Senators Reintroduce ASME-Endorsed FORWARD Act to Expand the R&D Tax Credit
Jun 21, 2021
“As the United States continues the work to recover from the global pandemic and grow as a leader in advanced manufacturing worldwide, it is critical that we have the right tax policies in place to allow for the continued success of our domestic manufacturing sector, including the R&D and workforce infrastructure necessary to jump start the U.S. manufacturing economy,” said Thomas Costabile, P.E., Executive Director/CEO of ASME. “This Act will create more opportunities for these small businesses to engage and grow by allowing small manufacturers an expanded R&D tax credit. Further, this Act will encourage the manufacturing sector to evolve and expand by making it easier for manufacturers and start-ups to invest in workforce development initiatives that are so critical to supporting world-class industrial research.”
In 2015, Congress passed legislation that made the R&D tax credit permanent and expanded access to more startups and small businesses. These changes were long sought after and highly impactful, but in the wake of the COVID-19 pandemic further action is needed. “There is bipartisan agreement that now is the time for a generational investment in American competitiveness and a skilled workforce that will win the next century,” said Senator Coons, a sponsor of the legislation. “The COVID-19 pandemic has highlighted the incredible benefits of innovative technologies, such as those used to rapidly develop safe and effective vaccines, but also presents an opportunity to rebuild our economy to provide more good, high-paying jobs.”
The U.S. spends far less of its GDP on federal R&D than many competitor nations. The FORWARD Act works to address some of the challenges associated with the U.S.’s insufficient R&D investment by:
- Expanding access to the research and development tax credit for new small- and medium-sized businesses. Firms with up to $20 million in gross receipts will be eligible to use the credit to reduce their payroll tax obligation during a span of 8 years—up from current thresholds of $5 million and 5 years. A new de minimis threshold delays the start of the 8-year window until gross receipts exceed $25,000.
- Strengthening the economy by incentivizing American manufacturing. The R&D credit is increased for companies that generate the majority of their gross receipts from manufacturing their products in the United States.
- Targeting specific activities that enhance economic productivity by spreading knowledge and work opportunities to the U.S. workforce. The full R&D credit is expanded to cover R&D-related worker training costs. For R&D performed in collaboration with industry consortia, academic institutions, federal laboratories, and other entities, the credit rate is increased by one quarter (to 25% and 17.5% for the Regular Research and Alternative Simplified Credits, respectively).
- Activating the R&D credit by providing outreach, education, and training for businesses with limited accounting expertise, to be provided by the Small Business Administration and the Internal Revenue Service.
A one-pager on the bill is available here.
For more information on how the FORWARD Act promotes American R&D, please visit: https://www.coons.senate.gov/news/press-releases/sens-coons-roberts-reps-delbene-walorski-lead-bipartisan-bicameral-bill-to-boost-federal-investment-in-american-randd-including-vaccine-research.