Interesting article in the L.A. Times: Tech Firms Are Riled Up Over Tax Credit, by Jim Puzzanghera:

The technology industry is furious that the U.S. Senate failed to extend a tax credit for research and development costs before departing Friday for its monthlong summer recess. The credit, which saves U.S. companies about $7 billion a year by offsetting about 6% of their research and development expenses, expired Dec. 31. It’s used heavily by tech firms as well as many traditional manufacturing companies….

Although the research tax credit usually is extended retroactively, McGuire said Congress didn’t do that in 1996, after it had been expired for 11 months. For that period, the credit was simply lost. Dealing with the unpredictability can be difficult.

"When you’re trying to figure out the cost of your U.S. R&D, does it cost $1 or does it cost 94 cents?" said Karen Myers, a lobbyist for CA Inc., formerly Computer Associates. That’s a big deal for a company such as CA, which will spend $700 million on research and development this year, she said.

Companies can’t make the assumption in their financial statements that Congress is going to extend the tax credit. And the uncertainty makes it challenging to plan research projects. "When you make an incentive like this unreliable … it’s putting in people’s minds, ‘Maybe I shouldn’t go whole hog,’ " said Clint Stretch, who manages tax policy for Deloitte Tax. "That undercuts the effectiveness of the credit."