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September 22, 2004, at 4:45 p.m. |
The R&D credit has always been incremental in nature, providing a credit for qualified R&D expenses exceeding some base amount. Originally, the base amount was the average of the previous three years’ R&D expenses (i.e., a moving average). After heavy criticism that the credit’s incentive effects were largely offset in the following three years, Congress substituted the moving average base with a fixed-base as part of the Omnibus Budget Reconciliation Act of 1989. This study examines the impact of this structural change on the number of firms that are eligible for the credit and the type of firms that are eligible for the credit. In addition, we examine the incentive effect of the R&D tax credit for firms that qualified for the credit, and whether the incentive effect changed after the implementation of OBRA89. Using data from 1981-1994, we find overall firm eligibility declined after OBRA89, but increased for firms belonging to high- tech industries, relative to firms belonging to other industries. Fixed-effects regressions that control for various non-tax factors indicate that median R&D intensity increased approximately 11.0 (5.4) percent from 1986-1989 to 1990-1994, producing credit induced additional spending by high-tech (other) firms of $3.54 ($1.68) per revenue-dollar forgone. Overall this translates into an estimate of $2.40 of additional R&D spending per revenue dollar forgone. Dr. Sanjay Gupta is a Dean's Council of 100 Distinguished Scholar and the director of ASU's Master of Accountancy & Information Systems (MAIS) and Master of Taxation (MTax) programs. He teaches in those programs as well as the MBA and doctoral programs. Professor Gupta earned his Bachelor of Commerce (B.Com.) in accounting and auditing from Bombay University (India), Bachelor of Laws (LLB) from Calcutta University (India), a Master of Accountancy from Bowling Green State University (Ohio), and his Ph.D. in business with an emphasis in taxation from Michigan State University. He also holds professional certifications as a CPA (Ohio) and as an associate member of the Institute of Company Secretaries of India. He is currently engaged in research on the role of implicit taxes in corporate tax burdens, the corporate response to changes in the structure of the R&D tax credit, and several projects on the effects of state corporate income tax policies. His research has been published in the Journal of Accounting & Economics, National Tax Journal, Accounting Review, Journal of the American Taxation Association, Journal of Law & Economics, Journal of Accounting and Public Policy, and Tax Notes. In 2000 he received the Arizona Society of CPAs Accounting Education Innovation Award, and in 2004 the Society's Outstanding Educator Award. Dr. Gupta is married to Kiran and they have two daughters, Priyanka and Neha, and he enjoys music, movies, tennis and traveling. |
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The colloquium is sponsored by the L.L. Bean/Lee Surace Endowed Chair in Accounting. ________________________________________________ USM Professor Jeffrey Gramlich was appointed the first L.L. Bean/Lee Surace Chair in Accounting in the USM School of Business in 2003. His appointment was made possible by a $1 million gift from L.L. Bean, Inc., its board chair, Leon Gorman, his wife Lisa, Jim and Maureen Gorman, and Tom Gorman, who established the chair in memory of L.L. Bean CFO Lee Surace '73, '81, who died in March of 2001. Surace was chair of the USM School of Business' Advisory Council and was a frequent guest lecturer. The USM School of Business is accredited by the prestigious AACSB International. For students seeking the finest education and companies seeking the highest caliber talent, partnership, and educational opportunities, AACSB International accreditation is one of the most important affirmations of sustained quality in the word. For more information about School of Business programs, call 780-4020. |
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