News & Blog

The R&D Tax Credit Extended Once Again – What Does 2015 have in Store?

On Friday, the White House indicated that President Obama signed the tax extender package contained in HR 5771, the Tax Increase Prevention Act of 2014. The bill, which was overwhelmingly approved in the House of Representatives and the Senate earlier this month, includes a one-year extension of the research tax credit retroactive to January 1, 2014.

As I’ve mentioned during recent weeks, it looked as though the R&D tax credit would be strengthened and made permanent this year. Republicans and Democrats in both chambers of Congress have applauded the credit for the benefit it provides manufacturers and the positive impact it has on the U.S. economy. In May, the House passed a bill that proposed making the credit permanent as well as an increase of the alternative simplified credit by about 43%. The following month, the Senate advanced a bill that would have enhanced the credit’s benefit for S-corps, allowing the credit to be used to offset alternative minimum tax, and that would have allowed start-up companies to use the credit to offset payroll taxes.

In early December, Congressional Democrats and Republicans in both chambers worked together and reached an agreement regarding the R&D credit and a handful of the 50-plus expired “tax extenders”. Unfortunately, the White House announced that the President would veto the bill if approved by Congress. Undeterred, the House Republicans offered up a backup plan — a 1-year extension of all the tax extenders retroactive to Jan. 1, 2014. The bill, HR 5771 – Tax Increase Prevention Act of 2014, passed easily in both chambers. Congressional leaders, in the meantime, have expressed they’ll press forward to make permanent and enhance the research credit after the new Congress is seated in early 2015.

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