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.
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).
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.
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