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Tax Cuts and Jobs Act (TCJA) of 2017

On December 20, 2017, the House passed H.R. 1 and the “Tax Cuts and Jobs Act of 2017”was signed into law by the president on December 22, 2017 (the “Act” or "TCJA"). See P.L. 115-97, 131 Stat. 2054 (2017). The TCJA includes substantial changes to the taxation of individuals, businesses in all forms and industries, multinational enterprises, and others, effective for tax years subsequent December 31, 2017. 

However, the TCJA does not to modify the Internal Revenue Code (IRC) § 41 research credit, and it remains a permanent tax benefit for taxpayers that lowers the effective tax rate.  Moreover, the benefits of the R&D credit have been enhanced resulting from lower tax rates (i.e. 35% to 21% corporate tax rate), modified NOL limitations (80% limitation), and the ability to use the credit to offset international tax implications that flow from tax reform. 

Furthermore, as discussed below, the use of the research credit to offset certain tax liabilities is not immediately subject to limitations that are imposed on other tax incentives. For example, the use of some business credits like the alcohol fuels credit determined under IRC § 40(a) cannot reduce the base erosion anti-abuse tax (“BEAT”), while the research credit can reduce BEAT for years beginning before January 1, 2026.

Below highlights important considerations for the R&D tax credit impacted by the TCJA.

(1) Reduction in Corporate Tax Rate & IRC § 280C

TCJA eliminates the progressive corporate tax rate structure, reducing the maximum corporate tax rate from 35 to 21%. The reduction is intended to make the U.S. corporate tax rate more competitive tax policies rates internationally.

Increase in Credit from Decrease in Tax Rates

  • Previous Law

    • Taxpayers couldn’t take a deduction under IRC § 174 equal to the amount of the R&D credit claim to prevent companies from getting a double tax benefit. As such, taxpayers must reduce their R&D expenses ("add back to income") by the amount of the R&D credit claimed. Thus, the reduction in R&D expenses claimed on the return (per IRC § 174) created an increase to income and potentially an increase in corresponding taxes.​

    • However, taxpayers could avoid the reduction of their research expenses by electing to take a reduced credit in accordance with IRC § 280C(c)(3). This election reduced the research credit by the amount of tax savings created by the double tax benefit. The § 280C(c) benefit was calculated using the maximum corporate tax rate.

  • New Law Moving Forward

    • § 280C(c) was retained in the 2018 tax reform. However, since the maximum corporate tax rate is going down from 35% to 21%, taxpayers will see an increased credit benefit.

    • The lower corporate rate indirectly increases the net R&D credit benefit upon applying § 280C (claiming reduced R&D credit adjusted for tax rate impact). The reduced credit was net of the highest tax rate that prior to tax reform (35%). However, because the new rate is now 21%, the reduced credit is now 21.5% higher, as demonstrated in the examples below:

      • Rate 35%

        • R&D credit $10,000​

          • Addback (or reduction under § 280C(c)(3) $(3,500)

          • Net credit $6,500

      • Rate 21%

        • R&D credit $10,000

          • Addback (or reduction under § 280C(c)(3) $(2,100)

          • Net credit $7,900

“Blended” tax rate application for fiscal year taxpayers under IRC § 15.

  • IRC § 15 provides special rules for determining how specific “rate changes” apply to corporate taxpayers whose tax years straddle relevant effective periods (e.g., fiscal year filers in the case of law changes that are effective as of the beginning or end of the calendar year). As such, amending taxpayers should consider fiscal year impacts when claiming the federal R&D credit and other tax implications for prior years.

(2) Alternative Minimum Tax ("AMT")

C-Corporation AMT Removal: Increased Usability of R&D Credits

  • TCJA repeals the corporate alternative minimum tax (“AMT”) effective for tax years beginning after December 31, 2017. Under prior law, The corporate AMT was set to 20%. This meant that regardless of any credits or deductions, corporations would still be taxed at a minimum rate of 20%.

    • However, non-corporate taxpayers may still use the research credit to offset AMT if they met the definition of an “eligible small business” under IRC § 38(c)(5), i.e., non-publicly traded corporations, partnerships, and S corporations with an average gross receipts for the prior three years of less than $50 million.

    • See "Retention of Eligible Small Business Credits & Alternative Minimum Tax (AMT) Offset" section below for additional details.

