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FI Group supports new bill to expand the Federal R&D Tax Credit

On July 23, 2020, Senators Coons, Roberts, Reps. DelBene and Walorski introduced legislation (H.R. 7766) to double the rate for each of the options businesses have to access the research and development (R&D) tax credit and allow more small business startups to access the credit.

By providing vital tax support to innovative startups and businesses, the bipartisan, bicameral FORWARD Act will help to combat the COVID-19 pandemic and rebuild a stronger U.S. economy” said Sen. Coons.

Here are the main features of the Furthering Our Recovery With American Research and Development or FORWARD Act:

  • Double the “Traditional” Credit to 40%: For more established companies, the existing traditional credit rate – which uses a complicated formula – would double from 20% to 40% of the increase in R&D spending.
  • Double the Alternative Simplified Credit (ASC) to 28%: The existing ASC rate – which uses a simpler formula – would double from 14% to 28% of the increase in R&D spending.
  • More than Double the Credit for Firms with Little Research History to 14%: For companies with no history of U.S. research in the past three years, the credit would more than double from 6% to 14% of R&D spending.
  • Double the Startup Limit to $500,000: Companies with relatively low income in the past five years can take one of the above credits as a credit against Social Security payroll taxes. The limit on the amount they may claim would double from $250,000 to $500,000.

The bill text is available here. FI Group will provide regular updates on the following stages of the legislative process.