Tax Reform Expert, Julio Gonzalez, Praises New REACH Act for the R&D Credit

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Tax reform expert and go-to advisor praises REACH Act for helping to retain United States' employment

“We have to provide incentives that allow us to be competitive in terms of growing jobs and stimulating more new start-up companies in the United States." -Julio Gonzalez

Tax reform expert, Julio Gonzalez, met with Congressman Pat Tiberi (R-OH) to praise his introduction of the Research & Experimentation Advances Competitiveness at Home (REACH) Act (H.R. 5187) and discuss the current status of tax reform.

"This is a positive plan because the REACH Act is intended to increase the Alternative Simplified Credit ("ASC") rate from 14 percent to 20 percent. These credits basically refund labor done in the United States for innovation of products and services and are key to helping retain employment in the United States and level the labor costs globally to retain jobs," said Julio. The Act next goes to the House Ways and Means Committee for consideration.

Currently, the ASC method provides a gross federal Research and Development (R&D) credit that is equal to 14 percent of the amount by which the current year qualified research expenditures (QREs) exceed 50 percent of the average prior three years’ QREs. This welcome change would put the ASC rate on par with the 20 percent regular method rate. If enacted, the ASC rate increase would be effective for tax years that began after December 31, 2015.

The recent enhancements to the R&D tax credit as part of the PATH Act of 2015, included making the R&D credit permanent for the first time, having AMT turnoff for small to mid-sized companies, and allowing the credit to offset payroll taxes for start-up companies. The REACH Act would continue to augment this important tax incentive that is meant to stimulate job creation, start-up venture capital and private equity, and inspire innovation and manufacturing within the United States. “We have to provide incentives that allow us to be competitive in terms of growing jobs and stimulating more new start-up companies in the United States,” said Julio.

About Engineered Tax Services and R&D Tax Credits

Despite the fact the R&D tax credit has been available since 1981, it is estimated that less than a third of eligible companies in the United States are aware that they qualify for the credit and refunds. For start-ups, these incentives became available starting in 2017.

ETS is a licensed engineering tax firm which specializes in assisting firms with their R&D tax credit studies. You can learn more at http://www.EngineeredTaxServices.com.

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Melissa Ferguson
Engineered Tax Services, Inc.
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