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Congressional Research Service 7-5700 www.crs.gov RL31181 Summary Technological innovation is a primary engine of long-term economic growth, and research and development (R&D) serves as the lifeblood of innovation. The federal government encourages businesses to invest more in R&D than they otherwise would in several ways, including a tax credit for increases in spending on qualified research above a base amount. This report describes the current status of the credit, summarizes its legislative history, discusses policy issues it raises, and describes legislation to modify and extend it. The report will be updated as warranted by legislative activity or other developments affecting the credit. The research credit (also known as the research and experimentation (R&E) tax credit) has never been permanent. It expired at the end of 2014. Since its enactment in mid-1981, the credit has been extended 16 times and significantly modified 5 times. While the credit is usually assumed to be a single credit, it actually consists of four discrete credits: (1) a regular credit, (2) an alternative simplified credit (ASC), (3) a basic research credit, and (4) an energy research credit. A taxpayer may claim one of the first two and each of the other two, provided it meets the requirements for each. In essence, the research credit attempts to boost business investment in basic and applied research by reducing the after-tax cost of undertaking qualified research above a base amount, which in theory approximates the amount a company would invest in R&D in the absence of the credit. As a result, the credit's effectiveness hinges on the sensitivity of the demand for this research to decreases in its cost. It is unclear from available studies how sensitive that demand actually is. While most analysts and lawmakers endorse the use of tax incentives to generate increases in business R&D investment, some have some reservations about the current credit. Critics contend that it is not as effective as it could or should be because of certain problems with its design. These include a lack of permanence, uneven and inadequate incentive effects, non-refundability, and an ambiguous definition of qualified research. The 113th Congress extended the research tax credit through 2014 by passing the Tax Increase Prevention Act of 2014 (H.R. 5771, P.L. 113-295). The act made no other changes in the credit. On May 21, the House passed a bill (H.R. 880) that would permanently extend and modify the research tax credit. Under the bill, the credit would equal the sum of 20% of qualified research expenditures (QREs) above 50% of a company's average annual QREs in the past three tax years; 20% of its basic research payments to a qualified organization for basic research done under a written contract above 50% of the company's average annual basic research payments in the past three tax years; and 20% of the company's payments to an energy research consortium for energy research in the current tax year. In the case of companies that have no QREs in any of the three previous tax years, the credit would be equal to 10% of their current-year QREs. The Senate Finance Committee reported a bill (S. 1946) on July 23 that would retroactively extend the research tax credit through 2016 and modify the credit to allow eligible small firms to apply up to $250,000 of any unused credit against their employment taxes in a tax year. Contents Introduction 1 Design of the R&E Tax Credit 2 Qualified Research Expenditures 3 Nature of Qualified Research 3 Expenses Eligible for the Credit 4 Regular Research Credit 4 Calculation: Regular Research Tax Credit 5 Calculation: Alternative Simplified Research Credit 6 Calculation: Regular Research Tax Credit 7 Calculation: Alternative Simplified Research Credit 7 Alternative Simplified Credit 7 Alternative Incremental Research Credit 8 University Basic Research Credit 8 Energy Research Credit 9 Option to Claim a Refundable Research Tax Credit in Lieu of Bonus Depreciation in 2008 and 2009 9 Legislative History of the Research Tax Credit 10 Effectiveness of the Research Tax Credit 13 Stimulative Effect of the Credit 14 Policy Issues Raised by the Current Research Tax Credit 17 Lack of Permanence 17 Uneven and Inadequate Incentive Effects 18 Uneven Incentive Effect 18 Inadequate Incentive Effect 19 Non-refundable Status 22 Incomplete and Ambiguous Definition of Qualified Research and Difficulties in Claiming the Credit 23 Original Definition 23 Changes Under the Tax Reform Act of 1986 24 Subsequent IRS Guidance 24 Other Concerns 27 Insufficient Focus on Innovative Research Projects 28 Legislation in the 113th and 114th Congresses to Modify and Extend the Research Tax Credit 29 113th Congress 30 House 30 Senate 30 114th Congress 31 House 31 Senate 31 President Obama's Budget Request for FY2016 31 Figures Figure 1. Share of U.S. Spending (current dollars) on Research and Development Held by the Federal Government and Businesses, 1955 to 2008 29 Tables Table 1. Sample Calculations of the Regular and Alternative Simplified Research Tax Credits in 2014 for an Established Firm 5 Table 2. Sample Calculations of the Regular and Alternative Simplified Research Tax Credits in 2014 for a Start-up Firm 6 Table 3. Business and Federal Spending on Domestic Research and Development, and Claims for the