The federal research and development (R&D) tax credit would be doubled under a bill introduced last week in the U.S. House of Representatives.

Rep. Jackie Walorski, R-Ind., a member of the Ways and Means Committee, introduced the Fostering Innovation and Research to Strengthen Tomorrow Act, or FIRST Act. The bill would increase the research and development credit from 20% to 40% for companies that have had research expenses within the three preceding years and increase the alternative simplified credit from 14% to 28%, according to the bill.

"Doubling the R&D tax credit will encourage American companies — especially small businesses and startups — to invest in innovation that will unleash economic growth and prosperity," Walorski said in a statement. "The FIRST Act will take a strategic step toward ensuring that America will lead the world in scientific discoveries, technological breakthroughs and cutting-edge manufacturing for the 21st century."

The measure would also increase the research credit for companies with no research expenses in the three preceding years from 6% to 14%. Additionally, the proposal would allow small businesses to take any of the credits included in the bill as a credit against Social Security payroll taxes for up to $500,000. Under current law, the limitation is $250,000.

The bill, if signed into law, would take effect Dec. 31. Rep. Kevin Brady of Texas, the top Republican on the Ways and Means Committee, said in a statement that the bill is crucial to making the U.S. a leader in innovation.

"With greater support for research and development, the U.S. can develop more cures, return drug manufacturing to the United States, and achieve medical independence," he said. The bill is supported by the National Association of Manufacturers, according to the committee's statement.

"The manufacturing industry is the backbone of American research and development, and this bill would support jobs, boost innovation, and help ensure America's future competitiveness," said David Eiselsberg, the senior director of tax policy at the association. Representatives for Democratic leaders in the House did not immediately respond to requests for comment.

Published on July 05, 2022