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House backs permanent business research tax credit

WASHINGTON (Reuters) - The U.S. House of Representatives on Friday voted 274-131 to approve making a tax credit for business research and development (R&D) costs a permanent part of the federal tax code for the first time.

The bill will face an uphill battle in the Democratic-controlled Senate amid criticism that its estimated $156 billion cost to U.S. taxpayers over 10 years is not offset by any new tax revenue. The bill would give businesses a 20 percent tax break for qualifying research expenses.

The credit is one of dozens of U.S. tax laws that are temporary. It has been extended 15 times since it was enacted in 1981. It technically expired at the end of 2013.

President Barack Obama has already said he would veto the measure if it arrives on his desk. He has said he wants to make the R&D credit permanent, too, but he and fellow Democrats want new tax revenue to pay for the credit's costs, rather than tack those costs on to the federal budget deficit.

"This vote today requires absolutely no courage ... This is ice cream without the spinach," said Representative Steny Hoyer, the No. 2 Democrat in the House, before the vote.

The R&D credit is one of about 50 temporary tax breaks known as "extenders," so named because they need to be renewed regularly.

House Republicans want to make the R&D credit permanent and eliminate other tax extenders as a first step toward comprehensive tax reform, analysts said. But the tactic is unlikely to succeed, they said.

"This approach will die in the Senate," said Greg Valliere, chief political strategist at Potomac Research Group.

As soon as next week, the Senate is expected to consider a bill that would renew about 50 tax extenders, including the R&D credit, through 2015. The two-year extenders package would cost about $85 billion.

(Reporting by Patrick Temple-West; editing by Kevin Drawbaugh, Chizu Nomiyama and Matthew Lewis)

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