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119-hr-4933119th CongressWALLET

Research and Development Tax Credit Expansion Act of 2025

Sponsored By: Representative Neguse, Joe [D-CO-2]

Introduced

Summary

Expands and simplifies the refundable research and development tax credit for new and small businesses. This bill would raise eligibility limits, create an inflation adjustment, boost simplified credit rates for qualifying firms, and allow certain startups to use the credit against unemployment taxes.

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  • Small and new businesses: It would increase the qualified small business gross receipts cap from $5 million to $10 million and add a prior‑year annual test of $25,000 to tighten eligibility tests. These changes aim to let more small firms claim a refundable credit.
  • Startups and payroll treatment: The bill would let qualified small businesses treat the R&D credit as refundable against unemployment taxes and creates a new unemployment‑tax credit mechanism to support monetization.
  • Credit calculation and simplification: Under the alternative simplified credit rules it would raise the rate to 20% for qualified small businesses, offer a 20% first‑year rule when there were no prior qualified research expenses, and provide elective options for a 10% alternative or limited lookback when computing the credit.

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Bill Overview

Analyzed Economic Effects

2 provisions identified: 2 benefits, 0 costs, 0 mixed.

More and bigger R&D credit for small firms

If enacted, more firms would count as a qualified small business for the R&D credit. The annual gross receipts limit would rise to $10,000,000, and a firm must not have more than $25,000 in gross receipts in any year before the 10-year lookback. Gross receipts follow tax rules and exclude most capital contributions. For qualified small businesses, the alternative simplified credit rate would be 20% instead of 14%. If you had no prior research expenses, your first-year substitute rate would be 20% instead of 6%. In later years, you could choose a 10% substitute rate or ignore zero-expense years when averaging. These changes would apply to tax years beginning after December 31, 2025.

Use R&D credit to cut unemployment tax

If enacted, small employers could apply the refundable R&D credit to the federal unemployment tax. Any amount used this way would be treated as an unemployment tax credit, with a specific existing limit not applying. This option would start for tax years beginning after December 31, 2025. The bill would also index the dollar cap on the refundable R&D credit election to inflation for tax years beginning after 2026, rounded to the nearest $100.

Sponsors & CoSponsors

Sponsor

Neguse, Joe [D-CO-2]

CO • D

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

No roll call votes available for this bill.

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