Boosting the US Economy | Invest in Research & Development for Tax Credit

Jul 14, 2014 • Business, Development
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boost economyDrawing from the UK Seed Enterprise Investment Scheme (SEIS) experience, US Senator Chris Coons will talk about the version of the Research & Development tax credit bill he sponsored on August 8 in New York City. He will highlight the benefits an ordinary person will get if he or she invests in startups with research and development ( R&D), as well as the enterprise itself.

Will the final draft of the bill be like the SEIS of UK?   A SEIS investment in startups gets you 50 percent deduction on your income tax as well as freedom from capital gains tax if you hold on to your  investment for 3 years before selling it. Argentina also has a similar law.

Can this bill be closely compared to  UK’s SEIS?  Unlike R&D tax credit bill  which specifically aims at motivating innovation and research, SEIS  creates a relatively conducive environment for companies to engage in business activities. For instance,  investors in SEIS receive an income tax relief of 50 percent on investments up to £ 100,000 per tax year in qualifying shares.

To ensure sustainability of the business, an entrepreneur must have access to capital, one of the essential  factors of production. Thus, it is necessary to empower the innovative business persons with the money or the capital  to venture into research and development activities that will spur business and economic growth. This is where the Startup Innovation Credit bill sponsored by Senator Coons comes in.

It is a strategy introduced  by U.S. Senator Chris Coons in the Senate, with seven Senators as co-sponsors, in the R&D tax credit policy that new and upcoming enterprises can avail. The R&D tax credit enables small businesses to reinvest and devote their hard earned money into innovative projects that will create jobs and sustain their businesses.

The bill is a long term economic strategy aimed at creating abundant job opportunities for generations to come. It focuses on strengthening R&D.

Shifting attention from Income Tax liability to R&D Tax Credit, the bill has opened up to new companies and entrepreneurs who do not yet have an income tax liability. As a result, these new companies will be able to revitalize the market with competitive high-tech products through intensive research.

According to Chris Coons, R&D tax credit is a holistic mechanism that stretches into all the sectors and levels of the private economy. All engaged parties indulge in progressive research and development, which is the pillar of economic prosperity.

Without doubt, stemming the costs  of research and development for small and upcoming enterprises attract investors and immigrants with high skills and innovative minds into building and stabilizing the economy. It is through R&D tax code that universities’ research activities are commercialized and brought on board to engage in new and emerging ventures and technologies.

The R&D tax credit bill  is a development strategy to hold on to and exploit the talents available regardless of their nationality.  These talents and  treasures should be retained within our  borders by creating productive and motivating policies to  attract these entrepreneurs  into jumpstarting our economy.

Dane Stangler, acting Director of Research and Policy at the Kauffman Foundation, recognizes the ability of policy makers in addressing the barriers of starting and stabilizing new businesses. He highlights  the importance of the R&D tax credit bill in addressing the capital infusion needed in start-up businesses and cocooning them as they grow and stabilize.

R&D tax credit bill is of massive importance for sustainable growth of the economy. It stands to create a healthy economy cycle that is innovative enough to create employment, encourage innovativeness, attract investors and enrich itself by exploiting the available resources exhaustively.

R&D fosters  knowledge that can be incorporated in production and manufacturing of economically treasured products and services. In the early stage of startups, R&D is an essential component to come up with the finished product or service. Costly, though, R&D has to be undertaken to have that product or service offering ready for the  consumers.  This is where the Startup Innovation Credit Act is really needed as part of the holistic R&D tax credit policy.

David Drake

David Drake is an early-stage equity expert and the founder and chairman of LDJ Capital, a New York City private equity firm, and The Soho Loft, a global event-driven financial media company helping firms advertise for investors. He also writes regularly for Forbes and Thomson Reuters.

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