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SSTI Releases Issue Brief on R&D Tax Incentives

July 25, 1997

The State Science and Technology Institute (SSTI) recently released an issue brief that examines specific tax incentives offered by the states to encourage research and development (R&D) activity. The report, State Research and Development Tax Incentives, identifies tax incentives for R&D offered in 1996 by individual states and describes their major attributes. It also considers the use and cost of the incentives.

SSTI found that thirty-five states offered some type of incentive for research and development activity in 1996. Many of the states offered an income tax credit modeled after the federal research and experimentation tax credit guidelines. Other types of incentives included sales and use tax credits and property tax credits.

SSTI also found that the relative impact of these incentives is uncertain. Sixteen states were able to address questions regarding the impact of the tax incentive in terms of the number of companies that received the incentive and the resulting tax expenditures. The limited amount of data available on the number of companies that use the incentive and the subsequent tax expenditure prevents any assessment of the effectiveness of the R&D tax incentives in encouraging R&D activity. More extensive data collection on the companies using the incentives would permit future analysis of the effect of the incentives and the relative merits of the differents types of incentives.

Contact SSTI at 614/421-SSTI (7784) for more information about the report.