H.R. 4933: Research and Development Tax Credit Expansion Act of 2025

This bill, titled the Research and Development Tax Credit Expansion Act of 2025, aims to make several modifications to the existing research credit designed to benefit small businesses. Below are the key components of the bill:

1. Refundable Research Credit Expansion

The bill expands the refundable research credit for small businesses by:

• Inflation Adjustment: The dollar amounts associated with the credit will be adjusted for inflation starting in taxable years after 2026. This adjustment is based on cost-of-living increases, ensuring that the credit remains relevant over time.
• Credit Refundability: It allows portions of the research credit to also be credited against unemployment taxes, thus providing more flexibility in how businesses can use the tax benefits.

2. Enhanced Definition of Qualified Small Businesses

The bill broadens the definition of what constitutes a qualified small business as follows:

• The maximum gross receipts threshold for a qualified small business will increase from $5 million to $10 million.
• To qualify, businesses must not have had gross receipts exceeding $25,000 for any taxable year prior to a specified 10-year period.

3. Modifications to Alternative Simplified Credit

Changes are proposed for the alternative simplified credit to stimulate research expenditures, making it more beneficial for small businesses:

• Credit Rate Increase: The credit rate will increase from 14% to 20% for qualified small businesses, enhancing the financial incentive for these entities to invest in research.
• First-Year Special Rule: If a business has no prior research expenses, the applicable credit is increased from 6% to 20% for that first year.
• Flexibility in Other Years: For years following a business's first year, the bill offers flexibility in applying the credit rates based on research expenditures.

4. Effective Date

All amendments proposed by this bill will take effect for taxable years beginning after December 31, 2025.

Relevant Companies

• None found