Research and Development Tax Credit Expansion Act of 2025
Summary
The Research and Development Tax Credit Expansion Act of 2025 aims to amend the Internal Revenue Code of 1986 to broaden eligibility and simplify the research credit for small businesses. It adjusts for inflation, allows the credit to be refundable against unemployment taxes, and expands the definition of a qualified small business. The bill also modifies the alternative simplified credit for new and small businesses, increasing the credit rate and providing special rules for businesses with limited research expenses.
Expected Effects
This act will likely increase the number of small businesses that can claim the research and development tax credit. It could also incentivize more small businesses to invest in research and development activities. This is achieved by making the credit more accessible and beneficial.
Potential Benefits
- Increased R&D investment by small businesses.
- Simplified tax credit calculations for eligible businesses.
- Potential for job creation within small businesses due to increased R&D.
- Greater access to capital for small businesses engaged in research.
- Boost to innovation and competitiveness of small businesses.
Most Benefited Areas:
Potential Disadvantages
- Potential for increased complexity in tax code due to modifications.
- Possible strain on government revenue due to increased credit claims.
- Risk of misuse or fraudulent claims of the expanded credit.
- Limited impact if small businesses lack resources to engage in R&D even with the credit.
- The benefits may disproportionately favor certain industries or types of small businesses.
Constitutional Alignment
The bill aligns with the Constitution's general welfare clause (Preamble) by promoting economic growth and innovation. Congress's power to tax and spend for the general welfare is established in Article I, Section 8. The specific provisions of the bill, such as adjustments for inflation and modifications to credit calculations, fall under Congress's authority to create and modify tax laws.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).