Rep. Jackie Walorski has proposed a Fostering Innovation and Research to Strengthen Tomorrow (FIRST) Act, which would double the research and development tax credits businesses can access. It is hoped that this would make it easier for smaller firms to access tax credits and encourage economic growth by helping innovative companies to flourish — especially technology startups, which are now a central part of the economy.
The Republican is from Indiana and a member of the House of Representatives’ Ways and Means Committee, which reviews taxation.
Specifics of the bill
The primary focus of the FIRST Act is to double the rate of tax credits companies can access for all the options available, meaning the standard tax credit level would rise to 40%. It would also double the current credit rate to 40% (although the formula used here is complex).
Plus, the Act intends to double the Alternative Simplified Credit (ASC), which uses a simpler formula to be more accessible. It currently stands at 14% but would increase to 28%. For businesses with minimal or no history of carrying out research in the US over the past three years, the tax credit available would rise from 6% to 14% — representing an increase even bigger than a double since a drafting error prevented the current rate being 7%.
This isn’t the only help that innovative companies would receive. Startups would be able to claim tax credit up to $500,000, while businesses on the lower end of the income scale over the past five years would be able to apply the credits against their Social security payroll taxes. They’d also be able to claim up to $500,000, compared to a previous limit of $250,000.
Republicans that have been involved in the bill have expressed their excitement to help companies in the US increase their research and development, with hopes that it will improve the nation’s standing in certain industries. Pharmaceutical and medical firms are a particular focus.
So far, the FIRST Act has received support from the National Association of Manufacturers, but the success of the bill remains unclear.