Legislative Update: New Senate Bill Enhances Tax Benefits for R&D Activities, Eligible Startups

Peter Mehta

October 29, 2020 – On October 20, Senators Maggie Hassan (D-NH) and Todd Young (R-IN), both members of the Senate Finance Committee, introduced the bipartisan American Innovation and Jobs Act (S. 4822) to support research and development (R&D) investments by enhancing tax benefits for R&D activities.

In summary, the bill

  • Allows companies to fully deduct R&D expenses, reversing the changes made by the Tax Cuts and Jobs Act of 2017 requiring companies to spread the deduction over a 5- year period beginning in 2022.
  • Increases the cap on refundable R&D tax credits for eligible startups from $250,000 to $500,000, ultimately raising it to $750,000 over ten years.
  • Expands the credit for startups from 14 percent to 20 percent.

The Act also expands the number of startup companies eligible for the credit by:

  • Increasing the eligibility threshold from $5 million to $15 million in gross receipts; and
  • Lengthening the period during which startups can claim the credit from 5 years to 8 years after generating at least $25,000 in revenue

Read the full text of the Hassan-Young American Innovation and Jobs Act

Learn more about the Research & Development Tax Credit (R&D).

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