GOP lawmaker proposes to double R&D tax credit

Rep. Jackie Walorski, R-Indiana, a senior member of the tax-writing House Ways and Means Committee, has introduced legislation to double the size of the research and development tax credit and enable more small-business startups to claim it.

Under H.R. 8253, the Fostering Innovation and Research to Strengthen Tomorrow (FIRST) Act, the existing traditional credit rate — which uses a complicated formula — would double from 20% to 40% of the increase in R&D spending for more established companies. The existing Alternative Simplified Credit rate — which uses a simpler formula — would double from 14% to 28% of the increase in R&D spending. For companies with no history of U.S. research in the past three years, the credit would more than double from 6% to 14% of R&D spending. (The current rate would have been 7% if not for a prior drafting error, Walorski’s office noted.) Companies with relatively low income in the past five years are able to claim one of the above credits as a credit against Social Security payroll taxes, and under the FIRST Act, the limit on the amount they could claim would double from $250,000 to $500,000.

“The American people’s innovative and entrepreneurial spirit drives our nation’s success,” Walorski said in a statement Wednesday. “Doubling the R&D tax credit will encourage American companies — especially small businesses and startups — to invest in innovation that will unleash economic growth and prosperity. The FIRST Act will take a strategic step toward ensuring that America will lead the world in scientific discoveries, technological breakthroughs, and cutting-edge manufacturing for the 21st century.”

The legislation has won support from the influential National Association of Manufacturers. “The manufacturing industry is the backbone of American research and development and this bill would support jobs, boost innovation and help ensure America’s future competitiveness,” said David Eiselberg, senior director of tax policy at NAM, in a statement.

The Republican leader on the committee also expressed his support for the bill. “This bill is crucial to making America the world leader in innovation,” said ranking member Kevin Brady, R-Texas, in a statement. “With greater support for research and development, the U.S. can develop more cures, return drug manufacturing to the United States, and achieve medical independence. I want to thank Rep. Walorski for her leadership on this bill.”

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