Research & Development Credit Made Permanent, But...

Research & Development Credit Made Permanent, But...

Among the provisions of the recently enacted Protecting Americans from Tax Hikes Act of 2015 (PATH), the Research and Development Credit has been made permanent.

This adds a degree of certainty to the availability of the tax credit that has been missing, as the R&D credit has been grouped with other "extenders" that required Congress to renew them every year or two. (Please keep in mind that, with regard to federal tax provisions, "permanent" lasts only until Congress decides to change it!)

Equally important are changes that could significantly help smaller and closely held businesses, including:

PATH also increases the alternative simplified method (a streamlined way to compute the research tax credit) from 14% to 20%, which should benefit some businesses.
PATH allows small businesses (those with revenues with less than $50 million) to use the credit against the alternative minimum tax, AMT (for years beginning after December 31, 2015). It is important to note that if the business is a pass through entity, such as an S Corp or partnership or LLC taxed as a partnership, the credit is available to the stakeholder.
PATH allows qualified small businesses (generally startups) to elect to claim a portion of their research credit against their employer FICA tax liability, rather than against their income tax liability. This also applies for years that begin after December 31, 2015.

Clearly there is a lot more to the new R&D credit than first meets the eye. If you have questions, please contact Gray, Gray & Gray's Tax Department at 781.407.0300.

We go beyond the numbers by delivering insight, guidance and success to our clients.

Gray, Gray & Gray, LLP
781.407.0300

www.gggcpas.com

STAY CONNECTED

The information contained in this communication (including any attachments and/or re-directs to other online sources) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code.