A tax credit for work you’ve already done
Innovative companies across the US claim billions in R&D tax credits each year. Recent changes in legislation allow early-stage, and even pre-revenue, companies to take advantage of this significant financial incentive.
The Federal Research and Development Tax Credit was established in the early 1980’s as an incentive to stimulate growth in the US economy. But due to the fact it was an income tax credit, it saw little use by pre-revenue startups.
Originally established by the Economic Recovery Tax Act (ERTA) to reward innovation in the US.
Prior to 2016, 87% of credits were claimed by companies >$100M in revenue.
The financial opportunity is significant, and amounted to nearly $14B in credits in 2015 alone.
The PATH Act signed on December 18, 2015 opened the door for early-stage companies to claim the R&D credit as a payroll tax offset.
Startups, investors, and funders have access to a new form of non-dilutive capital that never existed before
Recent changes in legislation clarified the definition of qualified research, allowing tech-focused startups to take advantage of this federal incentive.
New way to monetize
Claim up to $250,000 in R&D tax credits against payroll taxes per year
R&D money for startups
Companies with little or no revenue can now monetize the credit if they are a “qualified small business”
Here to stay
Permanently enacted into legislation with bi-partisan support
Do you qualify?
Less than $5 million in gross revenue in the credit year.
No gross receipts for any year preceding the five-year period ending with the credit year.
Computer science based product/service development
Discovery and design of new materials, particularly solids
Agriculture, food production, medicine
Mobile, manufacturing, and medical
Innovative or novel materials development
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