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The President signed a final Research & Development bill via the Path Act 9. R&D Tax Credit Highlights:
1) R&D is now permanent. No more waiting on extensions. R&D is authorized retroactive to December 31, 2014 (i.e., allowed for 2015).
2) R&D Credits are now allowed to offset AMT (Qualified Small Businesses with less than $50M in gross receipts only). This is effective for amounts paid or incurred after December 31, 2015, so takes effect next tax year for most taxpayers.
3) Added a new initiative to allow offset the first $250,000 of taxpayer’s portion of Payroll Tax (FICA) (only Qualified Small Businesses with less than $5M in gross receipts and no gross receipts for any taxable year preceding the 5-taxable years being filed). 1065 Partnerships and 1120S S-Corps make the election at the entity level, so there is no need to flow this through to partners/shareholders. This is effective for amounts paid or incurred after December 31, 2015, so also takes effect next tax year for most taxpayers. Clearly this is a huge win for start-ups who have incurred losses for their first 5 years in business – a significant tax planning consideration for taxpayers.
