Permanency for the R&D Tax Credit

On Tuesday December 16, Congress reached a tax deal agreement that extends over 50 expired tax code provisions. This agreement also expands and makes the Research & Development (R&D) Tax Credit permanent.
The bill’s R&D Tax Credit provision increases the number of companies that will be able to qualify for this federal tax incentive. First, the bill will allow small businesses to claim the R&D Tax Credit against their Alternative Minimum Tax (AMT). Second, the legislation allows startups or small businesses to take advantage of the R&D Tax Credit, for five years, against their payroll taxes.
Occasionally, the Kuhler Tax Credits team comes across clients that can’t take advantage of the R&D Tax Credit, regardless of their qualified research activity because of the AMT limitations. This tax limitation is one of the biggest obstacles that hinders businesses from obtaining the beneficial credit. However, the “AMT turn off” will allow thousands of small businesses, with less than $50 million in gross receipts, to claim the R&D Tax Credit without limitations.
The other massive adjustment on the tax bill is the Start-Up Act. The Start-Up Act permits small businesses or startups to take advantage of the R&D Tax Credit against payroll taxes paid by the company. This is a beneficial tax code revision given that startups are currently driving America’s innovation. Nonetheless, startups can’t benefit from the R&D Tax Credit since they don’t have an income or pay federal income tax. Under the Start-Up Act, small businesses or startups can claim up to $250,000 per year on payroll taxes. The Start-Up Act defines small businesses or startups as businesses with a gross receipt of less than $5 million a year.
If your company is investing in R&D activity contact the Kuhler Tax Credit team to learn howwe can help you take advantage of this valuable federal tax incentive. To learn more about the Research and Development Tax Credit visit the Kuhler Tax Credits or email us at

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