Comprehensive Tax Reform Vital for Incentivizing Innovative Biotech Companies Developing Cures and Treatments
Washington, DC, September 25, 2014 – Today, the Biotechnology Industry Organization (BIO) issued the following response to the recent Treasury Department notice of its intent to propose rules to limit corporate inversions, 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 recent Treasury Department notice and other criticism of so-called inversions and other corporate global economic strategies focus on the symptoms rather than the disease – a U.S. tax system that is simply out of step with the rest of the developed world and thus makes the United States less globally competitive,” said Jim Greenwood, BIO’s President and CEO.
In order to incentivize R&D, manufacturing, and the creation of jobs in innovative businesses here in the United States, BIO believes 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, BIO believes that any reformed code should include incentives to support R&D by all life sciences companies, both large and small. BIO strongly supports 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. BIO also believes 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, BIO strongly supports 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 following can be attributed to Jim Greenwood:
“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.
“Other countries have modernized their tax policies to encourage domestic investment, increase innovation incentives, and enforce less burdensome corporate tax regimes as a means to drive new investment and research.
“Placing disproportionate tax burdens on U.S. industry disadvantages American biotech companies and stymies the cutting-edge R&D critical to meeting our nation’s health challenges. Freeing up more than one trillion dollars that is currently trapped overseas due to the inefficiencies of the tax code will boost economic growth and capital investment here at home.
“We strongly support a U.S. tax code that recognizes innovation as a crucial part of the 21st century American economy and encourages 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.”
For more information on issues affecting emerging biotech companies, please visit http://www.bio.org/ecs.
Upcoming BIO Events
BIO Investor Forum
October 7-8, 2014
San Francisco, CA
BIO Europe 2014
November 3-5, 2014
Frankfurt, Germany
BIO IPCC Conference
November 10-12, 2014
Nashville, TN
BIO Pacific Rim Summit on Industrial Biotechnology & Bioenergy
December 7-9, 2014
San Diego, CA
BIO CEO & Investor Conference
February 9-10, 2015
New York City, NY
BIO Asia International Conference
March 24-25, 2015
Tokyo, Japan
BIO International Convention
June 15-18, 2015
Philadelphia, PA
###