News and Insights

House Passes Legislation for a Permanent Research and Experimentation Tax Credit

Tax Development May 26, 2015

On May 20, 2015, the U.S. House of Representatives passed the American Research and Competitiveness Act of 2015 (H.R. 880). The bill would make permanent the alternative simplified credit (ASC) associated with the federal credit for increased research activities, and it would increase the ASC rate from 14% to 20% of the annual qualified research expense that exceeds one half of the prior three-year average. The legislation would allow eligible small businesses (privately held entities with gross receipts of less than $50 million) to use the ASC credit as an offset to alternative minimum tax liabilities.

In addition, the bill would make permanent a 20% credit for basic research payments that exceed one half of the prior three-year average, and a 20% credit for current payments made to an energy research consortium. The bill would not renew the regular research credit, with a 1984 through 1988 base period, which expired on December 31, 2014.

The legislation is part of Congress’s larger agenda to pass corporate tax reform this year. The bill is estimated to reduce federal revenues by $181.6 billion over the next ten years. No offsets were identified in the bill to replace the revenue that would be lost as a result of the legislation. Unless the Senate identifies funding to offset the costs of the bill, President Obama promises to veto the legislation because of the impact it will have on federal deficits.


Jeff Malo

Stephanie Shell Condon