In an effort to rebuild the economy for workers, families, and small businesses, the Commitment to American GROWTH Act will lock in key provisions to help support businesses and maximize innovation through research and development.
The legislation was introduced by Rep. Kevin Brady, R-Texas, the top Republican on the tax-writing House Ways and Means Committee, and House Republican Leader Kevin McCarthy of California is intended to create or expand other tax provisions designed to boost domestic investment.
What the Commitment to American GROWTH Act Means for Businesses
The changes outlined in the proposal would reduce tax burden and provide an increase in incentives for qualifying activities such as medical research. The bill would repeal R&D Amortization costs beginning in 2022, restore immediate R&D expenses, double the R&D tax credit from 20 percent to 40 percent, and allow companies to bring back intellectual property that was developed offshore without any immediate U.S. tax cost.
The intention is to incentivize long-term investments right here in the US and support high-paying jobs in production and applied research providing a higher standard of living for Americans.
“The fact that this bill would repeal the TCJA provision that requires amortization of R&D expenses beginning 2022 is an important step in helping U.S. businesses stay competitive globally,” says Tri-Merit Partner Randy Crabtree, CPA.
“I do believe there will be enhancements to the R&D tax credit within the next year. The proposed increase from The Commitment to American Growth Act highlights the importance of the R&D tax credit to our economy,” says Crabtree.
If passed, the bill would also double the Alternative Simplified Credit from 14 percent to 28 percent, raise the credit for R&D expenses from 6 percent to 14 percent of the spending if the company has no history of U.S. research activity in the past three years.
In addition, the startup limit would double to $500,000 for companies with a relatively small amount of income in the past five years. These companies will potentially have the ability to choose to take one of the above credits as a credit against their Social Security payroll taxes.
The bill includes an Advanced Medical Manufacturing Credit as well. This 30 percent tax credit for new investments in advanced manufacturing equipment or machinery can be used in the U.S. to manufacture medicines and medical devices to reduce our dependence on China for manufacturing. It is important to note that the credit would phase down to 20 percent in 2028, 10 percent in 2029, and phase out in 2030. However, this could be a great opportunity for businesses manufacturing medical equipment on US soil to expand their efforts.
The Domestic Medical and Drug Manufacturing Credit in the bill would lower the tax rate on income made from the manufacturing and sales of active pharmaceutical ingredients and medical devices.
By providing a credit of 10.5 percent of the net income from the sale of these medical products, the bill would cut the corporate tax rate in half on the company’s eligible profits.
What Can You Do to Prepare for and Take Advantage the Commitment to American GROWTH Act
The Commitment to American GROWTH Act combined with the FORWARD Act – proposed over the summer to allow taxpayers to expand the number of qualified R&D expenses and expand the amount of tax-paying businesses that are eligible to receive the credit – would result in many small to medium-sized businesses across the country having more opportunities to receive funds needed to help put the U.S. back on track and boost our economy.
Although credits are becoming more readily available, you must still be able to support, document and substantiate your case. Tri-Merit makes the process surprisingly straightforward requiring minimal time and effort on your end. For more information, call (847) 595-0094 or go to the website to set up a no-obligation consultation with our R&D tax credit experts.