What does a President Biden mean for the R&D Credit for startups? Here’s our prediction.

Will a President Biden change the R&D Credit for startups?

The answer is maybe.

Biden and his campaign have not made any specific statements on the R&D Credit. Though, he has committed to greatly increasing federal spending–most likely through the Small Business Innovation Research (SBIR) program and tax credits–on R&D, especially when it comes to AI, quantum computing, clean energy, and 5G.

Both parties acknowledge that federal R&D spending needs to increase.  Current federal R&D spending is now half, as a percentage of GDP, compared to the 1980s. Part of this R&D spending will probably be through increased tax credits, including enhancing the PATH Act R&D Credit. 

Keep in mind, the Obama-Biden Administration (through the PATH Act) introduced this refundable, very startup-friendly credit.

Our prediction

Currently, the PATH Act R&D Credit maxes out at $250K per year for the first five years. In the past, certain members of Congress have floated the idea of raising the annual limit to $500K and received bipartisan support, but somehow that got buried in the committee process. 

We feel that the Biden Administration will likely rekindle this $500K limit and also expand it so that startups with more than $5M in annual sales will be eligible (currently, you are not eligible if your annual sales exceed $5M per year).

An Interesting statistic

For Tax Year 2017, $53M in PATH Act R&D credits were claimed, per the Treasury Department. (This is the latest stat on the R&D Credit).  For Tax Year 2019, Accountalent helped clients claim over $11.8M in PATH Act R&D Credits.

Not only can Accountalent help you find out if your company is eligible for the R&D Credit–and claim that $$$–but we can also recommend a firm that can put together an IRS-compliant R&D Credit study in an inefficient, inexpensive manner that will take very little of your time or involvement.

Want to find out if Accountalent is right for your startup? Click here to schedule a free consultation call.