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Economic Recovery Tax Act of 1981, Pub. L. No. 97-34.
The Act provided a 25% tax credit for the increase in a firm's qualified research costs above the average expenditures for the previous three tax years. Qualified costs included in-house expenditures such as wages for researchers, material costs, and payments for use of equipment; 65% of corporate grants towards basic research at universities and other relevant institutions; and 65% of payments for contract research. The credit applied to research expenditures through 1985.
While never made permanent, the Research and Experimentation Tax Credit has been extended many times. Several changes have been made to the rate and to the definition of "qualified expenses." Pub. L. No. 110-343 retroactively extended the credit through the end of calendar year 2009.