Federal Research Tax Credit, 2000 to 2010 16 Contacts Author Contact Information 32 Introduction Economists have gained notoriety for their differences of opinion on a variety of policy issues. Notable examples include the long-term economic effects of large, permanent tax cuts; the impact of illegal immigration on domestic wages; and the best way to achieve price stability, full employment, and greater income equality. But on the issues of the impact of technological innovation on economic growth in the long run and the proper role of government in the development of new technologies, there is relatively little dissent among practitioners of what is known as the dismal science. In general, economists agree that technological innovation has accounted for a major share of long-term growth in real per-capita income in the United States. It is useful to clarify what economists mean by technological innovation, since such a complex concept can mean different things to different professions. Economists who study the forces driving economic growth tend to see innovation as a convoluted and uncertain process that embraces the acquisition of new scientific and technical knowledge and its application to the development of new goods and services or methods of production through research and experimentation. Learning-by-doing and learning-by-using often play crucial roles in this process. In economies dominated by competitive markets, technological innovation is driven mainly by the efforts of competing firms to gain, sustain, or reinforce competitive advantages by being the first to introduce or use new or improved products or services; more efficient production processes; or more effective strategies for management, marketing and promotion, and customer service and support. Most economists would also agree that private R&D investment is likely to be less than the amounts that would be warranted by its economic benefits. The reason for this is thought to lie in the nature of these benefits. Firms generally cannot capture all the returns to their R&D investments, even in the presence of patents, trademarks, and other instruments of intellectual property protection, and their strict enforcement. Numerous studies have found that the average social returns to private R&D investments greatly exceeded the average private returns. This finding held true whether a firm invested in research projects narrowly focused on its existing lines of business, or in research projects aimed at extending the boundaries of knowledge in particular scientific disciplines in ways that had no obvious or immediate commercial applications. Economists refer to an excess of social returns over private returns as the spillover effects or external benefits of R&D. There are several channels through which the returns from innovation may escape full capture by the innovating firms and spill over to society at large. The most common ones are reverse engineering by competing firms, migration of research scientists and engineers from one firm to another, and the availability of new or improved goods and services at prices below what most consumers would be willing to pay. When seen through the lens of standard economic theory, the external benefits of technological innovation take on the appearance of a market failure. They signal that too few resources are being allocated to the activities leading to the discovery and commercial development of new technical knowledge and know-how. To remedy this failure, most economists recommend the adoption of public policies aimed at boosting or supplementing private investment in R&D. The federal government supports R&D in a variety of ways. Direct support comes mainly in the form of research performed by federal agencies and federal grants for basic and applied research and development intended to support concrete policy goals, such as protecting the natural environment, exploring outer space, advancing the treatment of deadly diseases, and strengthening the national defense. Indirect support is more diffuse. The chief sources are federal funding of higher education in engineering and the natural sciences, legal protection of intellectual property rights, special allowances under antitrust law for joint research ventures, and tax incentives for business R&D investment. Federal tax law offers two such incentives: (1) an unlimited expensing allowance for qualified research spending under Section 174 of the Internal Revenue Code (IRC), and (2) a non-refundable tax credit for qualified research spending above a base amount under IRC Section 41—known as the research and experimentation (R&E) tax credit, the research tax credit, the R&D tax credit, or the credit for increasing research activities. The deduction has been a permanent provision of the IRC since it was first enacted in 1954. Its main advantages are that the deduction simplifies tax accounting for R&D expenditures and encourages business R&D investment by taxing the returns to such investment at a marginal effective rate of zero. A similar policy objective lies behind the research tax credit, which has been a temporary provision of the IRC since it went into effect in July 1981. The credit is intended to stimulate more business R&D investment than otherwise would occur by lowering the after-tax cost of qualified research. But unlike the deduction, it complicates tax