Manufacturers watch status of R&D credit as Congress weighs tax reform

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Some in the marine industry are concerned about the possible elimination of the research and development tax credit, a step that was part of the bill Senate Republicans passed Friday.

“It appears that the final version of the Senate tax bill has effectively eliminated the R&D tax credit,” wrote Wells Fargo analyst Tim Conder in a flash email this week. “If the R&D tax credit is eliminated in the final bill we estimate it would raise the effective annual tax rate for several of our covered powersport manufacturers … by around 100 basis points” in isolation before factoring in other rate-reduction components of the bill.

Conder referred to powersports companies that include Brunswick Corp., Malibu Boats and MasterCraft Boat Co., although eliminating the credit would affect most if not all marine manufacturers.

Experts told The Wall Street Journal that the change would force many companies to lose tax breaks the bill’s authors were trying to protect.

“Like most companies, we are watching with interest the developments of the reconciliation between the House and Senate versions of this legislation and how it relates to the R&D tax credit,” Brunswick Corp. spokesman Daniel Kubera told Trade Only Today. “Brunswick has been a long supporter of the credit and the benefits it offers American innovation and ingenuity.”

The biggest consequence could be the research credit, often used by manufacturers, technology firms and pharmaceutical companies. Under the credit companies get money back from the government for what they spend on innovation, often for wages of scientists and engineers.

Corporations will claim $10.3 billion in research credits in 2018, according to the congressional Joint Committee on Taxation.

"Research and development is the lifeblood of manufacturing," Chris Netram, vice president for tax and domestic economic policy at the National Association of Manufacturers, told Fox Business. "The NAM supports pro-growth tax reform and is working with key policy-makers to ensure the final bill does not inadvertently harm manufacturing."