On the Horizon: A Brighter Tomorrow for the R&D Tax Credit

folderHappy 10/17 to all you tax pros out there! As we celebrate the conclusion of most of our tax year 2015 clients, BRAYN wants to remind you of some exciting things on the horizon for the R&D Tax Credit.

The “Protecting Americans from Tax Hikes” (PATH) Act of December 2015 brings some welcomed and long-awaited changes to the R&D Tax Credit. Internal Revenue Code § 41, entitled the “Credit for increasing research activities” (“the R&D Tax Credit”), has been around since 1981. However, many taxpayers in an alternative minimum tax (AMT) position and startups have rarely been able to utilize the credit. That is until the PATH Act improvements. Below is a summary of these changes:

AMT and R&D: Many taxpayers in the past were prevented from utilizing the R&D tax credit due to AMT limitations. However, the PATH Act of December 2015 brought some very positive change. For credits determined starting with tax year 2016, closely-held companies not exempt from taxation under IRC Section 501 with less than $50 million in average gross receipts (AGR) over the prior 3 years are no longer limited in using their R&D Tax Credits by Alternative Minimum Tax (AMT).

Startups, Payroll Tax, and R&D Tax Credits: Also starting with tax year 2016, qualified businesses with less than $5 million in gross receipts in the credit year, and no gross receipts for any taxable year preceding the 5-taxable-year period ending with that tax year, can offset payroll tax (capped at $250,000 per year) with R&D Tax Credits.

Let BRAYN uncover tax credits and incentives to help you bring optimal value to you, your firm, and your clients.

If you’re ready for your complimentary Phase 1 assessment, or would just like to learn more, contact BRAYN at 888.773.8356 or info@braynconsulting.com.

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