On July 21, the Senate Finance Committee, by a vote of 23 to 3, favorably reported out of committee the Chairman’s modified mark of a bill to extend 52 tax expired tax provisions.
Several tax credits key to small businesses extended by the bill are:
Research and Experimentation Tax Credit
Research and Experimentation (R&E) Tax credits of an eligible small business may offset both regular tax and AMT liabilities for taxable years beginning after December 31, 2014, and to carrybacks of such credits. Currently, the AMT limitation precludes many small business owners from utilizing their R&E tax credit in the current year. Allowing taxpayers in AMT to use the R&E credit to offset taxes will incentivize small US businesses to invest their dollars in research and development to remain competitive in today’s world market. The ability to carry back R&E tax credits to offset prior year AMT tax will provide cash flow for additional investments in hiring, acquiring assets, and investing in innovation and new product development.
The modified R&E tax credit would allow a qualified small business to claim a certain amount of its research credit as a FICA payroll tax credit for taxable years beginning after December 31, 2014. Small businesses that may not yet have taxable income to be offset by the R&E tax credit would benefit from using the R&E tax credit to offset payroll taxes.
Work Opportunity Tax Credit
The provisions extend the work opportunity tax credit to employers who hire individuals who have exhausted regular compensation benefits under State and Federal unemployment compensation laws. With respect to wages paid to such individuals, employers would be eligible for a 40 percent credit on the first $6,000 of wages paid to such individual, for a maximum credit of $2,400 per eligible employee.
New Markets Tax Credit
The Chairman’s modification would adjust the total new markets tax credit allocation amount from $3.5 billion in calendar years 2015 and 2016 to $3.94 billion in calendar years 2015 and 2016.
Click here for a complete list of the tax extenders impacted by this legislation. Have a Barnes Dennig Tax specialist reach out to you to talk more about how these extenders may impact your business.