CPA & Business Advisory Blog

Possible Expanded R&D Credit for Start-ups

The Startup Innovation Credit Act of 2012 was introduced last week.  The bill seeks to aid young companies by expanding the application of the research tax credit. 

Currently, the research tax credit is only available to offset income taxes.  However, many early stage and start-up companies incur significant tax losses in early years while they are developing their technology.  As a result, start-ups often do not pay income taxes and generally do not receive any cash benefit for R&D credit until much later.

The new bill would allow start-ups to claim tax credits against payroll taxes instead of income taxes.  To qualify for the credit, the company must be less than five years old and have less than $5 million in gross receipts.  The credit would offset the employer side of payroll taxes up to $250,000. 

The legislation is receiving bipartisan support and is expected to go through the Senate Finance Committee in the fall.

For more information about the Startup Innovation Credit Act of 2012, contact Jim Forbes in our
Tax Planning & Preparation Services group by leaving a message below, or by calling 440-449-6800.

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