Last month, the Protecting Americans from Tax Hikes (PATH) Act was passed by Congress and signed into law by President Obama. One of the many tax extenders addressed in the bill was the research credit, which was made permanent retroactive to January 1, 2015. The legislation provides two new taxpayer friendly provisions that expand the ability for certain taxpayers to benefit from the credit in tax years beginning on or after January 1, 2016.
Eligible small businesses will be able to use the research credit against their alternative minimum tax liability.
First, eligible small businesses will be able to use the research credit against their alternative minimum tax (AMT) liability. This includes companies with average gross receipts under $50M for the prior three years.
Secondly, a new provision provides some qualified small businesses (not to be confused with eligible small businesses) the opportunity to use research credits to offset a portion of their payroll tax liability. Qualified small businesses are typically startup companies with less than $5 million in gross receipts.
To learn more about how your company might benefit from claiming the research credit, please contact us.