Last week, congressional aides to Senate Majority Leader, Harry Reid (D-NV), and House Ways and Means Committee Chairman, Dave Camp (R-MI), were reportedly nearing a deal to address many of the tax provisions that expired at the end of 2013. The reported value of the deal was in excess of $400 billion. Many of these popular provisions, including the research and development tax credit, are currently temporary tax laws that expire every few years. While many of the extenders receive bipartisan support, the revenue offsets have been a major hurdle for years.
Policymakers are currently negotiating a deal that would temporarily extend most of the expired tax extenders while making a few of the provisions permanent. The R&D tax credit is one of the provisions not only being considered for permanency, but also for expansion. Expansion of the R&D tax credit may include an increase in the Alternative Simplified Credit rate from 14% to 20%. In addition to the extension and expansion of the R&D tax credit, the potential impact would also allow permanent deductions for college tuition, mass transit users, and state and local taxes.
Extension is not without its obstacles. Both Republicans and Democrats have put tax incentives on the table that are popular with their constituents. Republicans have been focused on pushing through several significant business tax incentives, while Democrats are primarily focused on extending provisions popular to low-income working families.
The White House has criticized the proposed deal that would address many of the tax extenders that expired at the end of 2013. White House spokeswoman Jennifer Friedman said, "The President would veto the proposed deal because it would provide permanent tax breaks to help well connected corporations while neglecting working families." President Barack Obama has maintained that any extension should include the permanency of certain tax incentives vital to working class families such as the Earned Income Tax Credit (EITC) and the Child Tax Credit. Both the EITC and the Child Tax Credit are set to expire at the end of 2017 and preliminary reports indicated that both were left out of negotiations.
As a result of not being able to agree on a permanent tax extenders package, Congress appears poised to pass a limited one year retroactive extension of the current provisions as a temporary solution. This allows for a more comprehensive package to be considered in 2015.
Author: Kevin Zolriasatain | Co-Author: Luis Guerrero, MBT
If you are currently doing research and development or have been in the past five years, you may be a good candidate to secure these tax credits