On December 18th of 2015, President Obama signed into law a sweeping $1.14 trillion dollar funding bill that will keep the federal government operating through September 30th of 2016. In connection to the tax aspects of this comprehensive and pivotal legislation, the Protecting Americans from Tax Hikes Act of 2015 (hereinafter the “PATH Act”) accomplished considerably more than the typical tax-extenders legislation passed in previous years and truly signifies a dynamic paradigm shift as the PATH Act makes permanent over twenty leading tax incentives while extending other tax incentives over either a five year period or a two year period.
In particular, the PATH Act meaningfully enhanced the R&D Tax Credit Program (hereinafter “RTC program”) on a myriad of levels. As an overview, the RTC program was initially added to the U.S. Internal Revenue Code (hereinafter the “Code”) in 1981 through the Economic Recovery Tax Act of 1981 as a temporary provision of the Code. The RTC program had most recently expired on December 31, 2014. A tremendous paradigm shift to the RTC program was made possible through the PATH Act which not only renewed the RTC retroactively for all of calendar year 2015 but most importantly made the RTC program permanent. In addition, the enhanced RTC program has been considerably restructured to:
Allow eligible small businesses (i.e., $50 million or less in gross receipts) to claim the credit against the Alternative Minimum Tax (hereinafter “AMT”) for tax years beginning after December 31, 2015;
Allow eligible startup companies (i.e., those with less than $5 million in gross receipts and earning revenue for less than 5 years) to claim up to $250,000 of the credit against the company’s federal payroll tax for tax years beginning after December 31, 2015; and
Allow Alternative Simplified Credit (hereinafter “ASC”) filers an increase from 14% to 20% in benefit.
Please contact me to discuss the scope and application of the PATH Act and its impact on your R&D Tax Credit claim and / or for assistance in identifying, gathering, and documenting a sustainable R&D Tax Credit claim.
A copy of the PATH Act can be downloaded for your reference at:
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