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Congress has been the pi\u00f1ata in every poll<\/a> lately, but recently presented bipartisan legislation — the Start-up Innovation Credit Act of 2013<\/a> (SICA) introduced by Senator Chris Coons<\/a> (D-DE) — is proof that Capitol Hill has its share of good ideas. In brief, SICA allows start-ups to take advantage of the R&D tax credit for the first time. <\/p>\n Our current tax code, and especially the R&D tax credit<\/a> (the biggest tax credit in the code), is not geared to benefiting start-ups. As a tax counsel for the Senate Finance Committee, I (Dean) listened to many speeches from members on both sides of the aisle in praise of the R&D tax credit, because it would help grow and support those two entrepreneurs in a garage with the new idea. But the current R&D tax credit does nothing for those two gals in a garage. <\/p>\n Why? Because a start-up is rarely paying federal income tax. The R&D tax credit under current law can only be used as a credit against income tax paid — not as a credit against other taxes a business pays. In practice, a start-up is in its early stages is not making a profit and is therefore not paying income tax — making it ineligible to use the R&D tax credit under current law.<\/p>\n SICA fixes that problem by allowing the business to count not just income taxes paid, but also other business taxes (e.g., payroll), towards the R&D tax credit. Even a start-up making no profits has employees and payroll to meet — now under SICA they can use those taxes to realize a benefit from the R&D tax credit.<\/p>\n Start-ups, and the U.S. economy, could use the extra boost. The current R&D tax credit supports exactly the kind of productive innovation our economy needs — not just a credit for basic science (lab coats and test tubes) but also for applied science (making a product better, manufacturing it greener, etc.). Supporting small incremental steps — the reality of innovation and technological change — are what the R&D tax credit is about. And let’s not forget the argument that better-performing start-ups create jobs. For example, an August 2010 paper from the National Bureau for Economic Research, “Who creates jobs? Small vs. Large vs. Young<\/a>,” clearly came to the conclusion that the answer is young — that start-ups and young businesses are the keys to creating jobs. <\/p>\n The legislation will be especially crucial in an environment where the number of new businesses has dropped considerably<\/a>. Washington Post columnist Robert Samuelson captures it well<\/a>: “We have gone from being an expansive, risk-taking society to a skittish, risk-averse one.” Putting dollars in the pockets of entrepreneurs (by letting them, in effect keep more of those dollars) will be a significant help in changing this climate.<\/p>\n While SICA is a new idea in Washington, several states have in place refundable state R&D tax credits — notably Minnesota, New York, and Louisiana. I have seen first-hand working with businesses in these states that these refundable credits have made a difference in continuing to create jobs, expanding a business, or even making the decision to start a business. The margins are so small and the belts so tight that even a tax credit of 30-50k can keep a business afloat. <\/p>\n Best of all, the bang for SICA’s buck can’t be beat. For a drop in the bucket compared to the overall R&D tax credit (approximately $9-10 billion a year), SICA will cost approximately $160 million dollars. It won’t be the federal government deciding the winner and losers either, but the market and investors — with the R&D tax credit providing support to those start-ups and new businesses receiving investments. Just as important, SICA can help immediately — with the benefits being recognized in the monthly payroll charges — as opposed to waiting for months if not years for grants to be made, committees to meet, and the grind of Washington. <\/p>\n It is perhaps because of this combination of supporting innovation and entrepreneurs, market-driven benefits, and limited costs that SICA has attracted strong support out of the gate from both Republicans and Democrats. Along with Senator Coons (who has been a house-a-fire on helping entrepreneurs<\/a>), SICA has already garnered cosponsors on the other side of the aisle including respected Senators Blount (R-MO), Enzi (R-WY), Moran (R-KS) and Rubio (R-FL) and important Democratic Senators like Schumer (D-NY) and Stabenow (D-MI). As Washington continues to search for ways to create jobs and encourage innovation, SICA is a smart idea ready on the shelf. <\/p>\n Congress has been the pi\u00f1ata in every poll lately, but recently presented bipartisan legislation — the Start-up Innovation Credit Act of 2013 (SICA) introduced by Senator Chris Coons (D-DE) — is proof that Capitol Hill has its share of good ideas. In brief, SICA allows start-ups to take advantage of the R&D tax credit for […]<\/p>\n","protected":false},"author":7780,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-646551","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/646551","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/7780"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=646551"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/646551\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=646551"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=646551"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=646551"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n<\/img><\/a>
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