FORWARD Act

To amend the Internal Revenue Code of 1986 to expand and modify the credit for increasing research activities, and for other purposes. 1. Short title This Act may be cited as the Furthering Our Recovery With American Research & Development Act FORWARD Act 2. Treatment of credit for qualified small businesses (a) Gross receipts test (1) In general Clause (i) of section 41(h)(3)(A) (A) by striking $5,000,000 $20,000,000 (B) by striking gross receipts gross receipts in excess of $25,000 (2) Definition of gross receipts (A) In general Clause (i) of section 41(h)(3)(A)(i) of such Code, as amended by paragraph (1), is further amended— (i) by striking (as determined under the rules of section 448(c)(3), without regard to subparagraph (A) thereof) (ii) by striking (as so determined) (B) Definition Subparagraph (A) of section 41(h)(3) of such Code, as so amended, is further amended by adding at the end the following flush sentence: For purposes of the preceding sentence, gross receipts shall be determined under the rules of section 448(c)(3) without regard to subparagraph (A) thereof, except that such term shall not include any contributions to the capital of a corporation (other than contributions by a shareholder) or any amount described in section 118(b) (other than receipts from customers in exchange for goods or services). . (b) Startup date Subclause (II) of section 41(h)(3)(A)(i) 5-taxable-year period 8-taxable-year period (c) Limitation on election amount Clause (i) of section 41(h)(4)(B) $250,000 $1,000,000 (d) Limitation on election Clause (ii) of section 41(h)(4)(B) 5 or more 8 or more (e) Payroll tax credit portion Paragraph (2) of section 41(h) (1) by striking subparagraph (C); (2) by adding or (3) by striking , or (f) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2019. 3. Inclusion of employee training expenses (a) In general Paragraph (1) of section 41(b) (1) by striking and (2) by striking the period at the end of subparagraph (B) and inserting , and (3) by adding at the end the following new subparagraph: (C) employee training expenses. . (b) Employee training expenses Subsection (b) of section 41 (1) by redesignating paragraph (4) as paragraph (5); and (2) by inserting after paragraph (3) the following new paragraph: (4) Employee training expenses (A) In general The term employee training expenses (B) Wages, etc For purposes of this paragraph— (i) In general The term wages (ii) Rules The rules of paragraph (2)(D) shall apply. . (c) Effective date The amendments made by this section shall apply to expenses paid or incurred in taxable years beginning after December 31, 2019. 4. Increased credit rate for certain research activities (a) In general Section 41 (i) Special rules for certain high-Benefit research activities (1) Certain collaborative research (A) In general In the case of any qualified research expenses described in subparagraph (B), as applicable— (i) subsection (a)(1) shall be applied by substituting 25 percent 20 percent (ii) subsection (c)(4)(A) shall be applied by substituting 17.5 percent 14 percent (iii) subsection (c)(4)(B)(ii) shall be applied by substituting 7.5 percent 6 percent (B) Expenses described (i) In general Qualified research expenses described in this subparagraph are qualified research expenses incurred by the taxpayer with respect to qualified research in collaboration with one or more other entities, which may include a qualified organization described in subparagraph (A), (B), or (C) of subsection (e)(6), an organization which is a Federal laboratory (within the meaning of subsection (b)(3)(D)(i)(III)), or a qualified research consortium (as defined in subsection (b)(3)(C)(ii)). (ii) Contribution requirement A collaboration shall be taken into account under clause (i) only if each entity involved in the collaboration provides or performs more than ½ of its pro rata share of the work hours for the research. (2) Research by United States manufacturers (A) In general In the case of a qualified domestic manufacturer, this section shall be applied— (i) by increasing the 20 percent amount in subsection (a)(1) by the bonus amount, (ii) by increasing the 14 percent amount under subsection (c)(4)(A) by the alternative simplified bonus amount, and (iii) by increasing the 6 percent amount under subsection (c)(4)(B)(ii) by the subsection (c)(4)(B) bonus amount. (B) Qualified domestic manufacturer For purposes of this subsection— (i) In general The term qualified domestic manufacturer (ii) Domestic production gross receipts The term domestic production gross receipts (C) Bonus amount; alternative simplified bonus amount; subsection (c)(4)(B) For purposes of subparagraph (A): If the The The The More than 50% but not more than 60% 1 0.7 0.3 More than 60% but not more than 70% 2 1.4 0.6 More than 70% but not more than 80% 3 2.1 0.9 More than 80% but not more than 90% 4 2.8 1.2 More than 90% 5 3.5 1.5. . (b) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2020. 