On April 3, 2014, The Senate Finance Committee agreed to expand the Federal-Level Research and Experimentation Tax Credit (hereinafter “RTC”) for certain small businesses, making the tax incentive available to companies that don’t have an income tax liability.

The change, pushed by Senator Chuck Schumer (D-N.Y.) and other lawmakers on the Hill, proposes to make the RTC available to many start-up companies that typically aren’t able to claim it during their first years in operation, as Senator Chuck Schumer indicated at the Finance Committee’s markup on expired tax incentives. Senators across both sides of aisles approved the proposal on a voice vote, with no objections.

Pursuant to the currently expired statute, companies can take the RTC only if they have income tax due. With the amendment, they can take the credit in the following year, even without a tax liability. Companies would claim the R&D credit against their employment taxes rather than their income taxes, Senator Chuck Schumer said. In order to qualify for the Startup Innovation Credit, a company must be less than five years old and have less than $5 million in gross receipts.

Due to the fact that the expired RTC has overwhelming support on both sides of aisles it was said that its extension is one imperative reason not to put off the extenders package any longer.

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