Tax credits for RoHS implementation

17 March 2008

The government relations committee of IPC - Association Connecting Electronics Industries has released a white paper titled The research and development tax credit or how your company could be losing hundreds of thousands of dollars (by not taking advantage of the R&D tax credit provisions).

The paper explains how expenses associated with the conversion to RoHS and lead-free assembly might qualify under the federal government’s research and experimentation tax credit to reduce a company’s tax obligations.

According to Fern Abrams, IPC director of government relations and environmental policy, there are two primary purposes to this white paper. “Firstly, the committee wanted to ensure that companies in our industry understood how they could be saving thousands, if not hundreds of thousands of dollars, by taking some time to document expenditures they’ve made in innovation and improvements. R&D is not limited to classic laboratory-type research as many believe, but includes process improvements such as those the industry has undertaken to comply with lead free regulations.” Apparently, examples of qualified research expenditures often overlooked include wages paid to line employees involved in research activities such as the evaluation of lead-free solders or surface finishes, and costs in quality assurance, engineering, product design and in-house software development.

A second impetus for the distribution of the white paper is to ask the industry to help urge congress to extend the tax credit that expired on 31 December 2007. “IPC members can benefit significantly, and gain a reprieve from their continued investments in lead free conversion, if congress would instill a permanent tax credit that companies could then plan for and rely upon,” said Abrams. “However, achieving an extension from congress in an election year will require a concerted effort by all parties involved.”

IPC say that two pieces of legislation would permanently extend the R&D credit; HR 2138 in the house, and S 2209 in the senate. While both have attracted significant support, neither has achieved sufficient momentum needed to bring the issue to a vote.

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