5. Transfers to federal old-age and survivors insurance trust fund There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act ( 42 U.S.C. 401 section 3111(a) 6. Support for small business research and development (a) Definitions In this section— (1) the term Administrator (2) the term Commissioner (3) the term small business concern 15 U.S.C. 632(a) (4) the term small business development center 15 U.S.C. 648 (b) IRS and SBA partnerships Beginning not later than 180 days after the date of enactment of this Act, the Commissioner, in consultation with the Administrator, shall develop partnership agreements that— (1) provide for the development of— (A) basic training, including in-person or modular training sessions, relating to Federal income tax credits that benefit small business concerns and startups, especially credits for research and experimentation; and (B) informational materials relating to such credits, including Internal Revenue Service guidance documents; (2) provide the basic training and informational materials developed under paragraph (1)— (A) through electronic resources, including internet-based webinars; and (B) at physical locations, including small business development centers; and (3) make such materials available to— (A) business development programs administered by the Small Business Administration, including women’s business centers, Veteran Business Outreach Centers, and U.S. Export Assistance Centers, and nonprofit research partners such as the Service Corps of Retired Executives authorized under section 8(b)(1)(B) of the Small Business Act ( 15 U.S.C. 637(b)(1)(B) (B) business development entities that partner with Small Business Administration programs, including universities, nonprofits, business incubators, and business accelerators. (c) Reporting Requirement Not later than 180 days after the date of enactment of this Act, the Commissioner, in consultation with the Administrator, shall submit to Congress a report describing how the Internal Revenue Service in partnership with the Small Business Administration will provide outreach and educational materials to small business concerns, businesses of medium size, and startups regarding section 41(h) (d) Small Business Development Centers Section 21(c)(3) of the Small Business Act ( 15 U.S.C. 648(c)(3) (1) in subparagraph (T), by striking and (2) in the first subparagraph (U) (relating to encouraging and assisting the provision of succession planning), by striking the period at the end of clause (v) and inserting a semicolon; (3) in the second subparagraph (U) (relating to providing training in conjunction with the United States Patent and Trademark Office)— (A) by redesignating that subparagraph as subparagraph (V); and (B) in clause (ii)(II), by striking the period at the end and inserting ; and (4) by adding at the end the following: (W) in conjunction with the Internal Revenue Service, providing informational materials, education, and basic training— (i) to small business concerns relating to Federal income tax credits available under the Internal Revenue Code of 1986, including— (I) credits available to businesses generally; and (II) credits available to small business concerns and startups specifically, especially credits for research and experimentation; and (ii) that may be delivered— (I) in person; or (II) through a website. . (e) Authorization of appropriations There are authorized to be appropriated $2,000,000 per year to carry out the requirements of this section.

Summary: Furthering Our Recovery With American Research & Development Act or the FORWARD Act This bill makes several changes to the income tax credit for business expenses for increasing research activities. Specifically, the bill expands eligibility for the credit by increasing the maximum amount of gross receipts of an entity for the taxable year and using an eight-year (rather than five-year) period in the calculation of those amounts; removes the business credit carryforward from calculation of the payroll tax credit portion of the credit; includes among qualified research expenses wages paid in connection with research activity training expenses; and increases the credit rate for expenses incurred in certain collaborative research activities (i.e., conducted with higher education institutions, tax-exempt scientific research organizations, or charitable grant organizations) and qualified domestic manufacturers. The bill appropriates to the Social Security trust funds amounts equal to the reduction in revenues from payroll taxes by reason of this bill. The Internal Revenue Service (IRS) shall develop partnership agreements to provide for development of basic training relating to federal tax credits benefitting small business concerns and startups, especially credits for research and experimentation, and informational materials relating to such credits, including IRS guidance documents. Small business development centers shall provide informational materials, education, and basic training to small business concerns relating to federal tax credits, including those available to (1) businesses generally; and (2) small business concerns and startups specifically, especially credits for research and experimentation.