Last month, the president signed into law the Protecting Americans from Tax Hikes Act of 2015 (PATH act) that will extend over 50 expired provisions of the tax code, including several key pro-business initiatives. Among the most vital aspects of the legislation, the extenders bill will expand and make permanent the Research and Development (R&D) Tax Credit, providing U.S. companies much needed certainty and greater access to one of the most valuable and pro-growth tax incentives.
The two key expansions to the R&D Tax Credit will begin in 2016. First and foremost, businesses with less than $50 million in gross receipts will now be able to claim the credit against their Alternative Minimum Tax (AMT), thereby removing the single greatest barrier preventing companies from claiming the credit in the past. Secondly, the bill includes a provision that opens the credit up for start-ups, allowing businesses with gross receipts of less than $5 million a year to take the credit against their payroll taxes (capped at up to $250,000 per year) for up to five years.
These are game-changing expansions and provisions for the R&D Tax Credit, which make the credit available to millions of previously unqualified U.S. businesses! With permanency, businesses owners and managers can now reliably plan for investments in new products and processes for 2016 and into the future.
Companies that may have been delaying the redesign of a database or network architecture, or that have been hesitant to hire more employees to build new product lines can now count on the R&D credit as a reliable funding source.
And, for millions of U.S. start-ups, the R&D credit is now an additional source of funding that will not dilute owner’s equity.
This is the most exciting piece of tax legislation in decades! Please contact us today to learn how your business can take advantage of these historic changes to the R&D credit.