R&D Tax Credit Extensions

Thanks to the U.S. Senate Finance Committee, the first steps were taken on April 3, 2014, to extend many of the business tax credits, including the Research and Development (R&D) Tax Credit. The bill provisions extend these credits for two years, to December 2015, covering all of 2014 and 2015 with no break in benefits that expired in December 2013.

Many consider the R&D Tax Credit, which has expired intermittently since 1981 when it became law, a popular driver of these tax credit extensions. The Senate Finance Committee agreed to accept a bipartisan amendment that makes the R&D tax credit, for the first time, eligible and accessible to start-up companies and allows the R&D tax credit to be claimed against the individual Alternative Minimum Tax (AMT) for 2014 and 2015, which is an enormous help to small and medium-sized businesses. These two R&D tax credit provisions encourage both innovation and job growth.

The bill, though, still needs to be finalized and considered in the House of Representatives, but it gets closer with each step.

What are next steps?

 The bill now goes to the Senate floor for consideration and most anticipate a vote in favor of the bill. Timing is uncertain, but the action of the Finance Committee combined with bipartisan support will lead to the Senate considering sooner rather than later. This issue is on the docket for the House Ways and Means Committee to hear on April 8, 2014. No one knows what the House will do, but the Senate will be expected to ask how long it will take the House to provide these popular tax reliefs to businesses, as well as individuals. Some say the extensions won’t take effect until after the November elections, but with the bipartisan support, these extensions may be addressed prior to the elections.

Other business tax benefits included in the extension bill are the Work Opportunity Tax Credit, Expensing (Section 179), Bonus Depreciation and energy-efficiency breaks such as the Energy Efficient Commercial Building (Section 179D).