Executives for small and medium business, and investors SCORED BIG on the Research and Development Tax Credit at the Tax Extenders bill passed in December.

What provisions should every small business, startup executive and investor be aware of going forward?

Afters years of trying to make the R&D credit, (USC Sec. 41) more “small business friendly,” a coalition of innovative, pro-growth businesses, like BIO, Pharma, Technology, Defense, IT—all companies trying new things—or revamping ideas to work in different markets.

Our coalition worked with Senators Coons, Roberts, Enzi and Schumer, and Chairman Brady, among others to make the world a safer place for small businesses. We finally succeeded and now the extenders bill expanded tax law and the R&D credit is permanent. No more CFOs wringing their hands hoping Congress renews the credit retroactively.

The two most exciting and significant expansions to the R&D Tax Credit

No more “AMT worry”: Businesses with less than $50 million in gross receipts will now be able to claim the credit against their Alternative Minimum Tax (AMT). This removes removing the single greatest barrier preventing passthrough entities from being able to utilize the credit. Bumping up the against the AMT.

Now, for small businesses, the AMT doesn’t matter when it comes to R&D. You can blow through it and take the credit even if you otherwise reach the AMT limit.

There is a very innovative provision for innovation (pun intended!) The R&D credit now has a provision for startup companies, allowing young businesses to take the credit against their payroll taxes for up to five years. These companies might not have corporate tax liability YET. They may have investors or venture capital firms involved, but they have payroll tax liability. And the R&D credit really is a credit based on the W2 forms a company has for its employees working on R&D, including the CEO.

A payroll credit taken against payroll taxes for young companies doing nothing but R&D! Too sensible and logical for the US Government?

You can stop pinching yourself. It actually happened. It’s real.