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BIO Urges Comprehensive Tax Reform

September 26, 2014
Earlier this week, the Treasury Department issued a notice of its intent to propose rules to limit corporate inversions. In response, we are urging Congress and the Administration to reform the corporate tax system in order to maintain America’s global competitiveness, sustain and create American jobs, and encourage investments in the United States.

The U.S. has one of the highest effective corporate tax rates in the world. Current U.S. corporate tax laws, including the lack of a territorial system of taxation, impede America’s ability to compete with other industrialized countries on the global stage.

In order to incentivize R&D, manufacturing, and the creation of jobs in innovative businesses here in the United States, we believe the U.S. corporate tax system must be fundamentally reformed. Currently, America has the highest corporate tax rate among industrialized nations, and unlike our competitors, seeks to tax income made by U.S. businesses overseas. These elements of our system must be changed so that American companies are not at a disadvantage internationally, and can continue to invest and grow here in the United States.

Additionally, we believe that any reformed code should include incentives to support R&D by all life sciences companies, both large and small. We strongly support the Orphan Drug Tax Credit, which incentivizes research and development of new treatments and cures for rare diseases, and believes this should be retained as a permanent part of the tax code. We also believe that the R&D Tax Credit must be made a permanent part of the tax code, not subject to yearly extensions, and enhanced to improve its effectiveness. At the same time, we strongly support incentives for emerging companies who do not yet have taxable income, in order to ensure that the tax code works to advance innovation for companies of all sizes.

In this regard, any tax reform should include Sec. 469 R&D Partnership Structures that would relax the passive activity loss limitations for small, R&D-focused companies (S. 1658, S. 2715, H.R. 4855); Sec. 1202 Capital Gains reform, which would allow investors in companies with gross assets up to $150 million to be eligible for a reduced capital gains rate (S. 1658); and Sec. 382 net operating loss reform, which would allow small companies the freedom to raise capital for innovative research without fear of losing their valuable research-related net operating losses. These incentives would support R&D and job creation in the United States, and help maintain America’s lead in R&D and innovation in the face of tough foreign competition.

The U.S. tax code should recognize innovation as a crucial part of the 21st century American economy and encourage new investment, R&D, and the creation of new innovative businesses. Federal tax policy that recognizes the special demands placed on biotech companies and other highly innovative industries also will speed the development of products to vastly improve the lives of Americans and people around the world.

Check out the full release here.