FOR IMMEDIATE RELEASE: Thursday, April 3, 2014
CONTACT: Ian Koski at 202-224-5042
Senator Coons’ bill to help innovative startups create jobs takes big step forward
Startup Innovation Credit now a part of annual ‘tax extenders’ package
WASHINGTON – The Senate Finance Committee on Thursday passed bipartisan legislation to allow startup companies and small businesses to access the successful Research and Development Tax Credit. The committee passed two versions of the Startup Innovation Credit — one, originally authored by U.S. Senators Chris Coons (D-Del.) and Mike Enzi (R-Wyo.) in the Startup Innovation Credit Act, will allow innovative startups to claim the R&D tax credit against their payroll taxes. The second version, originally authored by Senators Coons and Pat Roberts (R-Kan.) in the Innovators Job Creation Act, will allow small business owners to claim the R&D tax credit against their Alternative Minimum Tax liability. Working with Senators Enzi and Roberts, U.S. Senator Chuck Schumer (D-N.Y.) introduced an amendment to the annual tax-credit extension bill that included both approaches. The amendment passed the Committee unanimously.
“Companies that invest in research and development are investing in new products and processes that grow the economy and create quality, middle class jobs that our country needs right now,” Senator Coons said. “The successful Research and Development Tax Credit has helped tens of thousands of American companies invest in job-creating innovation, but startups haven’t been allowed to take advantage. Firms younger than five years old have been responsible for the overwhelming majority of our new jobs in recent years, and they are driving our nation’s economic recovery by taking risks to turn their ideas into products. Three years after I first introduced legislation to open up the R&D Tax Credit to startups, I am proud of the progress we made today and deeply grateful for the partnership of Senators Enzi and Schumer, and all of my colleagues who have cosponsored this idea over the years. Progress on this legislation is proof that we can still work together across party lines to help grow our economy.”
To qualify for the Startup Innovation Credit, a company must be less than five years old and have less than $5 million in gross receipts. Since many young companies invest heavily in research and development in their first few years and don’t have income tax liability, they are unable to claim a federal income tax credit, like the R&D Tax Credit. In fact, according to the Government Accountability Office, more than half of the credit claimed by companies each year goes to firms with $1 billion or more in receipts. With the Startup Innovation Credit, as passed by the Senate Finance Committee on Thursday, a new company that lacks the income tax liability necessary to claim the R&D Tax Credit would instead be able to claim the credit in the following year by reducing its employer-side employment taxes by an equivalent amount up to $250,000, or by reducing its Alternative Minimum Tax liability.
“Research and development are essential ingredients for making American companies competitive in the global marketplace,” Rich Heffron, president of the Delaware State Chamber of Commerce said. “The Startup Innovation Credit is an imaginative plan for providing entrepreneurs the means to create jobs while their company is still in its infancy. The companies that will make use of this program will be among those leading our country’s economic resurgence. The members of the Delaware State Chamber of Commerce urge Congress to quickly move this legislation to the President’s desk.”
“The Startup Innovation Credit will create jobs and speed up innovation, helping early-stage companies like many of those that belong to Delaware Bio,” Bob Dayton, president of Delaware Bio said. “Startups that are investing in innovation have enormous potential to grow and create jobs, and the Startup Innovation Credit is a creative way to help nurture that potential when it will have the greatest impact.”
In addition to Senators Coons, Enzi, and Schumer, the Startup Innovation Credit Act is cosponsored by Senators Marco Rubio (R-Fla.), Roy Blunt (R-Mo.), Debbie Stabenow (D-Mich.), Jerry Moran (R-Kan.), and Tim Kaine (D-Va.). It was first introduced in August 2012.
Language creating the Startup Innovation Credit was included in the Startup Act 3.0 introduced by Senators Moran, Coons, Blunt and Mark Warner (D-Va.) in February 2013.
The Innovators Job Creation Act is sponsored by Senators Roberts, Coons, Enzi and Schumer. It was first introduced in January 2014.
The Schumer-Enzi amendment in the Senate Finance Committee was cosponsored by Senators Warner, Roberts, Stabenow, and Maria Cantwell (D-Was.).
The full text of the original legislation can be downloaded here: http://coons.senate.gov/download/startup-innovation-credit