the biotechnology space.
Supporting small innovative companies in critical early stages of research and development, in my view could unleash untold innovations for growth and create new jobs for America. At its heart, today's legislation is a jobs bill.
Between 1980 and 2005, all net new jobs created in the United States were created by firms 5 years old or less, all of them, about 40 million jobs over those 25 years. This credit is specifically designed toward those new, young, risk-taking firms. It does not pick winners and losers, it doesn't focus on a specific area of the economy or technology, but instead supports all private sector investments, judgments, and decisions that prioritize investment in research and development. Cash in the pocket of small startup companies, such as this tax credit, can make a real difference, especially with financing and credit so hard to come by.
It was once said the States are the laboratory of democracy. In fact, that is where this idea has come from. Credits just like this have been done before in Iowa, Arizona, New York, Connecticut, Pennsylvania, and they have been game changers, helping companies get off the ground and keep their doors open during those demanding first years where they invest and spend so much on hiring and growth.
We know this can work. We also know more than half our current Fortune 500 companies were launched during a recession or a bear market. The next great American company that may redefine whole categories that may be known worldwide for its products, its services, may be starting right now in a garage or lab somewhere in this great country. It is an exciting prospect.
In fact, we are depending on our inventors, our innovators, and our small business owners to help innovate our way to a stronger economy and fuel a new generation of job creation. Let's give them the support they need and they deserve at a time when they need it the most.
I am grateful for all the cosponsors of this bipartisan legislation in this Chamber and as well to Congressman Gerlach of Pennsylvania and Congressman Kind of Wisconsin, who will introduce the House version of this legislation next week.
Rather than shutting our startups out of the R&D tax credit, let's open the doors to these innovators and see what they can do. I am confident they will surprise us yet again with how high they can reach and how far they can go. I think this is a wise investment in opening the doors of innovation, invention, and job creation for our future.
______ By Mr. DURBIN (for himself, Mr. Lautenberg, and Mr. Blumenthal): S. 194. A bill to amend the Internal Revenue Code of 1986 to provide tax rate parity among all tobacco products, and for other purposes; to the Committee on Finance.