Source: United States Senator for Indiana Todd Young
June 08, 2021
The FORWARD Act will improve access to the R&D tax credit and encourage American companies to invest in employee training and development of cutting-edge technologies
WASHINGTON – Today, U.S. Senator Todd Young (R-Ind.) joined Senators Chris Coons (D-Del.), Steve Daines (R-Mont.), Catherine Cortez Masto (D-Nev.), and Maggie Hassan (D-N.H.) to introduce the FORWARD Act, which would provide expanded tax incentives for American companies that invest in the research and development of new products and technologies.
“The private sector is helping America emerge from the pandemic and prepare for future emergencies,” said Senator Young. “Government should create an environment which enables our small businesses to conduct research and development activity that spurs innovation and job creation right here in the U.S.”
“There is bipartisan agreement that now is the time for a generational investment in American competitiveness and a skilled workforce that will win the next century,” said Senator Coons. “The COVID-19 pandemic has highlighted the incredible benefits of innovative technologies, such those used to rapidly develop safe and effective vaccines, but also presents an opportunity to rebuild our economy to provide more good, high-paying jobs. The FORWARD Act is a bipartisan, commonsense bill that provides tax support to cutting-edge startups and business. This bill supports President Biden’s vision for our nation’s economic recovery and growth.”
The United States supports R&D far less than our international competitors. This places American businesses at a disadvantage, undermining the U.S. economy and leaving the country ill-prepared for crises like COVID-19. In 2015, Congress passed legislation to make the R&D tax credit permanent and expand access for more startups and small businesses to receive the credit. The FORWARD Act expands on these initiatives to address the needs of today’s economic and national security situation.
The Furthering Our Recovery With American Research and Development, or FORWARD, Act:
· Expands access to the research and development tax credit for new small- and medium-sized businesses. Firms with up to $20 million in gross receipts will be eligible to use the credit to reduce their payroll tax obligation during a span of 8 years—up from current thresholds of $5 million and 5 years. A new de minimis threshold delays the start of the 8-year window until gross receipts exceed $25,000.
· Strengthens the economy by incentivizing American manufacturing. The R&D credit is increased for companies that generate the majority of their gross receipts from manufacturing their products in the United States.
· Targets specific activities that enhance economic productivity by spreading knowledge and work opportunities to the U.S. workforce. The full R&D credit is expanded to cover R&D-related worker training costs. For R&D performed in collaboration with industry consortia, academic institutions, federal laboratories, and other entities, the credit rate is increased by one quarter (to 25% and 17.5% for the Regular Research and Alternative Simplified Credits, respectively).
· Activates the R&D credit by providing outreach, education, and training for businesses with limited accounting expertise, to be provided by the Small Business Administration and the Internal Revenue Service.
The bill text is available here. A one-pager on the bill is available here.
The FORWARD Act is supported by the American Small Manufacturers Coalition, the Information Technology and Innovation Foundation, Third Way, the American Society of Mechanical Engineers, Intelligent Manufacturing Systems International, the Delaware Small Business Development Center, the Association for Manufacturing Technology, the Manufacturing Alliance of Communities, Cover & Rossiter, the Delaware Prosperity Partnership, the State Science and Technology Institute, the University City Science Center, AlliantGroup, the Small Business Investor Alliance, and Advanced Manufacturing International.
“As the United States continues the work to recover from the global pandemic and grow as a leader in advanced manufacturing worldwide, it is critical that we have right tax policies in place to allow for the continued success of our domestic manufacturing sector, including the R&D and workforce infrastructure necessary to jump start the U.S. manufacturing economy,” said Thomas Costabile, P.E., Executive Director and CEO of the American Society of Mechanical Engineers. “This Act will create more opportunities for these small businesses to engage and grow by allowing small manufacturers an expanded R&D tax credit. Further, this Act will encourage the manufacturing sector to evolve and expand by making it easier for manufacturers and start-ups to invest in workforce development initiatives that are so critical to supporting world-class industrial research.”
“Science and engineering-based innovation are critical for addressing a wide array of American challenges, including climate change and U.S. competitiveness,” said Dr. Robert D. Atkinson, President of the Information Technology and Innovation Foundation (ITIF). “But the main federal incentive for private sector research – the R&D tax credit – needs both modernization and expansion. The FORWARD Act does just that, and if passed would spur more American innovation, job creation and competitiveness.”
Additional quotes from endorsing organizations are available here.
The FORWARD Act builds upon Senator Young’s leadership in the R&D space to ensure America remains competitive with China. Earlier this year, he and Senator Hassan reintroduced the American Innovation and Jobs Act, which encourages domestic R&D investment by preserving the immediate expensing of R&D costs and increasing access to tax incentives for innovative small businesses and startups. In addition, Senator Young’s Senate-passed Endless Frontier Act is another effort aimed at spurring U.S. innovation to out-compete China in key emerging technology areas critical to our national security.
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