An Act Concerning A Research And Development Expenses Tax Credit For Pass-through Entities.
Impact
Should HB 5488 be enacted, it would amend existing tax codes related to R&D credits, potentially encouraging more investment in innovation-driven projects across the state. The bill is set to come into effect on October 1, 2022, targeting taxable years from January 1, 2023, onward. By providing this tax relief, the legislation aims to create a more favorable environment for small and medium-sized enterprises to enhance their R&D efforts, which could have positive ripple effects on the state's economy and job market.
Summary
House Bill 5488 aims to introduce a tax credit specifically for research and development (R&D) expenses incurred by pass-through entities such as S corporations and partnerships. The bill proposes a credit amounting to six percent of the research and development expenses paid or incurred by the taxpayer during the taxable year, effectively incentivizing companies to invest in innovation. The credit can be claimed by shareholders or partners of the pass-through entity, allowing them to leverage tax savings directly related to their contributions to research activities.
Contention
While supporters argue that the bill will boost local economies by promoting innovation and assisting companies in reducing tax liabilities, there may be concerns regarding the scalability and fairness of such tax incentives. Opponents could argue that the bill may primarily benefit larger pass-through entities or that it could lead to a disparity in how smaller firms might access these tax benefits. Additionally, the potential for changes in budget allocations or funding for other state programs could become a point of contention among various stakeholders in the legislative discussions.