Expansion and Permanent Status of the R&D Tax Credit

On Friday, December 18th, Congress unveiled the PATH Act (Protecting Americans from Tax Hikes Act of 2015) which not only includes a 2-year extension of many tax incentives such as the 179D EPAct but also the long awaited permanent status for others. A major highlight of this legislation involves the expansion and permanent status of the Research & Development (R&D) Tax Credit.

The R&D Tax Credit is the most valuable federal tax incentive for many taxpayers. However, it has been a temporary provision since first being enacted in 1981. By becoming permanent, ETS expects to see greater awareness, planning and utilization of this significant incentive which is meant to stimulate innovation and job creation in the US.

Research & Development Tax Credit Highlights:

In addition to making the R&D Tax Credit retroactive for 2015 and a permanent incentive for the first time, this legislation includes significant enhancements to the credit beginning in 2016.

  • Companies with less than $50 million in gross receipts will be able to use the credit to reduce Alternative Minimum Tax (AMT).
  • Start-up companies (companies with less than $5 million of gross receipts per year) will be able to use the credit to offset federal payroll taxes (up to $250,000 per year) for up to five years.

These provisions will be very meaningful to business owners of companies qualifying for the credit going forward. The improvements in the R&D credit and the other 50+ extenders are a welcome holiday gift for taxpayers and CPAs as we look forward to the New Year. They will ensure that valuable dollars remain in taxpayers’ pockets, while stimulating the US economy.

Other key provisions extended include: 179D EPAct, 45L Tax Credit, Bonus Depreciation, Section §179 Expensing, New Market Tax Credits, and 15 Year Recovery Period for Qualified Leaseholds, Restaurant, and Retail Property. Visit engineeredtaxs.wpengine.com to learn more.


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