# Plain Language Summary: Fostering Innovation and Research to Strengthen Tomorrow Act

This bill makes it easier and more rewarding for companies to invest in research and development by increasing the tax credits they can claim. Currently, when businesses spend money on research activities—like developing new products, testing new processes, or improving existing technology—they can get a tax credit that reduces what they owe in taxes. This bill doubles the main research credit from 20 percent to 40 percent, meaning companies get back twice as much in tax savings for every dollar they spend on qualifying research. There's also an alternative simplified version of the credit that increases from 14 percent to 28 percent for companies that prefer a simpler calculation method.

The bill specifically tries to help startup companies and smaller businesses access these research credits more easily. Right now, new startups often can't use research credits effectively because they don't owe enough in taxes to benefit from them. The bill addresses this by allowing small businesses with no research expenses in the previous three years to claim a smaller credit (half of the regular rate) against their payroll taxes instead of just their income taxes. Additionally, the bill raises the size threshold for what counts as a "small business" eligible for special treatment—instead of being limited to companies with $5 million in revenue, the threshold will now adjust annually to keep pace with inflation, potentially allowing more growing companies to qualify.

The practical effect is that companies investing in innovation and research will have more money to reinvest in their work, since they'll owe less in taxes. This could encourage more businesses to take on research projects they might otherwise skip due to cost. For startups and young companies, the changes make it more feasible to claim these credits even before they're highly profitable, which could help fuel innovation in emerging industries and new technologies.

Fostering Innovation and Research to Strengthen Tomorrow Act

Tenney, Claudia

Fostering Innovation and Research to Strengthen Tomorrow Act This bill doubles the rate of the tax credit for increasing research expenses and the alternative simplified research tax credit. It also increases the credit rate for taxpayers with no research expenses during a specified three-year period and the amount of the credit that certain small businesses may apply against payroll tax liabilities.