  • With AMT repeal, businesses that historically paid AMT will now be subject to regular tax that can be offset with the research credit, with certain limitations (e.g., under IRC § 38(c), the general business credit (one of which is the R&D credit) can offset the first $25,000 of tax plus up to 75% of the tax in excess of $25,000. Thus, if the regular tax liability is greater than $25,000 the credit cannot completely offset regular taxes.​ The rule, effectively known as the "25/25 limitation", restricts taxpayers with over $25,000 in regular tax liability from offsetting more than 75% of their regular tax liability using the credit.

Corporate AMT Carryover and Refund

  • Under the 2018 tax reform, any corporate AMT credit carryovers for tax years after 2017 can be used to offset regular tax liability (after reduction by certain other credits).

  • In addition, for tax years beginning in 2018, 2019, and 2020, to the extent that AMT credit carryovers exceed regular tax liability (as reduced by certain other credits), 50% of the excess AMT credit carryovers are refundable (a proration rule exists with respect to short tax years). Any remaining AMT credits will be fully refundable in 2021.

  • As such, taxpayers may also want to reexamine prior year research activities to ensure an appropriate amount of research credit was claimed. In particular, companies who were subject to AMT in prior years may not have claimed the R&D credit because the credit was available only against regular tax. With this new provision, companies have the opportunity to claim the research credit for prior years because tax reform clarifies how taxpayers can use the AMT credit and R&D credit carryforwards to offset taxes in the future. ​

Higher AMT Exemptions for Individual Taxpayers ("Increased R&D Credit Usability") 

  • For individuals, the AMT remains. However, the 2018 tax reform temporarily increases the AMT exemption amounts and the phase-out thresholds for individuals.

    • The higher limits for the individual AMT are also only temporary and will expire on Jan. 1, 2026, unless extended by Congress before then.

  • Previously, individual taxpayers were sometimes prevented from using the R&D credit because of AMT at the individual shareholder level. However, for tax years subsequent to December 31, 2017, the AMT exemptions for individual increases will help enable more individual taxpayers to use more of the R&D credits passing through to them from their businesses who were previously prevented due to lower AMT thresholds.

  • The increased exemption amounts and phase-out thresholds are scheduled to sunset after December 31, 2025. Until then, and based upon the limitation of certain itemized deductions (e.g., property tax deduction capped at $10,000), fewer individuals will be subject to the AMT, and thus more individuals, including owners of pass-through businesses, may benefit from the research credit.​

Optional 10-Year Write-off of Certain Tax Preferences

  • The preference items and other AMT-related provisions under IRC § 55 through § 59 were not repealed. Of significance to R&D is § 59(e), which allows taxpayers the option to elect to capitalize part or all of its R&D expenses and amortize the costs over 10 years.

  • Depending on each taxpayer’s facts, the election may provide a beneficial planning tool.

    • For example, the election could increase taxable income, which in turn could allow carryover net operating losses (“NOLs”) or other tax attributes to be more fully utilized.

  • It appears that post 2017, corporations may still be able to make § 59(e) elections to capitalize some or all of their R&D expenditures over a 10-year period.

  • Corporations may wish to make post-2017 § 59(e) elections with collateral impact on § 59A (BEAT) and § 163(j) (limitation on deduction for interest). A corporation with domestic NOLs and foreign source income covered by foreign tax credits may want to consider using § 59(e) to eliminate the domestic NOL and free up the foreign tax credit or other tax attributes.​

(3) Modified Net Operating Loss (NOL) Deduction

TCJA limits the NOL deduction for a given year to 80% of taxable income, effective to losses arising in tax years beginning after December 31, 2017.

TCJA also repeals the prior law carryback provisions for NOLs arising in tax years ending after December 31, 2017. However, it does permit a new two-year carryback for certain farming losses and retains present law for NOLs of property and casualty insurance companies. In addition, the Act provides for an indefinite carryforward of NOLs arising in tax years ending after December 31, 2017, as opposed to the prior 20-year carryforward.

Consequently, corporations with NOLs arising after 2017 will have regular tax liability (e.g. remaining 20% not offset by NOLs) that can be reduced by the research credit and/or other beneficial tax attributes.