compliance for firms claiming the credit. In FY2012, the combined budgetary cost of these incentives totaled $11.1 billion, or about 8% of the estimated $140.9 billion spent by federal agencies on defense and non-defense R&D that year. This report examines the current status of the R&E tax credit, describes its legislative history, discusses some important policy issues raised by it, and identifies legislative proposals in the 113th Congress to extend or otherwise modify the credit. It will be updated to reflect significant legislative activity and other developments affecting the credit's status. Design of the R&E Tax Credit Although many think of the research tax credit as a single unified credit, it has four discrete components: a regular research credit, an alternative simplified credit (ASC), a basic research credit, and a credit for energy research. Each is non-refundable. In any tax year, taxpayers may claim no more than the basic and energy research credits, plus either the regular credit or the ASC. To prevent taxpayers from benefiting twice from the same expenditures, any research tax credit claimed must be subtracted from deductible research expenses. The four components of the research tax credit expired at the end of 2014. Qualified Research Expenditures Ultimately, claims for the regular credit and the ASC rest on the definition of qualified research expenditures (QREs). There are two aspects to this definition. Nature of Qualified Research One aspect deals with the nature of qualified research itself. Under Section 41(d) of the federal tax code, research must satisfy four criteria in order to qualify for the regular credit and the ASC. First, the research must involve activities that qualify for the deduction under Section 174: namely, the activities must be "experimental" in the laboratory sense and aimed at the development of a new or improved product or process. Second, the research must seek to discover information that is "technological in nature." Third, it should strive to gain new technical knowledge that is useful in the development of a new or improved "business component," which is defined as a product, process, computer software technique, formula, or invention to be sold, leased, licensed, or used by the firm performing the research. And fourth, the research must entail a process of experimentation aimed at the development of a product or process with "a new or improved function, performance or reliability or quality." According to Section 41(d)(3), research satisfies the four criteria if it is intended to develop a new or improved function for a business component, or to improve the performance, reliability, or quality of a business component. By contrast, research fails to meet these criteria if its main purpose is to modify a business component according to "style, taste, (and) cosmetic or seasonal design factors." Businesses, the courts, and the IRS have clashed repeatedly over the interpretation of the four criteria. Although the IRS issued final regulations clarifying the definition of qualified research in December 2003 (T.D. 9104), disputes between businesses and the IRS over what activities qualify for the credit have continued. Section 41(d)(4) identifies the activities for which the credit may not be claimed. Specifically, the credit does not apply to: research conducted after the start of commercial production of a "business component"; research done to adapt an existing business component to a specific customer's needs or requirements; research related to the duplication of an existing business component; surveys and studies related to data collection, market research, production efficiency, quality control, and managerial techniques; research to develop computer software for a firm's internal use (except as allowed in any regulations issued by the IRS); research conducted outside the United States, Puerto Rico, or any other U.S. possession; research in the social sciences, arts, or humanities; and research funded by another entity. Expenses Eligible for the Credit The second aspect of the definition of QREs concerns the expenses to which the credit applies. Under Section 41(b)(1), qualified expenses relate to both in-house research and contract research. In the case of in-house research, the regular credit and ASC apply to the wages and salaries of employees and supervisors engaged in qualified research, as well as the cost of materials, supplies, and leased computer time used in this research. In the case of contract research, the credits apply to the full amount paid for qualified research conducted by certain small firms, colleges and universities, and federal laboratories; 75% of payments for qualified research performed by certain research consortia; and 65% of payments for qualified research performed by certain other nonprofit entities dedicated to scientific research. As a result, the credits do not cover all the expenses a company incurs in conducting qualified research. Specifically, outlays for depreciable durable assets used in qualified research (such as buildings and equipment), overhead expenses (e.g., heating, electricity, rents, leasing fees, insurance, and property taxes), and the fringe benefits of research personnel are excluded. The exclusion of these expenses has implications for the incentive effect of the credit (more on this later). According to some