By: Monika Diehl
GOP lawmaker introduces legislature to potentially double R&D tax credit
The R&D tax credit could be getting a major upgrade.
Recently, U.S. Rep. Jackie Walorski (R-Ind.) introduced H.R. 8253, the Fostering Innovation and Research to Strengthen Tomorrow (FIRST) Act. If signed into law at the end of this year, the bill would double the research and development tax credit and allow more small businesses and growing startups to take advantage.
The proposed increase would affect both the traditional and alternative rates that are used in the calculation of the credit for companies who already have a history of doing R&D. For companies taking the credit under the traditional method, the credit would increase from 20% to 40% of their qualifying spend that exceeds a base amount. The alternative credit rate, which uses a simpler formula, would increase from 14% to 28% of qualifying research expenses.
Businesses that have not yet started R&D activities can still benefit from the proposed legislation. Under the simplified credit approach, businesses that did not have qualifying research expenses in each of the three prior years, would see an increase in their credit from 6% from 14% of R&D spend – more than doubling the amount of the benefit available to claim.
Early stage companies with little or no income can still utilize these credits by taking them against Social Security payroll taxes. The maximum amount that they can claim would also see a substantial increase: from $250,000 to $500,000.
The R&D tax credit is already a valuable opportunity for companies to get rewarded for driving innovation in the US. The proposed legislation will make this benefit even greater. If your business develops or improves processes or products, talk to one of our experts today to find out what the credit could be worth to you.
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