Small Business Jobs Act Expands Availability of R&D Tax Credit for Small and Mid-sized Businesses

Sept. 15, 2010 - PRLog -- On September 14th, the Senate invoked cloture and took an important procedural step toward turning the Act into law.

Senate Finance Committee Chairman Max Baucus, D-Mont., and Small Business and Entrepreneurship Chair Mary Landrieu, D-La., introduced the Small Business Jobs Act in June to help create the right economic conditions for small businesses to create jobs.

This bill allows certain small businesses to use all types of general business credits against their AMT.  This applies to general business credits for those sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years.  

The Senate version of the Small Business Jobs Act expands the availability of the Research and Development Tax Credit for small and mid-size businesses.  Under current law, business tax credits such as the R&D Tax Credit and the Work Opportunity Tax Credit (WOTC) are limited to the amount which a taxpayer’s net income tax exceeds tentative minimum tax.  This cap on business tax credits is especially harmful to smaller businesses struggling through the economic downturn.

Under the proposed Act, business tax credits such as the R&D Tax Credit (also known as the Manufacturers Tax Credit or R&E Tax Credit) would count against the alternative minimum tax. Additionally, the new legislation would allow taxpayer’s to carry back business tax credits for five years instead of the one year allowed under current law.

For thousands of small to mid-sized businesses that could not take advantage of the R&D Tax Credit previously because of the AMT issue, the passage of this law would provide the means to now benefit from this great tax incentive and others.

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Paradigm Partners is a national tax consulting firm specializing in niche tax services: the R&D Tax Credit, the IC-DISC (US Exporters' Tax Incentive), Sales and Use Tax, Federal and State Hiring Tax Incentives, Energy Efficiency (Section 179D) and Cost Segregation Studies.