At the end of March, the IRS issued interim guidance explaining how eligible small businesses to claim a portion of their R&D tax credit against their payroll tax obligations. The guidance applies to tax year 2016; companies wishing to apply the credit to their 2016 returns can view the IRS guidance at www.irs.gov/uac/newsroom/for-small-business-startups-irs-explains-new-option-for-claiming-research-credit-option-still-available-for-those-that-already-filed.
In 2015, Congress reformed the R&D credit to allow an immediate capital infusion for pre-revenue start-ups. Under the new rules, certain pre-revenue companies will be able to claim R&D credits against their payroll tax liability. Qualified small businesses will be eligible to claim up to $250,000 in R&D credits against their employer-side payroll tax (FICA) liability, or to use the R&D credit against the Alternative Minimum Tax (AMT). BIO supported this reform as an important acknowledgement that the tax code should support pre-revenue innovation.