President Signs Tax Extenders into Law; R&D Tax Credit Made Permanent

On December 18, President Obama signed into law the Protecting Americans From Tax Hikes Act of 2015 (“PATH”), which extends or makes permanent over 50 provisions of the Internal Revenue Code that had expired at the end of 2014, including several key pro-business initiatives.
The PATH legislation expands and makes permanent the Research and Development (R&D) Tax Credit retroactively to January 1, 2015. This is a very significant development, as the R&D credit generally has required annual legislative renewal.
Two additional enhancements have been made to the R&D credit, effective for tax years beginning after December 31, 2015.

  • Startup companies (those with gross receipts of less than $5 million for the current tax year and no gross receipts for any tax year before the five tax years ending with the current tax year) may utilize the R&D tax credit against employer’s payroll tax (i.e., FICA) up to $250,000. This is an important added benefit, as startup companies investing in new technologies often do not pay income taxes.
  • Additionally, smaller companies eligible to claim the R&D Credit also received an unexpected bonus in the form of the credit’s not being limited by the Alternative Minimum Tax.

The most pleasant development in the bill is that many provisions that previously were renewed annually have either been made permanent or extended for three to five year periods. This creates an environment of certainty and stability for individuals and businesses, which will enhance long term planning and decision making.
As always, AAFCPAs will keep you informed and provide further updates as they become available.
We encourage you to have AAFCPAs’ Tax Team assist you with your specific tax strategy and to ensure you take full advantage of available tax savings.  If you have questions, please contact your AAFCPA partner, or Rich Weiner, CPA, partner at 774.512.4078,  Thank you.

About the Author

Rich has over 30 years of broad tax experience with a specialty in tax planning and consulting for private and publicly-held businesses. Rich has specific expertise in the Software, Bio-Technology, Medical Device, Life Science, Manufacturing, Retail, Professional Service and Publishing industries, as well as U.S. aspects of international taxation. He works extensively with European companies expanding into the U.S. market. Additional areas of focus include companies and stockholders in transition, including structuring of and planning for Mergers & Acquisitions, planning for changes in ownership and management, and adoption of tax methodologies with a view toward the long term. He is well known in his field and is a frequent speaker on a variety of tax related topics.

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