WASHINGTON – Today, the U.S. Senate Finance Committee unanimously passed bipartisan legislation to allow startup companies and small businesses to access the successful Research and Development Tax Credit. The Innovators Job Creation Act would help startups and other small companies take advantage of valuable R&D tax credits that are currently unavailable to them. The legislation, led by U.S. Senators Chris Coons (D-Del.), Pat Roberts (R-Kan.), and Chuck Schumer (D-N.Y.), now heads to the full Senate for consideration.
“Companies that invest in research and development are investing in new products and processes that grow the economy and create quality, middle class jobs that our country needs right now,” Senator Coons said. “The successful Research and Development Tax Credit has helped tens of thousands of American companies invest in job-creating innovation, but startups haven’t been allowed to take advantage. Firms younger than five years old have been responsible for the overwhelming majority of our new jobs in recent years, and they are driving our nation’s economic recovery by taking risks to turn their ideas into products. Three years after I first introduced legislation to open up the R&D Tax Credit to startups, I am proud of the progress we made today and deeply grateful for the partnership of Senators Roberts and Schumer, and all of my colleagues who have cosponsored this idea over the years. Progress on this legislation is proof that we can still work together across party lines to help grow our economy.”
“Research and development in new technologies and new products is an important source of economic growth,” Senator Roberts said. “The new technologies, products, and lower prices generated by investments in R&D create new jobs, raise wages, and create new demand for goods and services. Our legislation would increase cash flow for small businesses and start-ups involved in R&D intensive activities by reducing past, current and future tax liabilities leading to permanent tax savings. This would also reduce a company’s effective tax rate, increasing cash flow and improving earnings, which results in them becoming a more attractive investment."
“We need to tear down barriers that prevent our startup companies from reaching their full potential,” Senator Schumer said. “The current structure of the R&D tax credit puts established companies ahead of the curve while leaving startups behind. Our bill would even the playing field and create jobs in New York and across the country, and we’re going to fight hard to see it passed into law.”
Despite the fact that research and development is critical for American innovators, the Research and Development Tax Credit is not accessible to many small businesses and startups. According to the Government Accountability Office (GAO), over half of the credit goes to firms with $1 billion or more in receipts, even though many commercially successful innovations originated in small, fledgling firms that could not access the R&D credit.