With Owens-Illinois Inc. drawing closer to breaking ground on a $35 million expansion of its research and development center at its Perrysburg headquarters, the glass maker on Thursday was visited by U.S. Sen. Sherrod Brown, who is working on a bill to restore the federal research and development tax credit that could help O-I.
Research and development “is how you stay in business and how you stay competitive around the world. The tax system doesn’t always work for that. Too often, our tax system encourages outsourcing and doesn’t encourage the kind of R&D long term that we need to attract investment and do what we need to do here,” said Mr. Brown (D., Ohio), speaking to nearly two dozen O-I researchers after touring the company’s R&D center.
Mr. Brown, who has supported efforts to expand Ohio’s manufacturing base, said that six months ago he and six Democratic senators drafted a bill, the 21st Century Investment Act of 2012, which he hopes to get passed next year.
Mr. Brown said Sen. Orrin Hatch (R., Utah) also is proposing a bill to restore the federal tax credit, which expired at the end of 2011. “I think we can work out something together,” Mr. Brown said.
The issue is a general business tax credit for companies that incur R&D expenses at facilities in the United States. The tax credit, introduced in 1981, has expired eight times. It was extended 13 times. Under the tax credit, businesses and individuals get a credit equal to a portion of their expenses for research and development.
After the tax credit expired last year, Mr. Brown said, he decided the matter needed permanence.
He is proposing legislation with tax incentives, “not for one year or two years or three years, which government typically does, but to make them longer-lasting investment tax credits. So that when people invest here and do the innovation here and the production here, that tax credit, those tax incentives will remain and you can plan for the future better and continue the innovation here,” he said.
Specifically, the legislation would permanently extend the tax credit, raise the rate of the credit to 25 percent from 20 percent for research performed in the United States, increase an alternative credit formula to 20 percent from 14 percent, and increase for 10 years the domestic manufacturing tax credit to 15 percent from 9 percent.
The tax credit is usually made retroactive, so if it is passed next year, O-I probably could claim it for its Perrysburg expansion. The company plans to break ground by year’s end and finish by the end of 2013.
O-I announced the 18,000-square-foot expansion last month. It will be funded in part by a $3 million grant from the Ohio Third Frontier Commission. The glass maker said the expansion would add 45 jobs with an average salary of $75,000 a year, plus 55 contract jobs that could lead to full-time employment.
A feature of the expansion will be an area capable of melting and forming glass in a small-scale manufacturing environment.
Since 2008, O-I has invested over $30 million on its R&D facilities in Perrysburg and Lurin, Peru.
Kim Houchens, O-I vice president of research and development, said her department is focused “on creating breakthroughs that could revolutionize how glass is made and formed.”
But the expansion is just one component of O-I’s plans to invest in process and product innovation efforts, she said.
“Strengthening this tax credit and making it permanent — so important to actual job continuity for everyone in this room — is an important step that government can take to support manufacturers like O-I as we compete in a global marketplace,” she said.
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