Demand grows for R&D tax credits

“Given the increase in applicants, we were able to fulfill 82.7% of the total requested dollar amounts for each company, a sign that demand for the program continues to grow as New Hampshire’s economy booms and companies pursue new opportunities,” said Gov. Chris Sununu in a statement.

The number of companies that want state research and development tax credits keeps on growing, but the money available remained the same. This year, there was even an attempt by the state House of Representative to shrink it substantially.

Some 223 businesses applied for the credit against their business taxes for 2018, compared to 200 in 2017, but the cap remained at $7 million, so the amount the individual companies will receive decreased, from 92.4%  to 82.7%. Using those percentages, it appeared that businesses asked for about $8.4 million last year, compared to $7.6 million in 2017, a 16% increase.

In 2016, when the cap was $2 million, 193 business requested $7.4 million, and only got 27% for which they were eligible.

In a statement, Governor Chris Sununu said that the growing numbers of applicants was a “sign that demand for the program continues to grow as New Hampshire’s economy booms and companies pursue new opportunities.”

The amount of tax credits has grown since the R&D tax credit was revived in 2008 with a $1 million cap. That cap doubled in 2013 and jumped to $7 million in 2017.

Last session the state House twice voted to roll back the R&D credit back to $2 million again.

The first time, the House voted to pass House Bill 1554, using the $5 million saved by cutting the cap to increase exemptions on the interest and dividends tax, in an attempt to help small and mostly elderly investors who live off of their savings. The Senate tabled it.

The second time the House tried to cut the R&D tax credit (without the I&D provision) by amending SB411, which originally required businesses receiving the credit to complete a survey providing the type of research they are engaged in, the results of that research and the number of jobs created, among other information. That bill died when the House and the Senate failed to reach a compromise.

The Business and Industry Association, which has strongly lobbied for expanding the credit, said that rolling back the cut would cause “irreparable harm.” It pointed to most surrounding states that have higher caps or none at all – there is no such cap for the federal R&D tax credit either.

In addition to the group cap, individual companies can only get 10% of what they invest in R&D or $50,000, whichever is lower. It is that number that this year will be reduced by 82.7%.