Federal R&D Tax Credit Permanently Extended – 2015 R&D Studies Underway
The Federal Research & Development (R&D) Tax Credit has been retroactively and permanently extended.
Signed into law by the President on December 18, 2015, the Protecting Americans from Tax Hikes Act (“PATH”) has permanently and retroactively extended the Federal R&D Tax Credit for tax years starting after December 31, 2014.
The credit previously expired on December 31, 2014 and was pending retroactive renewal for nearly a year along with other tax incentives.
Prior to the announcement of a permanent R&D Tax Credit, the R&D Tax Credit along with other incentives were subject to periodic expirations, followed by subsequent renewals. This had been the standard practice with the R&D Tax Credit, which has expired and been renewed 17 times since its introduction with the Economic Recovery Tax Act of 1981.
In addition to making the R&D Tax Credit permanent, lawmakers have added two additional benefits to the credit for certain groups of tax payers. For tax years that begin after December 31, 2015, eligible small businesses who gross $50 million or less of gross receipts may claim the credit against their Alternative Minimum Tax (AMT) liability. Small startup businesses who have less than $5 million of gross receipts may claim up to $250,000 per year of the R&D Tax Credit against their employer FICA tax liability.
WOTC Renewed through 2019 – Waiting for Word on “Transitional Relief Period”
PATH includes a renewal of the Federal Work Opportunity Tax Credit (“WOTC”) program for an unprecedented five-year period through December 31, 2019, and retroactive to its previous expiration on December 31, 2014. All paperwork submitted within 28 days of employees’ 2015 hire dates can now be reviewed for qualification by State Workforce Agencies (WOTC Centers). ROMO continued to file WOTC paperwork with the WOTC Centers for its clients’ new hires throughout the hiatus period (January 1, 2015 through today) to ensure that no credits would be lost as a result of the hiatus.
The IRS and the Department of Labor have yet to determine as to whether a “Transition Relief Period” will be applied, which would temporarily waive the required 28-day filing deadline and allow companies to go back and screen all new hires that occurred on or after January 1, 2015. With WOTC’s last retroactive renewal – slightly less than one full year after its expiration on December 31, 2013 – such a period was granted. This resulted in the opportunity to retroactively submit WOTC paperwork for employees hired during the hiatus period between program expiration and ultimate renewal.