(4) IRC § 174 Research and Experimental Expenditures - R&D Amortization Starting in 2022:

Before the TCJA, taxpayers had the option to either deduct their R&D expenses or charge them to a capital account if they make an election under IRC § 174. However, 2018 tax reform (TCJA) now provides specified research or experimental (“R&E”) expenditures under IRC § 174 paid or incurred in tax years beginning after December 31, 2021, should now be capitalized and amortized ratably based on the following:

  • 5 years for R&E conducted in the U.S., beginning with the midpoint of the tax year in which the specified R&E expenditures were paid or incurred.

  • 15 years for R&E conducted outside the U.S., beginning with the midpoint of the tax year in which the specified R&E expenditures were paid or incurred.

  • Specified R&E expenditures subject to capitalization include expenditures for software development.

    • Previously, per Revenue Procedure. 2000-50 and its predecessor Revenue Procedure 69-21, the IRS permitted taxpayers to treat the costs of developing software as deductible IRC 174 expenses, whether or not the particular software was patented or copyrighted or otherwise explicitly met the statutory requirements of IRC 174.​

    • However, the TCJA terminates this rule of​ convenience and requires capitalization of software development expenses (as noted above) otherwise eligible for expensing under Revenue Procedure 2000-50 as an incentive to push for further R&D efforts within the U.S. 

For retired, abandoned, or disposed property with respect to which specified R&E expenditures are paid or incurred, any remaining basis may NOT be recovered in the year of retirement, abandonment, or disposal. Instead such property (retired, abandoned, etc.) must continue to be amortized over the remaining amortization period.

The application of this rule is treated as a change in the taxpayer’s method of accounting initiated by the taxpayer, and made with the consent of the Secretary. This rule is applied on a cutoff basis to R&E expenditures paid or incurred in tax years beginning after December 31, 2021 (thus there is no adjustment under IRC § 481(a) for R&E expenditures paid or incurred in tax years beginning before January 1, 2022). § 1.174-2 provides a general definition of R&E expenditures, and it does not appear that this definition would change under the new law.


This will not only result in a shorter amortization period, but also may enhance the research credit. Additional considerations include inter-company reimbursements of R&E expenditures under a qualifying cost sharing agreement or through cost plus arrangements, which may affect the accounting treatment under these transfer pricing provisions.

Although cost sharing generally nets costs, cost-plus arrangements generally account for the payment for R&D services as a revenue item. This may create a mismatch between the revenue and expense for tax reporting purposes.

(5) Orphan Drug Credit & IRC § 280C(b)(3)

The new law reduces the “orphan drug credit” to 25% (50% under prior law) of qualified clinical testing expenses (“CTEs”) for the tax year and allows an election of a reduced credit under § 280C(b)(3). The provision is effective for amounts paid or incurred in tax years beginning after 2017. The election to reduce the credit under new § 280C(b)(3) provides a similar election method as the research credit, meaning the election must be made by the due date of the tax return (including extensions) and the election is irrevocable for that tax year.

In addition, as discussed above, special rules (IRC § 15, "blended rate") apply to fiscal year end corporate taxpayers whose tax years straddle the effective date for purposes of the section 280C computation.​

(6) International Considerations

Before the TCJA, the U.S. utilized a worldwide tax system which U.S. corporations were required to pay U.S. corporate income taxes on all their earnings, even those that were made internationally. However, income earned from international operations were not taxed until that income was distributed back to the U.S. parent entity, or when the earnings were repatriated. 

As such, prior the TCJA, companies were discouraged from repatriating their earnings, and instead those earnings remained overseas, where their U.S. tax liability was deferred. This put U.S. based businesses at a disadvantage and created an obstacle to repatriation because companies could defer U.S. taxation by keeping their overseas earnings outside the U.S. And when companies actually decided to repatriate their overseas earnings, those businesses would be required to pay the pre-TCJA 35% U.S. corporate income tax rate (offset by a credit for foreign taxes paid), one of the highest rates among industrialized nations. 

Companies that did not require additional cash flow, through U.S. debt, were unlikely to repatriate their cash due to the potential large tax liability. Thus, a large amount of earnings built up overseas under the old system. The TCJA reformed U.S. tax policy away from the worldwide system and toward a territorial system, in which only income earned within the United States is subject to the corporate income tax.

