R&D Tax Credit Now Yields Refunds for Start-up Companies

TRCG Advisors helps companies identify tax credits to potentially reduce liability and produce refunds

The Federal R&D tax credit is a dollar-for-dollar reduction of federal income tax liability for qualified expenditures incident to the development or improvement of a product, process, software, formula or invention. The credit was recently made permanent by The Protecting Americans from Tax Hikes Act of 2015 (“PATH” Act).  In addition to enhancing the R&D credit for later stage companies, the PATH Act can provide a cash benefit to start-ups, in addition to larger, mature companies.

As a result, start-up companies can now receive refunds from the R&D credit.  Beginning in the 2016 tax year, start-up companies with annual gross receipts of less than $5 million can apply up to $250,000 in R&D tax credits against its payroll tax liability.  Before this change in law, a company had to actually generate a profit and taxable income to utilize the R&D tax credit.  With this change, startup companies can receive a refund of a portion of their payroll tax payments.

Companies of all types can qualify as long as they are performing qualified research and development.  For example, assume an early-stage information technology-based company has approximately $1,500,000 in annual payroll expenses, of which $1,000,000 consists of wages paid for software development.  If the company meets the qualified small business criteria, it should qualify for between $45,000 and $100,000 in federal R&D tax credits.  Assuming the company has no tax liabilities to offset, it can apply the R&D credits against its payroll tax liability of +/-$93,000, which would generate an immediate refund.

“TRCG is excited to have the opportunity to work with the high-impact startups the Institute support,” said Adam M. Weems, Managing Director. “We joined the Leadership Council to show our commitment to Florida’s developing innovation economy, and look forward to assisting companies who may qualify for the tax credits that are now available through the PATH Act.”

"The Institute and TRCG Advisors share the goal of supporting the success of high growth-potential companies in Florida, and we anticipate that a valuable partnership will result from this effort,” said Jackson Streeter, Institute Chief Executive Officer.

For more information about TRCG Advisors and its services, visit www.trcgadvisors.com or contact Adam Weems, Managing Director at aweems@trcgadvisors.com or at 662-812-7016.

 

 

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