by Larry Wilson
August 11, 2012
Congress mulls reduction for R&D
Corning Inc., which invests heavily in research and development, could soon get a new tax break for doing so.
Support is building in Congress for the so-called “innovation tax break.”
It would reduce the tax rate to 10 percent on profits derived from products that result from U.S. patents.
The normal federal tax rate on corporate profits ranges from 15 percent to 35 percent.
Many of Corning Inc.’s most innovative and profitable products have resulted from work done at the company’s flagship research center, Sullivan Park, in Erwin.
Optical fiber for communications was developed there as well as glass for liquid crystal displays and ceramic devices to cut pollution from gasoline and diesel engines.
No action is expected on the proposed tax legislation until next year.
Sponsors of the bill in the House of Representatives are Democrat Allyson Schwartz and Republican Charles Boustany.
Corning Inc. is consistently in the top tier of industrial companies receiving U.S. patents. In 2011, it held more than 4,300 unexpired patents, more than half of which were issued in the United States.
Other countries, including Great Britain, already have launched similar corporate tax programs.
Critics of the legislation say it would be difficult to determine how much of a company’s profits are tied directly to specific patents.
Other tax reform advocates think U.S. corporations already enjoy enough tax breaks. Citizens for Tax Justice, for example, identified Corning Inc. as one of more than two dozen companies that paid no federal income tax in the United States from 2008 through 2011.
How would Corning Inc. benefit from the lower tax rate proposed in the new legislation?
Lower taxes translate into higher profits, which could help pump some life into Corning’s under-performing stock.
Lower corporate taxes also mean lower revenue for the federal government, which is already grappling with an unprecedented debt load.
The innovation tax break will likely be taken up as part of a broad tax reform effort in Congress next year.
Its prospects depend to some extent on the outcome of the presidential and Congressional elections in November.
Whether it passes or not, Corning Inc.’s commitment to innovation research and development is not likely to wane.
The evidence for that is a $400 million expansion at Sullivan Park that will create about 300 new jobs when it is completed by 2013.