In a temporary effort to boost the economy in 1981, the federal government sought to use the passage of the Research and Experimentation tax credit to reward businesses for investing in research. With the rapid changes in technology in the past decades, companies across multiple industries have seen increasing challenges to constantly innovate their products or processes to compete across a global economy. Business owners small and large understand the expensive and time-consuming risks that drastic innovations pose and thus, often failing– yielding no financial return on investment.
Recognizing the need to create jobs domestically and maintain global economic competitiveness, Congress has extended the R&D tax credits more than a dozen times over subsequent years, finally making them permanent with the passage of the PATH Act of 2015. In addition to becoming permanent, the Protecting Americans from Tax Hikes act expanded R&D credit provisions to start-ups and small businesses. The R&D tax credit is now available to any U.S. business that spends time and resources on new development, improvements, or technological advancements in effort to improve upon its products or processes. The credit could also be available to American Business owners that have improved upon the performance, functionality, reliability, or quality of existing products or trade processes.