FW: The payroll R&D credit, five years on

 

 

Brandy Mai (she/her)

Director of Public Information, GHC3

www.globalhealthc3.org | (910) 580-0380

 

 

From: Good Day BIO <bionewsletter@bio.org&gt;
Sent: Friday, December 18, 2020 10:26 AM
To: Brandy Mai <Bmai@GlobalHealthC3.org&gt;
Subject: The payroll R&D credit, five years on

 

The only newsletter at the intersection of biotech, politics, and policy

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Yesterday, an FDA independent advisory panel voted to endorse Moderna’s COVID-19 vaccine, clearing the way for emergency use authorization as soon as today. Meanwhile, we’re taking a look at the payroll R&D tax credit, Washington State’s plans for a low-carbon fuel standard, and whether the federal government will shut down tonight. (767 words, 3 minutes, 50 seconds)

 

The payroll R&D credit, five years on

Five years ago today, the Protecting Americans from Tax Hikes (PATH) Act was signed into law, with several helpful provisions for small, start-up, and pre-revenue biotechs. John Guy, BIO’s Manager of Emerging Companies Policy, explains the law and what needs to be done to expand the R&D tax incentives in the future.

As biotech companies (especially small ones) know, it’s extremely expensive and time-consuming to research and develop new innovations—and there’s no guarantee of a return on investment. 

Enter the PATH Act, which became law on December 18, 2015, and permanently extended the R&D tax credit and the Small Business Stock Gains Exclusion (Section 1202 of the tax code), providing stability to investors and the companies they invest in. 

The PATH Act also established a payroll R&D credit, which for the first time allowed pre-revenue innovators to take part or all of their R&D credit against their payroll tax liability (instead of their income tax liability), as the IRS explains

This provision is particularly important for high-tech companies who invest heavily in R&D but don’t have a product on the market (yet). Before the PATH Act, these companies couldn’t take advantage of the R&D incentives—since they didn’t have an income tax liability. 

But many start-ups can’t access the benefits of the PATH Act provision due to restrictive eligibility requirements, BIO’s John Guy explains

Fortunately, Congress has taken notice of the payroll R&D credit’s shortcomings. Among the recent legislative proposals is the Furthering Our Recovery With American Research and Development (FORWARD) Act ( S. 3593/H.R. 6713), which would expand access to the credit to companies with up to $20 million in gross receipts over a span of 8 years and increases the amount of the credit to $1 million. In addition, a new de minimis threshold delays the start of the 8-year window until gross receipts exceed $25,000.

Read John’s blog post for more on the eligibility qualifications and the proposed bills to ensure all small businesses have access to the R&D credit as policymakers intended.

BIO will continue advocacy efforts toward building on the payroll R&D credit. We’ve developed a survey to assess the utilization of the credit by high-tech companies, which will launch in early January. Click here to be notified when the survey goes live.

 

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A low-carbon fuel standard for Washington State?

One could be coming, reports The Seattle Times. We have the details and why it matters.

Washington Gov. Jay Inslee proposed a low-carbon fuel standard for the state, part of the climate-change package in his 2021-2023 budget proposal, reports The Seattle Times.

The proposed standard would reduce carbon in transportation fuels 10% by 2028 and 20% by 2035. 

Will it pass? “While House Democrats passed a version of the low-carbon fuels legislation in 2019 and 2020, the proposal stalled in the Democratic-controlled Senate. There, a handful of Democrats have opposed it—and with few changes in this year’s legislative elections, that dynamic may be no different,” explains the newspaper.

What they’re saying: “This plan will help create jobs, reduce pollution, increase investment in critical infrastructure, and help families through these troubled times,” said Gov. Inslee. 

Why it matters: As we see more and more evidence of the link between air pollution and health risks (including COVID-19), it’s critical we clean up carbon emissions. Low carbon fuel standards are proven drivers in decarbonizing transportation, decreasing toxic particulates in the atmosphere, and reducing pollution. They also bolster the biofuels sector, creating needed jobs and economic growth.  

What’s next: The Washington State legislature will vote on the proposal when they reconvene in January. We’ll be watching.    

Learn more about sustainable biofuels. 

Listen: Gevo CEO Pat Gruber joined the I AM BIO Podcast to talk about the company’s jet fuel made with renewable plant material and genetic engineering. Visit www.bio.org/podcast or listen via AppleGoogle, or Spotify.

 

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BIO Beltway Report

BIO Beltway Report

 

President Trump’s Friday: Meeting with Acting Secretary of Defense Christopher Miller. VP Mike Pence, second lady Karen Pence, and Surgeon General Jerome Adams received their first doses of the Pfizer-BioNTech vaccine on camera at the White House this morning. 

President-elect Biden’s Friday: He has selected Michael Regan, head of the North Carolina Department of Environmental Quality, to run the Environmental Protection Agency (EPA), and Nature takes a look at what’s next for the agency

What’s Happening on Capitol Hill: Today’s the deadline for a FY2021 budget and coronavirus relief—but as of this writing, Congress is heading for a shutdown and a weekend session, reports The Hill.

 

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