Legislation Would Boost Investment in Innovation, Expand Access to Tax Credit for Small Business Startups

WASHINGTON – U.S. Rep. Jackie Walorski (R-Ind.) today introduced legislation to double the R&D tax credit and allow more small business startups to access the credit.

“America’s recovery from the unprecedented crisis we are facing will be driven by our innovative and entrepreneurial spirit,” Congresswoman Walorski said. “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.”

BACKGROUND 

The bill would double the rate for each of the options businesses have to access the research and development (R&D) tax credit.

  • Double the “Traditional” Credit to 40 Percent: For more established companies, the existing traditional credit rate – which uses a complicated formula – would double from 20 percent to 40 percent of the increase in R&D spending.

  • Double the Alternative Simplified Credit (ASC) to 28 Percent: The existing ASC rate – which uses a simpler formula – would double from 14 percent to 28 percent of the increase in R&D spending.

  • More than Double the Credit for Firms with Little Research History to 14 Percent: For companies with no history of U.S. research in the past three years, the credit would more than double from 6 percent to 14 percent of R&D spending. (The current rate would have been 7 percent if not for a prior drafting error.)

  • Double the Startup Limit to $500,000: Companies with relatively low income in the past five years can take one of the above credits as a credit against Social Security payroll taxes. The limit on the amount they may claim would double from $250,000 to $500,000.

This proposal is supported by the National Association of Manufacturers.

The full text of the legislation can be found here.

Walorski represents the 2nd Congressional District of Indiana, serving as a member of the House Ways and Means Committee.

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