Sens. Chris Coons, D-Delaware; Pat Roberts, R-Kansas; Catherine Cortez Masto, D-Nevada; Todd Young, R-Indiana; Maggie Hassan, D-New Hampshire; and Steve Daines, R-Montana, along with Reps. Suzan DelBene, D-Washington, and Jackie Walorski, R-Indiana, introduced on May 4 the Furthering Our Recovery With American Research and Development Act, or FORWARD Act — legislation to provide expanded tax support for American companies that invest in the research and development of new products and technologies.
“As the U.S. confronts this public health and economic crisis, it is critical that we do everything we can to support the American companies that will develop the vaccines, products and technologies necessary to move our country forward,” said Coons. “By providing vital tax support to innovative startups and businesses, the bipartisan, bicameral FORWARD Act will help to combat the COVID-19 pandemic and rebuild a stronger U.S. economy.”
The U.S. spends far less supporting R&D than international competitors. This places American businesses at a disadvantage, undermining the U.S. economy and leaving the country ill-prepared for crises like COVID-19. In 2015, Congress passed legislation authored by Coons and Roberts to make the R&D tax credit permanent and to expand access to the credit for more startups and small businesses. These changes addressed urgent problems, but as the current crisis makes clear, further steps are needed.
The FORWARD Act:
— Expands access to the research and development tax credit for new small- and medium-sized businesses. Firms with up to $20 million in gross receipts will be eligible to use the credit to reduce their payroll tax obligation during a span of eight years — up from current thresholds of $5 million and five years. A new de minimis threshold delays the start of the 8-year window until gross receipts exceed $25,000.
— Strengthens the economy by incentivizing American manufacturing. The R&D credit is increased for companies that generate the majority of their gross receipts from manufacturing their products in the United States.
— Targets specific activities that enhance economic productivity by spreading knowledge and work opportunities to the U.S. workforce. The full R&D credit is expanded to cover R&D-related worker training costs. For R&D performed in collaboration with industry consortia, academic institutions, federal laboratories, and other entities, the credit rate is increased by one quarter, to 25% and 17.5% for the Regular Research and Alternative Simplified Credits, respectively.
— Activates the R&D credit by providing outreach, education and training for businesses with limited accounting expertise, to be provided by the Small Business Administration and the Internal Revenue Service.
The bill text is available at bit.ly/35zO9Ab.