Sen. Roberts Introduces R&D Tax Credit Bill
As part of our ongoing plan to track the Manufacturing Jobs for America Congressional initiative, we bring you news about updates to the relevant bills proposed by the initiative’s members. For more news, visit our Manufacturing Jobs for America page.
On January 14, Sen. Pat Roberts (R-KS) introduced Senate bill 1920, the Innovators Job Creation Act, which intends to ament the Internal Revenue Code of 1986 to extend and modify the R&D tax credit, with the aim of eking out more innovation. The bill is a variation on the Startup Innovation Credit Act of 2013 (S. 193), which was written by Sen. Coons (D-DE).
The bill is currently co-sponsored by the initiative’s head, Sen. Coons, and has been referred to the Senate Finance Committee for consideration before it may be passed on to Congress for voting.
The bill would allow qualified small businesses to use a portion of its tax credit for increasing research costs as an offset against its payroll tax liability, and limits that to $250,000 in any taxable year. These small businesses are defined as a corporation, partnership or S corporation with gross receipts for the taxable year of less than $5 million.
The initiative says that many startup firms are shut out of the R&D tax credit even though they create the most jobs. This change to the Revenue Code would allow these companies to claim the R&D credit against their employment taxes, which would provide the needed cash to grow.
The amount to which this bill would influence manufacturing job growth is unclear at best. Even hardware-based startups tend to use established contract manufacturers to create their products, and not with their own production lines. Sometimes, those companies will expand into a facility and begin producing their own hardware, but by that point, they would likely not qualify for this amended credit allowance. At first glance, this seems more beneficial to the software startups, for example, that have made Silicon Valley famous.
The full bill text can be found here.