estimates, the excluded expenses account for 27% to 50% of business R&D spending. Regular Research Credit The regular research tax credit has been extended 16 times and significantly modified 5 times. Under IRC Section 41(a)(1), it is equal to 20% of a firm's QREs beyond a base amount. Such an incremental design is intended to encourage firms to spend more on R&D than they otherwise would by lowering the after-tax cost to business taxpayers of investing in qualified research above some normal amount by as much as 20%. Given that business R&D investment appears sensitive to its cost, a decline in the after-tax cost of R&D can be expected to spur a rise in business R&D investment, all other things being equal. The base amount for the regular credit is designed to approximate the amount a firm would spend on qualified research in the absence of the credit. As such, the base amount can be viewed as a firm's normal or preferred level of R&D investment. Two rules govern the calculation of the base amount under IRC Section 41(c). First, it must be equal to 50% or more of a firm's QREs in the current tax year—a rule that some refer to as the 50-percent rule. Second, the base amount depends on whether the business taxpayer is considered an established firm or a start-up firm. Established firms are defined as firms with gross receipts and QREs in at least three of the tax years from 1984 through 1988. Start-up firms, by contrast, are defined as firms whose first tax year with both gross receipts and QREs occurred after 1983, or firms that had fewer than three tax years from 1984 to 1988 with both gross receipts and QREs. The base amount for all firms, established or start-up, is the product of a fixed-base percentage and average annual gross receipts in the previous four tax years. An established firm's fixed-base percentage is the ratio of its total QREs to total gross receipts in 1984 to 1988, capped at 16%. By contrast, a start-up firm's fixed-base percentage is set at 3% during the firm's first five tax years with spending on qualified research and gross receipts. Thereafter, the percentage gradually adjusts to reflect a firm's actual experience, so that by its 11th tax year, the percentage equals the firm's total QREs relative to its total receipts in the 5th through 10th tax years. In general, the lower a firm's fixed-base percentage, the better its chances of claiming the regular credit. Furthermore, a firm can expect to benefit from the regular credit if its ratio of QREs in the current tax year to average annual gross receipts in the previous four tax years is greater than its fixed-base percentage. (See Table 1 for a calculation of the regular credit for a hypothetical established firm and Table 2 for a calculation of the regular credit for a hypothetical start-up firm.) Table 1. Sample Calculations of the Regular and Alternative Simplified Research Tax Credits in 2014 for an Established Firm ($ millions) Year Gross Receipts Qualified Research Expenses 1984 100 5 1985 150 8 1986 250 12 1987 400 15 1988 450 16 1989 400 18 1990 450 18 2007 835 45 2008 915 50 2009 1,005 53 2010 1,215 60 2011 1,465 70 2012 1,650 85 2013 1,825 95 2014 1,900 100 Source: Congressional Research Service. Calculation: Regular Research Tax Credit Compute the fixed-base percentage: 1. Sum the qualified research expenses for 1984 to 1988: $56 million. 2. Sum the gross receipts for 1984 to 1988: $1,350 million. 3. Divide the total qualified research expenses by the total gross receipts to determine the fixed-base percentage: 4.0%. Compute the base amount for 2014: 1. Calculate the average annual gross receipts for the four previous years (2010-2013): $1,539 million. 2. Multiply this average by the fixed-base percentage to determine the base amount: $62 million. Compute the regular tax credit for 2014: 1. Reduce the $100 million in qualified research expenses for 2014 by the greater of the base amount ($62 million) or 50% of the qualified research expenses for 2014 ($50 million): $38 million. 2. Multiply this amount by 20% to determine the regular R&E tax credit for 2014: $7.60 million. Calculation: Alternative Simplified Research Credit 1. Calculate the average qualified research expenditures in the three previous years (2011-2013): $83 million. 2. Divide this amount by 2: $41.5 million. 3. Subtract this amount from qualified research expenditures in 2014: $58.5 million. 4. Multiply this amount by 0.14 to determine the alternative simplified research credit for 2014: $8.2 million. Table 2. Sample Calculations of the Regular and Alternative Simplified Research Tax Credits in 2014 for a Start-up Firm ($ millions) Year Gross Receipts Qualified Research Expenses 2006 30 35 2007 42 40 2008 55 45 2009 60 55 2010 210 65 2011 305 73 2012 400 82 2013 475 90 2014 600 105 Source: Congressional Research Service. Calculation: Regular Research Tax Credit Compute the fixed-base percentage: 1. According to current law, a start-up firm's fixed-base percentage is fixed at 3% for each of the first five years after 1993 when it has both gross receipts and qualified research expenses; it then adjusts according to a formula over the next six years to reflect the firm's actual research intensity. Thus, the fixed-base percentages are 3% for 2006 through 2010, 7.4% in 2011, 8.9% in 2012, 12.0% in 2013, and 14.9% in 2014. Compute the base amount for 2014: 1. Calculate the average annual receipts for the four previous years (2010-2013): $347.5 million. 