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Tax Credits and Incentives

House Republican’s Bill Would Double R&D Tax Credit

Jeff Carlson  

· 5 minute read

Jeff Carlson  

· 5 minute read

Rep. Jackie Walorski, a member of the House of Representatives’ Ways and Means Committee,  introduced legislation that would double the U.S. research-and-development tax credit and allow more small-businesses to access the incentive.

Walorski, an Indiana Republican, said her Fostering Innovation and Research to Strengthen Tomorrow (FIRST) Act (H.R. 8253) would encourage American companies, particularly small businesses and startups, to invest in innovation that would “unleash economic growth and prosperity.”

To foster innovation, the FIRST Act would double the rate for each of the options businesses have to access the R&D tax credit. The measure would double the “traditional” credit to 40%; for more established companies, the existing credit rate, which uses a complicated formula, would double, to 40% % from 20% of their increase in R&D spending.

It would also double the Alternative Simplified Credit (ASC). The existing ASC rate, which uses a simpler formula, would double, to 28% from 14% of the increase in R&D spending. The FIRST Act also would increase the credit for companies with little research history. For those with no history of U.S. R&D in the preceding three years, the credit would more than double, to 14% from 6% of R&D spending. The current rate would have been 7% if not for a prior drafting error.

In addition, Walorski’s bill would double the startup limit to $500,000. Companies with relatively low income over the past five years could apply one of the aforementioned credits against Social Security payroll taxes. The limit on the amount they may claim would double, to $500,000 from $250,000.

“This bill is crucial to making America the world leader in innovation,” said Rep. Kevin Brady of Texas, ranking Republican on the Ways and Means Committee. “With greater support for research and development, the U.S. can develop more cures, return drug manufacturing to the U.S., and achieve medical independence.”

Walorski’s bill drew support from the National Association of Manufacturers.


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