Here in Washington, D.C. there has not been any significant action by Congress regarding renewing tax extenders or actual steps toward tax reform. The Senate Finance Committee has focused its attention on bipartisan “Working Groups” to seek feedback and input from stakeholders in how to best reform the federal tax code, and this month the Committee is set to review the recommendations and determine the next steps. The House Ways and Means Committee has marked up several permanent stand-alone tax bills, but no steps have been taken to revive the lapsed tax extenders package as a whole.
For those curious on the status of federal R&D and 179D legislation – here’s the latest:
179D – No bill has been introduced yet in either chamber, but efforts are underway to have a Senate bill be introduced next month with the expectation of bipartisan support. Stay tuned for an update. As for the House, once a Senate bill is introduced, it will help advocate for a House companion bill.
H.R. 880 – Sponsored by Rep. Kevin Brady (R-TX), and entitled The American Research and Competitiveness Act of 2015, the bill currently has 12 cosponsors. It was introduced on February 11, 2015, and was marked up and passed by the House Ways and Means Committee on February 12, 2015. The bill would make the R&D tax credit permanent and the Alternative Simplified Credit (ASC) would now be the only method for calculating the tax credit for qualified research expenses. The bill will also generally increase the associated credit to 20 percent of those expenses that exceed 50 percent of the average qualified research expenses for the three preceding taxable years. It also includes the provision to turn off the individual Alternative Minimum Tax (AMT) for pass-through entities, so everyone who qualifies for the R&D tax credit can claim it. The bill will be on the house floor the week of May 18 as part of a series of bills aimed at promoting innovation.
S. 455 – The Innovators Job Creation Act introduced by Senators Pat Roberts (R-KS), Chris Coons (D-DE) and Charles Schumer (D-NY). The bill was introduced on February 11, 2015 and was referred to the U.S. Senate Finance Committee.
Currently, even if a company is entitled to the R&D tax credit, many pass-through entities are unable to claim it as the credit cannot be used against AMT. The Innovators Job Creation Act would address this issue by allowing the credit to be claimed against AMT and would also enable startup firms to claim the R&D credit by claiming against their employment taxes. If a startup company cannot access the R&D credit because it does not have an income tax liability, it can claim the R&D credit against taxes it pays on employee wages. The benefit is capped at $250,000 per company, per year. The bill is currently awaiting consideration by the Senate Finance Committee.