U.S. Tax Reform

For many areas of chronic disease or unmet medical needs, such as Alzheimer’s disease, the question that we need to be asking is “how can we innovate our way to a solution that cures this disease?” Within the context of industry, the answer is to create a more stable, long-term business environment that fosters innovation and jobs.  One mechanism to achieve this is through a tax system that provides incentives for U.S. companies to foster continued medical advances and invest in R&D.

The U.S. currently ranks seventeenth globally when measuring government incentives for private sector R&D. Corporate R&D location decisions are based on R&D incentives and tax rates imposed upon income related to intellectual property.  To provide an attractive location for innovation, the U.S. must embrace innovation incentives and low taxation of IP-derived income.

For American companies to remain competitive globally, we need to embrace a business tax system that fosters certainty, levels the playing field for America’s companies globally, and provides incentives for U.S. companies to foster continued medical advances and invest in R&D.  Ideas for action include:

  • The adoption of an internationally competitive territorial system for the taxation of foreign earnings in which countries would collect taxes on income earned inside their borders. The U.S. is one of very few countries that continue to embrace a worldwide system for the taxation of foreign earnings. 
  • Making the R&D tax credit permanent and reducing the corporate tax rate applied to income from patents (also known as enacting a patent box regime). Making the R&D tax credit permanent will help provide certainty to businesses engaged in R&D and stimulate additional R&D investment. The patent box regime would lower U.S. taxation of income derived from intellectual property rights developed/exploited within the United States. Similar tax regimes are embraced by many European nations.

These two proposals will spur job creation domestically and boost the country’s long-term innovation capacity.