Tillis’ bipartisan bill would spur R&D investments by new, small American businesses

U.S. Sen. Thom Tillis (R-NC) recently introduced bipartisan legislation to expand the refundable Research and Development (R&D) tax credit by raising outdated caps and incentivizing startups to increase R&D investment. 

“Research and development plays a crucial role in allowing small businesses in North Carolina and across the country to grow and create jobs,” Sen. Tillis said. “This bipartisan legislation will expand the R&D tax credit so American innovation can continue to thrive and compete globally.”

Refundable tax credits are vital for new and small businesses that are not yet profitable enough to have income tax liability. However, startups have limited access to the R&D tax credit because of restrictions on its refundability, according to information provided by Sen. Tillis’ office. 

Currently, the refundable R&D tax credit is capped at $250,000 and cannot exceed a business’ Social Security payroll taxes. And small businesses are only eligible for the refundable R&D credit if their gross receipts are less than $5 million, the information says.

Sen. Tillis on July 23 cosponsored the Research and Development Tax Credit Expansion Act of 2019, S. 2207, with bill sponsor U.S. Sen. Maggie Hassan (D-NH) to increase the refund cap from $250,000 to $500,000; extend the credit to all small businesses with less than $10 million in annual revenue; and broaden how the refundable credit is claimed against payroll taxes, according to a section-by-section summary of the bill provided by the lawmakers. 

If enacted, S. 2207 also would bolster incentives for startups to increase R&D investment and remove barriers that limit their ability to claim the credit, the summary says.

S. 2207 has garnered support from the Center for American Entrepreneurship, the National Venture Capital Association, the Angel Capital Association, and the Information Technology & Innovation Foundation.