On April 3, the United States Senate Finance Committee passed the bipartisan Expiring Provisions Improvement Reform and Efficiency Act (EXPIRE) to renew virtually all of the tax relief provisions, known as ‘tax extenders,’ including the R&D tax credit.
More than 50 tax provisions expired at the end of last year – some being of more significance than others. For individuals, the expired tax provisions include mortgage tax relief, the deduction for state and local sales taxes, education tax deductions, and tax-free distributions from individual retirement accounts for charitable purposes.
For businesses, the tax extenders include: increased expensing under Section 179 (full deduction on cost of qualifying equipment) for which the limit fell from USD500,000 to USD25,000; the 50 percent bonus depreciation; the work opportunity tax credit; the excise tax rebates to Puerto Rico and the US Virgin Islands from a tax on rum exported to the United States; the credit for research and development (R&D) expenses; and tax breaks promoting renewable energy, such as the production tax credit for wind energy projects.
It has now been proposed that the R&D tax credit will be strengthened in the EXPIRE Act. In particular, the Committee accepted a bipartisan amendment to assist small and medium-sized pass-through businesses, such as S Corporations and partnerships. They will be allowed to claim the credit against the individual Alternative Minimum Tax.
The Finance Committe’s Chairman Ron Wyden (D-Oregon) put an emphasis on his expectation that the EXPIRE Act – as indicated by its name – would be the final bill that temporarily renews the tax extenders, and that by the end of next year it will have been agreed to cancel or renew them permanently within a comprehensive tax reform framework.
“By passing this bill, the Finance Committee has put an expiration date on the status quo,” Wyden confirmed. “The stop and go nature of these tax extenders contributes to the lack of certainty and predictability America needs to create more family wage jobs. But it makes no sense to let these incentives disappear without a comprehensive reform proposal to replace them when jobs, innovation and research, and people’s homes are on the line.”
Here’s hoping that this is the last R&D tax credit extension required.