2. Multiply this amount by the fixed-base percentage (14.9%) to determine the base amount: $52 million. Compute the regular tax credit: 1. Reduce qualified research expenses for 2014 ($105 million) by the greater of the base amount ($52 million) or 50% of the qualified research expenses for 2014 ($52.5 million): $52.5 million. 2. Multiply this amount by 20% to determine the regular R&E tax credit for 2014: $10.5 million. Calculation: Alternative Simplified Research Credit 1. Calculate the average qualified research expenditures for the three previous years (2011-2013): $82 million. 2. Divide that amount by 2: $41 million. 3. Subtract that amount from qualified research expenditures in 2014: $64 million. 4. Multiply this amount by 0.14 to determine the alternative simplified research credit for 2014: $9.0 million. Alternative Simplified Credit The most recent addition to the array of research tax credits provided by Section 41 is the alternative simplified credit (ASC). It was established by the Health Care and Tax Relief Act of 2006 (P.L. 109-432). Under Section 41(c)(5), a business taxpayer may claim the ASC in lieu of the regular credit. The ASC is equal to 14% of a taxpayer's QREs in the current tax year above 50% of its average QREs during the three previous tax years. If a taxpayer has no QREs in any of those years, then the credit is equal to 6% of its QREs in the current tax year. A decision to elect the ASC remains in effect until a taxpayer gains the consent of the IRS to claim the regular research credit. (See Table 1 for a hypothetical calculation of the ASC for an established firm and Table 2 for a similar calculation of the ASC for a startup firm.) Taxpayers with one or more of the following conditions may benefit more from the ASC than the regular credit: a relatively large base amount under the regular credit; incomplete records for determining the base period as a start-up firm; substantial growth in gross receipts in recent years; and a complicated history of mergers, re-organizations, acquisitions, and dispositions. Alternative Incremental Research Credit Firms investing in qualified research that could not claim the regular credit had the option of claiming the alternative incremental R&E tax credit (or AIRC), under IRC Section 41(c)(4), for tax years from 1996 to 2008. The Emergency Economic Stabilization Act of 2008 (P.L. 110-343) repealed the AIRC for the 2009 tax year, and Congress has not reinstated it. When a firm elected the AIRC for a particular tax year, it had to continue to do so, unless the firm received permission from the IRS to switch to the regular research credit. There was some concern that such a rule deterred firms from claiming the AIRC, even though they might have been better off doing so. The definition of QREs for the AIRC was the same as the definition of QREs for the regular credit. But that was where the similarity between the two credits ended. While the regular credit is equal to 20% of QREs in excess of a base amount, the AIRC, in the final year it could be taken, was equal to 3% of a firm's QREs above 1% but less than 1.5% of its average annual gross receipts in the previous four tax years, plus 4% of its QREs above 1.5% but less than 2.0% of its average annual gross receipts in the previous four tax years, plus 5% of its QREs greater than 2.0% of its average annual gross receipts in the previous four tax years. In general, firms benefited from the AIRC if their QREs in the current tax year exceeded 1% of their average annual gross receipts during the past four tax years. Moreover, the AIRC was probably of greater benefit than the regular credit was to business taxpayers with relatively high fixed-base percentages, or whose research spending was declining, or whose sales were growing much faster than their research spending. (See Table 1 for a calculation of the AIRC for a hypothetical established firm, and Table 2 for a calculation of the AIRC for a hypothetical start-up firm.) University Basic Research Credit Firms that enter into contracts with certain nonprofit organizations to perform basic research may be able to claim a separate research credit for some of their expenditures for this purpose under IRC Section 41(e). A primary aim of the credit is to foster collaborative research involving U.S. firms and colleges and universities. The credit is equal to 20% of total payments for qualified basic research above a base amount, which is known as the "qualified organization base period amount." This amount has little in common with the base amount for the regular R&E tax credit, except that both amounts seem intended to approximate what firms would spend on qualified research in the absence of the credits. For the purpose of the credit, basic research is defined as "any original investigation for the advancement of scientific knowledge not having a specific commercial objective." The credit does not apply to qualified basic research done outside the United States, or to basic research in the social sciences, arts, or the humanities. In addition, the basic research credit applies only to payments for qualified basic research performed under a written contract by the following organizations: educational institutions, nonprofit scientific research organizations (excluding private