Tax Savings for Start-Ups and Small Businesses: R&D Credit Can Now Offset AMT
February 01, 2017
This is Part 2 of a 2-part series. To see Part 1, please click here.
The 2015 Protecting Americans from Tax Hikes (“PATH”) Act included various changes to the Research and Development credit (“R&D credit”) that are mostly beneficial for start-ups and small businesses.
In the past, the R&D credit could not be used to offset Alternative Minimum Tax (“AMT”), with limited exception. The PATH Act provides the ability for certain taxpayers to utilize the credits to offset both regular or AMT for tax credits generated during tax years beginning on or after January 1, 2016. Credits generated in prior years typically will not be eligible to offset AMT, but can continue to be carried forward to offset future regular tax in accordance with previous tax law.
The AMT offset is available only to eligible small businesses. Eligible small businesses are those that are a:
- corporation, the stock of which is not publicly traded,
- partnership, or
- sole proprietorship.
In addition, the average annual gross receipts of such corporation, partnership or sole proprietorship for the 3-taxable-year period preceding the taxable year must not exceed $50 million. For example, if the business wishes to utilize the credit to offset AMT in 2016, its average annual gross receipts for tax years 2013, 2014 and 2015 must not exceed $50 million. Any partner or S corporation shareholder claiming a pass-through credit must also meet the gross receipts test for its pass-through credit to be eligible to offset AMT.
EisnerAmper Trends & Developments - March/April 2017
- Estate Planning: News from the Heckerling Institute on Estate Planning...
- Highlights from Recent Developments 2016
- Retirement Accounts in First and Second Marriages: The Fun Begins
- The Executor's Job Gets Tougher: Basis Consistency and Selected Other Income Tax Issues Facing Executors
- Recent International Developments
- Portability: Lots of Questions, Few Easy Answers
- Managing Inherited Art and Encouraging Clients to Plan Ahead
- Intellectual Property Protection: The Evolving World of 3D Printing and Intellectual Property
- Will Autonomous Cars Sideswipe the Insurance Industry?
- Immigration and Investment: The Changing World of the EB-5 Program
- Tax Savings for Start-Ups and Small Businesses - Part 1: R&D Credit Can Now Offset Payroll Tax
- Tax Savings for Start-Ups and Small Businesses - Part 2: R&D Credit Can Now Offset AMT