Rep. Jackie Walorski, R-Indiana, senior member of the House Ways and Means Committee, tax editor, introduced legislation to double the amount of the research and development tax credit and allow more small start-ups to claim it.
Under HR 8253, the FIRST Act (Fostering Innovation and Research to Strengthen Tomorrow), the existing traditional credit rate – which uses a complicated formula – would double 20% to 40% of increased R&D spending for more established companies. The existing Alternative Simplified Credit Rate – which uses a simpler formula – would double from 14% to 28% of the increase in R&D spending. For companies with no U.S. research history in the past three years, the credit would more than double, from 6% to 14% of R&D spending. (The current rate would have been 7% had it not been for a prior drafting error, Walorski’s office noted.) Businesses with relatively low revenues over the past five years can apply for one of the above credits as credit on Social Security payroll taxes, and under the FIRST Act, the limit on the amount they could claim would double from $250,000 to $500,000.
“The innovative and entrepreneurial spirit of the American people is what drives our nation’s success,” Walorski said in a statement Wednesday. “The doubling of the R&D tax credit will encourage American businesses – especially small businesses and startups – to invest in innovation that will spark economic growth and prosperity. The FIRST Act will take a strategic step to ensure that America will lead the world in scientific discovery, technological breakthroughs and advanced manufacturing for the 21st century.
The legislation won the support of the influential National Association of Manufacturers. “The manufacturing industry is the backbone of American research and development and this bill would support jobs, spur innovation and help ensure America’s future competitiveness,” said David Eiselberg, director head of tax policy at NAM, in a statement.
The Republican leader of the committee also expressed support for the bill. “This bill is critical to making America the world leader in innovation,” R-Texas member Kevin Brady said in a statement. “With increased support for research and development, the United States can develop more cures, return drug manufacturing to the United States, and achieve medical independence. I would like to thank Representative Walorski for her leadership on this bill.