On May 4, 2020, Senator Chris Coons (D-DE), along with 5 other senators representing both Republicans and Democrats, introduced the Furthering Our Recovery with American Research and Development Act (FORWARD Act). The FORWARD Act provides expanded tax support for American companies that invest in the research and development (R&D) of new products and technologies. A companion bill was introduced in the U.S. House of Representatives by Rep. Susan DelBene (D-WA) and co-sponsored by Rep. Jackie Walorski (R-IN) on May 5, 2020. The legislation would amend the Internal Revenue Code of 1986 to expand and modify the R&D tax credit. Specific benefits of the Act that were listed in a one-page synopsis of the bill include:

 

  • Improves access to the credit for new small- and medium-sized businesses. Firms with up to $20 million in gross receipts will be eligible to use the credit to reduce their payroll tax obligation during a span of 8 years—up from current thresholds of $5 million and 5 years. A new de minimis threshold delays the start of the 8-year window until gross receipts exceed $25,000.

 

  • Targets specific activities that strengthen the American economy by spreading knowledge, new ideas, and work opportunities to a larger fraction of the U.S. workforce. The full R&D credit is expanded to cover R&D-related worker training costs. For R&D performed by domestic manufacturers or in collaboration with other entities, the credit rate is increased by one quarter (to 25% and 17.5% for RRC and ASC, respectively).
  • Activates the R&D credit by providing outreach, education, and training for businesses with limited accounting expertise, to be provided by the Small Business Administration and the IRS.

 

Rep. Walorski is quoted as saying, “Our country is facing an unprecedented challenge, but I know we will emerge even stronger because of American innovation and entrepreneurial spirit. Boosting investment in research and development – including for new treatments and vaccines – will not only help in the fight against coronavirus, it will put America’s small businesses and manufacturers on the best path to rebuilding our economy.”

 

A full copy of the a one-page synopsis of the bill is available HERE.

 

Additionally, the full text of the legislation is HERE. A recent study released by the American Economic Association demonstrates the value of such tax credits, particularly for smaller companies, given they are more responsive than larger ones due to limited cash reserves. A copy of that study is HERE.