The two-year, $14 billion extension of the research and development tax credit approved as part of the $700 billion federal economic bailout package in early October ends the uncertainty at least until the end of 2009 over whether there will be an incentive to keep R&D projects in the United States.
It was the 13th extension of the R&D tax credit since it was enacted in 1981. The credit's status had been in limbo since it expired at the end of last year.
The R&D credit, along with the congressional decision last month to allow offshore drilling for the first time since 1982, were two issues that had been closely watched by plastics trade groups.
But while manufacturers' groups said they are pleased with R&D stability for the next 15 months and the certainty that they will be able to deduct 20 percent of qualified expenses, they still prefer a permanent extension. Retroactive and short-term extensions are impractical, they said, since R&D projects tend to require multiyear commitments.
The R&D Credit Coalition, a group of more than 100 associations, has asked Congress to establish a stronger, more competitive and permanent credit. The coalition estimates that the United States' R&D credit ranks No. 17 out of the 30 countries in the Organization for Economic Cooperation and Development.
The lifting of the drilling moratorium will allow oil and natural gas drilling as close as three miles offshore. However, it is unlikely the Interior Department will grant any leases until 2010, meaning it will take five to 10 years before those supplies reach the market if the ban isn't re-imposed by the incoming Congress.
The end of the moratorium is not a solution to the energy dilemma that faces the U.S., but it is ``a starting point,'' said Bill Carteaux, president and chief executive officer of the Washington-based Society of the Plastics Industry Inc., in a news release. ``I am hopeful that increased access to domestic natural gas supplies will help lower our members' cost of doing business.
``Energy is the largest variable cost'' in plastic company operations, Carteaux said.
But environmentalists argue it is unlikely that increased access to the reserves beneath the Outer Continental Shelf estimated by the government to be 18 billion barrels of recoverable oil and 76 trillion cubic feet of natural gas will provide a new balance in energy supplies, or price relief.