foundations), and certain grant-giving organizations. Firms conducting their own basic research may not claim the credit for their expenditures for this purpose, but the spending may be included in their QREs for the regular credit or ASC. In addition, basic research payments eligible for the credit that fall below the base amount are treated as contract research expenses and may be included in the QREs for those credits as well. Energy Research Credit Under IRC Section 41(a)(3), taxpayers may claim a tax credit equal to 20% of payments to certain entities for energy research. To qualify for the credit, the payments must be made to a nonprofit organization exempt from taxation under IRC Section 501(a) and "organized and operated primarily to conduct energy research in the public interest." In addition, at least five different entities must contribute funds to the organization for energy research in a calendar year; none of these entities may account for more than half of total payments to the organization for qualified research. The credit also applies to the full amount (i.e., 100%) of payments to colleges and universities, federal laboratories, and certain small firms for energy research performed under contract. In the case of small firms performing this research, a business taxpayer may claim a credit for the full amount of payments with two limitations. First, the taxpayer cannot own 50% or more of the stock of the small firm performing the research (if the firm is a corporation), or hold 50% or more of the small firm's capital and profits (if the firm is a non-corporate entity such as a partnership). Second, the firm performing the research must have an average of 500 or fewer employees in one of the two previous calendar years. Because the credit is flat rather than incremental, it is more generous than the other four components of the research tax credit. Option to Claim a Refundable Research Tax Credit in Lieu of Bonus Depreciation in 2008 and 2009 As a result of the Economic Stimulus Act of 2008 (P.L. 110-185), corporate and non-corporate firms could claim an additional first-year depreciation deduction equal to 50% of the cost of qualified property placed in service between March 31, 2008, and December 31, 2008. The deduction was known as the 50% bonus depreciation allowance. A provision of the Housing and Economic Recovery Act of 2008 (P.L. 110-289) gave corporations only the option of claiming a limited refundable tax credit for unused research and alternative minimum tax (AMT) credits stemming from tax years before 2006, in lieu of any bonus depreciation allowance they could claim for qualified property acquired after March 31, 2008. The credit was capped at $30 million for a single corporation and was set to expire at the end of 2008. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) extended both the first-year 50-percent bonus depreciation allowance and the option to claim a refundable research and AMT credit through 2009. Under the Tax Relief, Unemployment Compensation Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), the option to monetize unused AMT credits from tax years before 2006 in lieu of claiming a bonus depreciation allowance was extended so that it applied to qualified property acquired after March 31, 2008, and before January 1, 2013. The extension did not apply to unused research credits from the same tax years. With the passage of the American Taxpayer Relief Act of 2012 (P.L. 112-240), the option was extended through 2013 for qualified property acquired and placed in service that year. Legislative History of the Research Tax Credit The research tax credit entered the tax code as a temporary provision through the Economic Recovery Tax Act of 1981 (P.L. 97-34). In adopting the credit, the 97th Congress was hoping to stem a decline in spending on R&D by the private sector as a share of U.S. gross domestic product that commenced in the late 1960s. Around the time the credit was enacted, more than a few analysts thought the decline was a primary cause of both a slowdown in U.S. productivity growth and an unexpected loss of competitiveness by a variety of U.S. industries in the 1970s. A majority in Congress concluded that a "substantial tax credit for incremental research and experimental expenditures was needed to overcome the reluctance of many ongoing companies to bear the significant costs of staffing and supplies, and certain equipment expenses such as computer charges, which must be incurred to initiate or expand research programs in a trade or business." The initial credit was equal to 25% of qualified research spending above a base amount, which was equal to average spending on such research in the three previous tax years, or 50% of current-year spending, whichever was greater. It is not clear from the historical record why Congress chose a statutory rate of 25%. But there is no evidence that the rate was chosen on the basis of a rigorous assessment of the gap between the private and social returns to R&D investment, or the sensitivity of R&D expenditures to declines in their after-tax cost. Any taxpayer that claimed the credit and could not apply the entire amount against its current-year federal income tax liability was allowed to carry the unused portion back as many as three tax years, or forward as many as 15 tax years. The credit was to remain in effect from July 1, 1981