What Does the Future Hold for the Research and Development Tax Credit?
The rules and regulations surrounding the Research and Development Tax Credit have been rapidly changing and will continue to do so in the future. If you are looking to implement the credit into your planning this year it is increasingly important that you become aware of these changes.
Despite the Research and Development Tax Credit being permanent and enjoying bipartisan support, changes will happen to the credit as other parts of the tax code change. Every political administration seeks to accomplish certain policy goals that typically occur through taxes (either cuts or increases) and spending (either cuts or decreases) decisions. As a result, the R&D Tax Credit will likely continue to change based on those larger political and tax policy decisions. Budget, tax, and policy decisions are typically made on a ten-year window with certain assumptions on overall economic growth. Currently, the credit enjoys bi-partison support and will continue to do so. Changes could come in the form of enhancements to the alternative simplified credits. Currently, the alternative simplified credit is a 14% credit compared to a 20% regular credit. The regular credit requires a much futher look-back period into the mid-90s or mid-80s depending on when your company was founded. Documenting the early years of research expenses can be challenging for company and enhancements to the alternative simplified credit would be favorable for most taxpayers. In addition, people on both sides of the political aisle support further enhances to the R&D credit for domestic manufacturing. Finally, we are seeing the initial effects of changes made to the credit for small businesses (AMT turnoff) and startups. Additional changes and enhancements could be implemented to further improve the financial health of small businesses as more and more political leaders realize the importance of small business in relation to the economy as a whole.
Staying up to date on all of these changes can be challenging, fortunately Indago has your back and we will do the heavy lifting for you to make sure your business doesn’t miss key tax savings!