Pursuant to a congressional request, GAO reviewed eight studies of the research tax credit, focusing on the: (1) adequacy of the studies' data and methods to determine the amount of research spending stimulated per dollar of foregone tax revenue; and (2) other factors that determine the credit's value to society.

GAO found that: (1) four studies supported the claim that, during the 1980s, the research credit stimulated research spending that exceeded its revenue cost, but the other four studies did not support the claim or were inconclusive; (2) all of the studies had significant data and methodological limitations that made it difficult to evaluate industry's true responsiveness to the research tax credit; (3) the studies did not use tax return data to determine the credit's incentive because the authors did not qualify for access to such data; (4) publicly available data were not a suitable substitute for the tax return data because public sources used different definitions of taxable income and research spending; (5) the studies' analytical methods, such as use of industry aggregates and failure to incorporate important tax code interactions, made their findings imprecise and uncertain; (6) there was little research on the latest design of the credit to determine its effect on incentives and costs; (7) the studies' evidence was not adequate to conclude that a dollar of research tax credit would stimulate a dollar of additional short-term research spending or about two dollars of additional long-term research spending; and (8) to measure the credit's true impact, the studies would need to assess the research's net benefit to society, resource costs of research, and administrative, compliance, and efficiency costs of funding the credit.

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