Each year the US government provides billions of dollars to innovative businesses for developing new or improving existing technologies, products, materials, and processes, under the Research Experimentation Tax Credit (RD Tax Credit) program.
The RD Tax Credit is a general business tax credit under the Internal Revenue Code section 41 for businesses that incur research and development (RD) costs in the United States. The US RD tax credit has been in existence since 1981.
Previously, the program periodically expired and was renewed by Congress. Businesses wishing to include this in their long-term budgeting plans could not rely on the credit being around for certain.
In 2015, Congress made the RD tax credit permanent as part of the Protecting Americans from Tax Hikes (PATH) Act of 2015, in addition to making key changes so that small businesses who are not profitable could benefit from the credit.
The RD tax program can be difficult to understand and navigate. We’ve compiled answers to the most common questions we’ve received from hundreds of startups to help you simplify the process.