Research and development is at the heart of many startup businesses. Big aspirations and huge risks have allowed these businesses to turn their ideas into marketable products, helping to create the majority of new jobs in the past few years.
Many young companies initially focus on hiring employees and on product development, leaving little room for profit. Since they do not have an income tax liability, they are unable to claim any federal income tax credits, like the Research and Development (R&D) Tax Credit. This credit has helped many businesses create jobs by incentivizing innovation and should be available to the businesses that are focusing on research and development.
That is why Senator Chris Coons, D-Del., and I have proposed the Startup Innovation Credit Act of 2012. This bipartisan legislation would give startup companies the ability to claim tax credits against their payroll taxes rather than income taxes, meaning they would have access to the R&D Tax Credit. This will allow our job creators to keep more of their hard-earned cash so they can focus on creating the high value jobs that drive our economic recovery. The tax credit is a tool to remove some of the risk of starting and continuing a thriving business.
According to the bill, to qualify for the credit is simple - a business must be less than five years old and have less than $5 million in annual gross receipts. This could have a huge impact on businesses in the State of Wyoming because 97% of hiring businesses in Wyoming are small businesses, many of them still in their infancy.
We need to encourage entrepreneurs with innovative ideas to take the next step of starting a business. The Startup Innovation Credit Act will benefit America now and for years into the future. It's something Congress can come together to ensure we are putting small businesses first. Creating an environment of certainty is one of the best ways to encourage economic growth. Removing the red tape frees our job creators and puts America back to work.