“A bill to amend the Internal Revenue Code of 1986 to enhance tax benefits for research activities.”
No CRS summary available for this bill.
This section restores immediate expensing of research or experimental expenditures under Section 174 of the Internal Revenue Code (reversing the requirement, effective for amounts paid or incurred in tax years beginning after December 31, 2021, to capitalize and amortize such expenditures over five years for domestic research or 15 years for foreign research). Taxpayers may, without IRS consent in their first applicable year, deduct such expenditures paid or incurred in connection with their trade or business or, at election, amortize certain capitalizable expenditures ratably over a period of at least 60 months (beginning when benefits are first realized); the provision excludes expenditures for land, depreciable or depletable property, mineral exploration, or unreasonable amounts and includes conforming amendments to the R&D tax credit under Section 41 and deduction coordination rules under Section 280C(c).
This section expands the qualified small business research credit—allowing startups and small businesses both to elect a refundable portion (up to 14%) of the section 41 research tax credit for qualified research expenses and to receive refunds exceeding tax liability—by (1) increasing the annual cap on the refundable amount to an escalating "applicable amount" from $250,000 to $500,000 for taxable years beginning in 2025, rising in $25,000 annual increments to $750,000 for taxable years beginning in 2035 and thereafter; (2) extending the eligible startup period (i.e., years since first gross receipts) from five to eight taxable years for both initial eligibility and the limitation on electing the refundable credit; and (3) raising the average annual gross receipts threshold from $5 million to $15 million and modifying the prior-period receipts test from "gross receipts" to "gross receipts in excess of $25,000." The changes apply to taxable years beginning after December 31, 2024.
This section increases rates under the alternative simplified credit (ASC) of the research tax credit for qualified small businesses (as defined in IRC §41(h)(3), generally startups with limited gross receipts and operating history). Specifically, for such businesses, it (1) raises the base ASC rate to 20% (from 14%) of qualified research expenses exceeding 50% of the average for the prior three taxable years, and (2) if no qualified research expenses in those years, allows taxpayer election of either a 10% rate (from 6%) of qualified research expenses or calculation of the base rate by disregarding years with no qualified research expenses.