PATH Act gives big boost to technology innovation
New law allows tech companies to claim R&D credit against payroll taxes
Friday, Dec. 18, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). As part of this act, the Research & Development Tax Credit has been permanently extended.
The PATH Actmakes the R&D tax credit permanent starting in 2016.
Specifically, an Eligible Small Business (defined as gross receipts of less than $5,000,000 and no gross receipts prior to the five taxable years prior) will be able to claim its R&D tax credit against payroll taxes paid by the employer.
Previously, companies without income tax liability or companies that were limited to Alternative Minimum Tax (AMT) had to carryforward R&D tax credits for future use. For tax years beginning on or after Jan. 1, 2016, Eligible Small Businesses will be able to get the tax benefit of the R&D tax credit within the immediate tax year.
Additionally, companies with $50 million or less of gross receipts for the prior three years can claim the credit against AMT tax liability.
For a comprehensive overview of the PATH Act, view the summary of the key provisions for both businesses and individuals on The Committee on Ways and Means’ site.
To find out how your technology company can leverage these provisions, contact Katz, Sapper & Miller’s Technology Industry Services Group.