WASHINGTON – The year-end tax extenders bill released last night includes three important provisions previously introduced by U.S. Senator Chris Coons (D-Del.) that will allow businesses to grow and create jobs, especially in the manufacturing industry. The bill will permanently extend the R&D tax credit, help startup companies access the credit, and allow small and medium-sized businesses to use the credit against Alternative Minimum Tax (AMT) liability.
Senator Coons’ first piece of legislation in the Senate called for a permanent extension of the R&D credit. This is one of the most important credits to American businesses and until today, Congress has failed to permanently extend it. In fact, the R&D tax credit was initially enacted in 1981 and has been temporarily extended 16 times.
The extenders bill also includes two provisions introduced by Senators Coons and Pat Roberts (R-Kan.) in the Innovators Job Creation Act. The first provision will help startup companies access the R&D credit. Under current law, the R&D credit is non-refundable, so only firms with income tax liability can benefit from the credit. Since many new companies invest heavily in research and development in their first few years and don’t have income tax liability, they are unable to claim the R&D credit. To solve this problem, this provision would allow a startup that cannot access the R&D credit because it does not have an income tax liability to instead claim the credit against the taxes it pays on employee wages. This simple tweak would allow thousands of innovative startups to access the R&D credit.
The second provision would allow the R&D credit to be claimed against the AMT. Right now, even if a company is entitled to the R&D credit, many pass-through entities cannot claim it because the R&D credit cannot be used against the AMT. Eight out of 10 businesses that would otherwise benefit from taking the R&D credit will receive little to no benefit because of the AMT.
“Research and development are the lifeblood of great American companies, turning ideas into innovations that grow businesses and create jobs,” said Senator Coons. “Helping companies in Delaware and across the country, particularly the startups that are creating the majority of our country’s jobs, invest in the R&D they need to grow their business has been a top priority since my first day in the Senate. I’m thrilled to see two provisions from my very first bill that will make it easier for startups to access the same R&D tax credit currently accessible to larger companies become law. Our tax code will finally encourage job-creating R&D for companies of all sizes.”
“Senator Coons has been a tireless advocate for permanently extending the R&D tax credit and making sure startups and small businesses across the country can more easily access R&D tax credits in order to innovate and create jobs. I welcome his hard work and smart ideas for strengthening our tax code,” said Senator Ron Wyden (D-Ore.), Ranking Member of the Senate Committee on Finance.
"These important R&D tax credits will support start-ups and small businesses working on innovative technologies in Delaware," said Kelvin H. Lee, Ph.D., Director of the Delaware Biotechnology Institute. "The Startup Innovation Credit recognizes the important role that innovative science plays in supporting our economy and will lead to a stronger economy."
“We applaud Senator Coons’ leadership on this important issue,” said Stephen S. Tang, Ph.D, M.B.A., President and CEO of the University City Science Center, a dynamic hub for innovation and entrepreneurship headquartered in Philadelphia. “These proposals will enable earlier-stage startups to access the benefits of the R&D tax credit, therefore spurring greater technology commercialization and economic growth.”
Senators Coons is the co-Chair of the Senate Competitiveness Caucus, a forum to bring together Democrats and Republicans to address the most pressing issues facing the economy. Coons is also the co-head of the Manufacturing Jobs for America campaign, launched last Congress to rally bipartisan support for legislation that would help manufacturers grow and create jobs.