It would seem to me that this should be quite bullish for those equipment companies with leading edge products....
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U.S. semiconductor sector celebrates restoration of R&D tax credits
By Bolaji Ojo
Electronic Buyers' News
(11/24/99, 07:31:01 AM EDT)
NEW YORK--High-tech companies, particularly chip makers, are cheering Congress this week for reinstating research and development tax credits for U.S. businesses.
But even as industry executives were celebrating the win, they were also intensifying efforts to rewrite another segment of the tax code. This time, they want the depreciation schedule for technology equipment slashed to three years from five.
"It's one down and one to go," said William Morin, deputy director of public affairs at the IPC, a trade association representing printed-circuit-board manufacturers and assemblers. The IPC, based in Northbrook, Ill., has been campaigning in Congress against a five-year depreciation schedule.
"For the most part, the equipment used in the printed-circuit-board industry, for instance, doesn't last five years," Morin said. "Technology has progressed to the extent that some equipment has to be replaced every 12 months. We need to change the law."
That battle will have to wait until next year. Congress is putting off all debate on the depreciation law until the second quarter of 2000. Meanwhile, the IPC and other industry associations are researching the impact of the current five-year depreciation schedule on technology companies' operations.
Several groups said they plan to submit their findings to the U.S. Treasury Department for inclusion in a final report requested by Congress. For now, however, Thanksgiving comes at an opportune time for the semiconductor industry, one of the prime beneficiaries of the R&D legislation.
"The evidence is that the R&D tax credit helps fuel technology innovation," said Stanley Myers, president of Semiconductor Equipment and Materials International (SEMI) in Mountain View, Calif.
Under the new bill-included in a "tax-extender" package granting tax credits worth $18.3 billion over 10 years to individuals and businesses-the R&D credit provision has emerged stronger than it has ever been. Congress declined to make the provision permanent but extended it for five years, deviating from the previous practice of renewing the legislation, sometimes for as short as six months, one year, or at most 18 months.
"The legislation provides a way of helping U.S. companies in their competition against foreign companies whose countries subsidize or write off R&D expenses," said Jim Feldhan, an analyst at Semico Research Corp. in Phoenix. "It alleviates some of the financial risks semiconductor companies face." |
