As the country awaits the outcome of tax reform proposals in Washington, several lawmakers have introduced legislation that would enhance the value of research and development (R&D) tax credits that businesses of all sizes can take for qualified activities.
In fact, ever since Congress enacted the Protecting Americans from Tax Hikes (PATH) Act of 2015, the R&D tax credit door has opened to more businesses than ever before. R&D is now a permanent part of the tax code, and there’s been no discussion about any modifications to the law that would affect these valuable credits.
Bipartisan Support for R&D Tax Credits
Quite the contrary, In a show of bipartisanship, U.S. Sens. Chris Coons, D-DE, and Pat Roberts, R-KS, introduced the Invent and Manufacture in America Act on June 6, 2017. The bill is intended to further enhance the research and development (R&D) tax credit for those companies that conduct R&D in the U.S. and for those who manufacture products as a result of R&D that took place in the U.S.
The bipartisan measure would enhance the value of the R&D tax credit by up to 25 percent for companies that perform the majority of their manufacturing in the U.S. The enhanced value would be graduated so that the credit rate would increase as the percentage of a company’s domestic manufacturing increases.
Another bipartisan bill from U.S. Reps. Pat Tiberi, R-OH, and John Larson, D-CT, proposes an increase to the Alternative Simplified Credit (ASC) from 14 percent to 20 percent, which is the same as the regular R&D tax credit. Further, the legislation would help new firms because it allows the tax credit to be equal to ten percent (up from four percent) of the taxpayer’s qualified research expenses for the year.
With so many tax proposals swirling around in Washington, the business world is in a wait-and-see mode to see how it all falls out. While tax reform could very well do away with many of the tax credits businesses utilize, R&D tax credits are here to say, and there is a possibility that their value will continue to increase.
Find Out if Your Activities Qualify
The R&D tax credit can be a lucrative incentive for businesses. And given the new permanent nature of the federal tax credit, now is the time to consider whether activities performed by your company qualify for major cash-saving federal and state tax credit opportunities.
We encourage all business owners to examine activities you are already engaged in to determine eligibility for R&D tax credits. Please read our e-book Business Owner’s Guide to R&D Tax Credits for a closer look at qualifying activities and industries, the four-part qualification test, how to work with an R&D tax expert, and much more.
The Skoda Minotti Tax Services Group will continue to monitor political and legislative changes and keep you updated through our blogs and newsletters. If you have questions about R&D tax credits or need more information on Tax Planning and Preparation, please contact Dennis Murphy, CPA, CCA, at 440-449-6800 or dmurphy@skodaminotti.com.
