USMCA Calculating the High-Wage Technology Expenditures Credit
Section 810.200 High-Wage Technology Expenditures Credit
This section explains how to calculate the second high-wage component of the LVC requirements, the high-wage technology expenditures credit. Article 7.3 of the Automotive Appendix provides that a producer is entitled to a high-wage technology expenditures credit equal to “the annual vehicle producer expenditures in North America on wages for research and development (“R&D”) or information technology (“IT”) as a percentage of total annual vehicle producer expenditures on production wages in North America.”
As explained in this section, a producer may receive a 10 percent credit towards its total LVC requirement by demonstrating that the sum of its annual expenditures in North America on wages for R&D and IT is equal to or greater than 10 percent of its annual expenditures on production wages in North America.
If a producer’s annual expenditures in North America on wages for R&D and IT are less than 10 percent of the producer’s annual expenditures in North America on production wages, then the producer is eligible for a credit equal to the actual percentage of the producer’s annual expenditures in North America on wages for R&D and IT as a percentage of its total annual expenditures in North America on production wages.
In other words, the high-wage technology expenditures credit is calculated as follows, with a maximum allowable credit of 10 percent:
Consistent with the USMCA, and as described in more detail in the Uniform Regulations, for purposes of the calculation, “annual expenditures in North America on wages for R&D” means total annual corporate spending in North America on wages for research and development, including prototype development, design, engineering, testing, or certifying operations. See Automotive Appendix, Article 7.3, n. 79; see also Uniform Regulations, Part VI, Sec. 12, ¶ 1.
Likewise, “annual expenditures in North America on wages for IT” means total annual corporate spending in North America on wages for information technology, including software development, technology integration, vehicle communications, and information technology support operations. See Automotive Appendix, Article 7.3, n. 80.
The Department invites comment on the types of R&D and IT work performed for automotive producers, including how often such workers perform other types of work in addition to their R&D and IT duties. Similarly, consistent with the USMCA, “annual expenditures in North America on production wages” means total annual corporate spending on wages for production of passenger vehicles, light trucks, and heavy trucks in North America. See Automotive Appendix, Article 7.
The Department interprets the term “wages” for purposes of the high-wage technology expenditures credit as meaning all wages paid to relevant Start Printed Page 39791workers, including bonuses, premium payments, incentive pay, and overtime premiums. “Wage” in this context is distinct from the “hourly base wage rate” defined in § 810.105(b)(1), as the treaty language addressing the high-wage technology expenditures credit refers to “wages” broadly as opposed to the narrower “base wages” used for calculating the high-wage material and manufacturing expenditures component and the high-wage assembly expenditures credit.
Thus, for purposes of calculating the numerator in the above formula, producers must total expenditures for all wages paid to workers in North America for the research and development and information technology work described above. Similarly, for purposes of calculating the denominator in the above formula, producers must total expenditures for all wages paid to workers in North America who perform direct production work. Producers often keep this data regarding total expenditures on wages in the normal course of business, and thus this interpretation of “wages” should provide administrative efficiency for producers.
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