Schock and Nye Introduce Bipartisan R & D Tax Credit for Small Businesses
Offer legislation as an amendment to Tax Extenders bill
Contact: Dave Natonski
Dec 9, 2009 -
Congressman Aaron Schock (R-IL) and Glenn Nye (D-VA) today introduced the Small Business Research and Experimentation Simplification Act, which increases the percentage of the R&D tax credit, adds to its certainty and stability, and allows for targeted refundability. If enacted, this legislation will give small businesses a more generous option to choose when tax season comes around.
Schock and Nye, the Ranking Member and Chairman the Small Business Subcommittee on Contracting and Technology, also offered this bill as an amendment to H.R. 4213, the Tax Extenders Act, which is being considered by the House this week.
“Now, more than ever, we must focus on providing appropriate incentives to those small companies which will help grow our economy and make a sustained commitment to conducting long-term, high-cost research here in the United States, contributing to a stronger economy and a higher standard of living for American workers,” said Schock. “Since the R&D credit is only available for research performed in the United States, it remains a job creator that cannot be exported. As such, the credit is certainly needed, especially as foreign governments continue to actively recruit American companies to base research operations at a low cost option abroad.”
“Investments in research and new technologies are a proven way to create jobs. Small businesses are the most innovative sector of our economy, and the R&D credit will make a huge difference for small entrepreneurs at a time when research funding is harder-than-ever to find,” said Nye. “As we work to create jobs and grow our economy, extending and simplifying this tax credit is essential to maintaining America’s competitive edge as the world leader in industries like biotechnology, defense, and energy.”
The Small Business Research and Experimentation Simplification Act:
Qualification: Small businesses in the U.S. that employ no more than 500 people
Credit: 20 percent of total qualified expenses (current credit is 14 percent)
Qualified expenses: Current definition plus the inclusion of expenditures for equipment, structures and overhead costs
Refundable: For businesses that operate in the red, the credit is refundable equal to 25 percent of the underlying credit.
• Refund is only available to the extent of negative income (not just zero tax liability which could be obtained through various other credits)
• The credit application shall be of no percentage greater than gets the qualifying small businesses financial loss to a revenue neutral year (the application of the credit under ‘refundable terms’ should not allow the qualifying business to profit)
• The refundable portion of this credit is only applicable for first 5 years of operation
Permanency: Credit operates on a 6 year life cycle
Rollover: Neither remaining percentages of credit or refund may be rolled into next taxable year
Study: GAO is required to study and report regarding the useful and effectiveness of this tax credit for small businesses along with recommended changes.