House introduces companion bill to offer CROs a share of R&D tax credit

By Zachary Brennan contact

- Last updated on GMT

House introduces companion bill to offer CROs a share of R&D tax credit
In a House bill that largely mirrors one reintroduced earlier this year in the Senate, CROs (contract research organizations) would be able to capture a share of the R&D tax credit, thereby making the US more competitive with other countries that offer such credits.

Under the House bill (H.R. 2481​) -- co-sponsored by Reps. Pat Meehan (R-PA), George Holding (R-NC) and G.K. Butterfield (D-NC) -- CROs would be eligible for a credit of up to 35% of qualifying research investments.

John Lewis, SVP of Policy and Public Affairs at ACRO, told that two things that have to happen for the credit to change: “One you have to remove the prohibition from contract research claiming the credit, and the second is to specify what percentage the contractor would be eligible for, and both the Senate and House bills do that​.”

Current law, which was set up in 1981, mandates that sponsors outsourcing their research to CROs can only claim 65% of expenses, most of which are wages, under the credit. The remaining 35%, however, disappears under current law. And even when CROs acquire research facilities from pharma companies, they still don’t see any of the tax credit.

That compares with other countries, such as the UK, France and Canada​, which already offer CROs a share of the tax credit.

Jamie Macdonald, chairman of ACRO (Association of Clinical Research Organizations), said: “By enabling contract research organizations to capture a portion of the R&D tax credit that is currently abandoned, this legislation will enable the United States to remain competitive globally. Similar provisions are included in the bi-partisan COMPETE Act (S.537) introduced earlier this year by Senators Tom Carper (R-DE) and Pat Toomey (R-PA). We look forward to enactment this year​.”

According to GovTrack.US, a website that tracks the US Congress, the Senate COMPETE Act has a 0% chance of passing and a 1% chance of making it past the Senate Finance Committee. Between 2013 and 2015, only 15% of all bills in Congress made it past committee and only about 3% were enacted.

This bill and the provisions related to contract research in the Senate COMPETE Act actually achieve the same result though with different language because the Senate bill is a comprehensive R&D bill while the House bill is a standalone dealing only with this issue​,” Lewis added, noting that it’s likely the bills will be taken up in September.

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