The First State has made the decision to fully match the federal research and development tax credit for small businesses! Here’s what you need to know, even if you’re not based out of Delaware:
What is research and development?
In the business world, research and development is the innovation and introduction of new products and processes by which a business operates and creates their products. Research and development is important because it helps your business compete on a global scale by modernizing and bettering products and services.
What the tax credit increase actually looks like:
Delaware’s tax credit increase was introduced in HB 318 in early May 2014. The Bill amends the current code relating to the research and development (R&D) tax credit by doubling it, all while keeping in place the annual cap of $5 million for the credit as a whole.
If your business has made less than $20 million per year for the last four years, then you are considered a small business in Delaware, and your federal R&D tax credit will be matched 100% by Delaware! If your business made over $20 million per year in the last four years, Delaware will still match the federal credit by 50%. Not bad!
The importance of the increased tax credit for businesses
Having a 50% larger R&D tax credit really reduces the risk of trying something new for businesses—especially small businesses where a risk could cost them everything. The idea with the tax credit increase is that now businesses will hopefully devote time to research and development, which could raise their value in the global market. This all equals business growth in and a bolstered economy for Delaware. Ingenious, isn’t it? It’s amazing what a few business-friendly laws can eventually do for a place. Now if only the rest of the country would follow suit.