Senators ask IRS to issue guidance to help startups

Senators ask IRS to issue guidance to help startups

A bipartisan group of senators is asking the Internal Revenue Service (IRS) to issue guidance to help startups and small businesses take advantage of the research and development tax credit.


The R&D tax credit was expanded to allow startups and small businesses to access it under legislation Congress passed in December.

"This newly expanded credit has the potential to greatly assist new innovative businesses," Sens. Chris CoonsChris Andrew CoonsDemocrats don't trust GOP on 1/6 commission: 'These people are dangerous' Sunday shows preview: 2024 hopefuls gather at CPAC; House passes coronavirus relief; vaccine effort continues The Hill's Morning Report - Presented by The AIDS Institute - Senate ref axes minimum wage, House votes today on relief bill MORE (D-Del.), Pat RobertsCharles (Pat) Patrick RobertsPat Roberts joins lobbying firm weeks after Senate retirement Senate swears-in six new lawmakers as 117th Congress convenes Window quickly closing for big coronavirus deal MORE (R-Kan.) and Charles SchumerChuck SchumerThe bizarre back story of the filibuster Hillicon Valley: Biden signs order on chips | Hearing on media misinformation | Facebook's deal with Australia | CIA nominee on SolarWinds House Rules release new text of COVID-19 relief bill MORE (D-N.Y.) said this week in a letter to IRS and Treasury Department officials.

The senators said that Treasury and the IRS should use "common sense" when administering the new provisions, "reflecting the real world of entrepreneurs and new businesses." 

The senators said that startups and small businesses should not be excluded from receiving the R&D credit if they receive grants from governments or nonprofits. Also, the senators said that the record-keeping burdens for businesses seeking the credit should be minimal. 

"We do not want entrepreneurs to spend significant time and money filling out unreasonable paperwork for the IRS," they said.

The senators also urged Treasury and the IRS to "conduct meaningful outreach" to educate small businesses and startups about the credit. The lawmakers suggested that Treasury and the IRS partner with the Small Business Administration on outreach efforts.

Dean Zerbe, managing director of alliantgroup and former senior counsel to the Senate Finance Committee, praised the senators for "working hard to ensure that this new provision is a success."

"The IRS needs to recognize the importance of educating business owners as to this new R&D provision," Zerbe said. "Study after study has shown that the key to new job creation is encouraging and supporting new businesses -- helping ensure the success of the start-up R&D tax credit will be an important part of creating new jobs."

updated at 3:42 p.m.