Dean Zerbe, alliantgroup’s National Managing Director and the former Senior Counsel to the U.S. Senate Finance Committee, was quoted in Tax Notes in an article referencing the OECD’s recent suggestion to make the section 41 research credit (i.e. the federal R&D Tax Credit) refundable.
In Nathan J. Richman’s piece “OECD R&D Suggestion Out-of-Date but More Start-Up Help Possible,” Zerbe offers several suggestions for ways in which the R&D Tax Credit could be further strengthened for the benefit of startups and small businesses. Referencing one of the PATH Act’s modifications to the research credit—the startup provision—Zerbe explains that the OECD’s suggestion of a refundable credit is not much different than the already enacted startup provision. Zerbe does however praise the OECD for raising the issue of the R&D credit’s shortcomings in relation to small and new businesses:
Dean Zerbe of alliantgroup LP said that while he does not see a lot of difference between the payroll tax offset and general refundability, it is helpful for the OECD to point out that the section 41 research credit is “not as strong for small businesses and new businesses.” He added, “The OECD recommendation dovetails well with exactly what the Congress did.”
On Potential Legislative Changes
Elaborating further on potential legislation changes he would like to see from Congress with respect to the R&D Tax Credit, Zerbe offered the following recommendation to expand the recently enacted startup provision:
Zerbe said one way the research credit could be improved for startups is to allow the payroll tax offset to be taken for all open years, rather than just the current year. That change would require legislation, but it would also conform the payroll tax offset provision with the rest of the research credit provisions, he said.
If implemented, the open-year expansion would provide an initial boost for a small or midsized startup company to overcome the initial cost of implementing research cost-tracking systems, Zerbe said. It could provide “a game-changing infusion of capital,” he said.
On Potential Non-legislative Changes
In addition to congressional tax policy, Zerbe also emphasized the importance of educating businesses at large on the existence and value of the research credit:
Zerbe said that beyond further legislative improvements, implementation and education are critical areas of focus. “What we have found on the small business side is that. . .only 10 to 15 percent of businesses that are eligible for the credit know they are eligible,” he said.
Click here to read the Tax Notes article in its entirety.
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