News & UpdatesTax Credits

New Bill Proposes Doubling the Research Tax Credit and More

By October 15, 2020
DST Advisory Group - New Bill Proposes Doubling the Research Tax Credit - image of US currency shown as a growth chart

The global pandemic has caused many companies to find themselves in financial distress. While investing in innovation, and in the future, goes against the urge to hold onto cash during challenging times, it is critical to do so for the economy to come back strong.  With the U.S. Presidential election less than a month away, the Research Tax Credit is a key item that could help Taxpayers. 

A new bill was just introduced on October 9, 2020 by Congressman Kevin McCarthy (R-CA) and Kevin Brady (R-TX) entitled the “Commitment to American Growth, Renewal, and Opportunities for Workers, Technology, and Health Act”, or as the shorter version “Commitment to American G.R.O.W.T.H. Act” using a catchy acronym.  This legislation would extend a number of tax breaks in the Tax Cuts and Jobs Act of 2017. 

H.R. 11 would double the rate for the Research Tax Credit, and allow startups better access to the credit.  

    • Repeal amortization of Research and Experimental expenditures, effectively reverting the treatment to pre-TJCA legislation. 
    • Double the R&D tax credit from 20% to 40% for Regular Method, and from 14% to 28% for the more popular alternative simplified credit. 
    • Better access to credits for startups by increasing the limitation from $250,000 to $500,000 and increasing the qualified small business gross receipts threshold. 

The bill also includes an Advanced Medical Manufacturing Credit – a 30% tax credit for new investments in advanced manufacturing equipment or machinery used in the U.S. to manufacture medicines and medical devices.

If the Bill passes, this legislation will help to grow the economy by incentivizing long-term investments. It aims to make America a more attractive place to grow a business, and it supports high-paying jobs in production and applied research. This would ultimately result in a higher standard of living for all Americans. Rep. McCarthy said: “As our nation continues to make significant strides toward defeating Covid, we must simultaneously work to rebuild the greatest economy of our generation. But building back isn’t enough – we have to implement pro-growth policies that will guarantee America’s citizens unprecedented prosperity.”

Earlier this summer, Rep. Walorski (R-IN) introduced similar legislation (H.R. 7766) to double the Research Tax Credit and allow for more small business start-ups to access the credit.  Congresswoman Walorski says “doubling the R&D tax credit will encourage companies – especially small businesses and startups – to invest more in research and development that will unleash economic growth and prosperity. This commonsense measure will go a long way toward keeping America ahead of our global competitors and ensuring we continue to lead the world in scientific discoveries, technological breakthroughs, and cutting-edge manufacturing.”

See the Bill at Congress.gov:

https://www.congress.gov/bill/116th-congress/house-bill/11/text?q=%7B%22search%22%3A%5B%22HR+11%22%5D%7D&r=1&s=1