The Senate Finance Committee today passed the bipartisan Startup Innovation Credit, which will allow Virginia startups to claim the popular Research and Development tax credit. The Finance Committee amendment, which aims to help jumpstart the economy by creating and growing new businesses and jobs, passed the Committee as part of a tax extenders legislative package.
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. The benefit is capped at $250,000 per year. Since many young companies invest heavily in research and development in their first few years but don’t yet have income tax liability, they are unable to claim federal income tax credits, including the R&D Tax Credit. In fact, according to a Government Accountability Office report, more than half of the credit claimed by companies each year goes to firms with $1 billion or more in receipts.
“Startups create about three million new jobs each year, but they face immense challenges getting their businesses off the ground,” Sen. Warner said. “I’m pleased that because of our bipartisan amendment, more startups may be able to access the immensely popular R&D tax credit. This will help make sure more startups in Virginia can spend more resources on creating jobs. I look forward to passing this legislation out of the full Senate, and I will continue working with Senator Moran and our cosponsors to pass Startup 3.0 as well.”
“I am very pleased to see the Senate Finance Committee approved a tax extenders package that includes Startup Act’s R&D tax credit for startup companies. Research shows that companies five years or younger create all net new jobs in the American economy,” Sen. Moran said. “We also know the recession had a major impact on the economy, dropping new business formation to a historically low level. Most startups do not earn a profit immediately after they launch, and therefore are limited from accessing R&D tax credits available to larger, profitable businesses. The proposal adopted by the Finance Committee offers startup companies that are not yet profitable a tool to expand without facing a greater tax liability, increasing the chances they can ultimately grow and hire more Americans. This credit is a central part of the bipartisan Startup Act 3.0, the leading pro-entrepreneur legislation in the U.S. Senate.”
Startup Act 3.0 is co-sponsored by Sens. Roy Blunt (R-MS), Chris Coons (D-DE), Amy Klobuchar (D-MN), Tim Kaine (D-VA) and Marco Rubio (R-FL). It is based upon research showing that for close to three decades, companies less than five years old have created almost all of the net new jobs in America.
The Startup Innovation Credit was cosponsored by Sens. Warner, Pat Roberts (R-KS), Debbie Stabenow (D-MI), Maria Cantwell (D-WA), Chuck Schumer (D-NY) and Mike Enzi (R-WY).