To transition to this new system and address the buildup of cash that occurred under the old system, the TCJA requires companies to pay a one-time tax (“deemed repatriation”). This tax would be assessed at a 15.5% rate on liquid assets (i.e. cash) and an 8% rate on noncash assets as if companies repatriated their cash which may be paid in installments over eight years. 

A. Mandatory ("Deemed") Repatriation

The TCJA includes a transition rule that provides the subpart F income of a specified foreign corporation (“SFC”) for its last tax year beginning before January 1, 2018, is increased by the greater of its accumulated post-1986 deferred foreign income (deferred income) determined as of November 2, 2017, or December 31, 2017 (a measuring date). A taxpayer generally includes in its gross income its pro rata share of the deferred income of each SFC with respect to which the taxpayer is a U.S. shareholder.


This mandatory inclusion, however, is reduced (but not below zero) by an allocable portion of the taxpayer’s share of​ the foreign earnings and profit (“E&P”) deficit of each SFC with respect to which it is a U.S. shareholder and the taxpayer’s share of its affiliated group’s aggregate unused E&P deficit.


The transition rule includes a participation exemption, the net effect of which is to tax a U.S. shareholder’s mandatory inclusion at a 15.5% rate to the extent it is attributable to the shareholder’s aggregate foreign cash position and at an 8% rate otherwise. With the mandatory repatriation, many multinational corporations may be subject to additional tax.


R&D Credit / General Business Credits Considerations: 

  • Incentives such as the research credit, would be available to offset the one-time repatriation tax liability.

  • Therefore, companies may want to re-examine their prior year research activities to ensure an appropriate amount of research credit was claimed. In addition, it may be possible to do further planning to reduce the amount of E&P and mandatory repatriation tax.

​B. Global Intangible Low-Taxed Income ("GILTI" Tax)

Before the TCJA, the U.S. generally taxed its businesses on its worldwide income. However, U.S. entities could defer the tax on foreign subsidiaries’ active business earnings until those earnings were repatriated to the U.S. as dividends. After the TCJA, the U.S. generally exempts earnings from active businesses of U.S. entities' foreign subsidiaries, even if the earnings are repatriated. Although the U.S. still taxes the income from passive investments of foreign subsidiaries.

However, to avoid completely exempting U.S. multinationals’ foreign earnings which may promote an incentive to shift profits to low-tax jurisdictions abroad, the TCJA included IRC § 951A which provides a new 10.5% minimum tax on global intangible low-taxed income (GILTI) to discourage such profit shifting. The new IRC § 951A requires a U.S. shareholder of a controlled foreign corporation (“CFC”) to include in income its GILTI in a manner similar to subpart F income. More specifically, a U.S. business must include GILTI in its gross income annually.

GILTI is intended to approximate the income from intangible assets (e.g. patents, trademarks, and copyrights) held abroad. Because intangible assets are considered highly mobile, GILTI was implemented to discourage U.S. entities from shifting these assets offshore.

GILTI Calculation:

  • In general, GILTI is the excess of a U.S. shareholder’s “net CFC tested income" over its “net deemed tangible income return,” which is defined as 10% of its CFCs’ “qualified business asset investment,” reduced by certain interest expense taken into account in determining net CFC tested income.

  • More simply, GILTI is calculated as the total active income earned by a U.S. entity's foreign affiliates that exceeds 10% of the firm’s depreciable tangible property.

    • Similar to other amounts calculated under subpart F, the GILTI would be included in a U.S. shareholder’s income each year without regard to whether that amount was actually distributed by the CFC to the U.S. shareholder during the year.

  • A corporation (but not other businesses) may generally deduct 50% of the GILTI (reduced to 37.5% starting in 2026) and claim a foreign tax credit for 80% of foreign taxes paid or accrued on GILTI.

    • For any amount of GILTI that may be included in a U.S. corporate shareholder’s income, the new law provides for a limited deemed credit for 80% of the foreign taxes attributable to the tested income of the CFCs.​ Thus, if the foreign tax rate is zero, the effective US tax rate on GILTI will be 10.5% (half of the regular 21% corporate rate because of the 50% deduction). If the foreign tax rate is 13.125% or higher, there will be no US tax after the 80% credit for foreign taxes. 

  • ​These rules are effective for tax years of foreign corporations beginning after December 31, 2017, and for tax years of U.S. shareholders in which or with which such tax years of foreign corporations end.​

General Example - GILTI Tax Calculation:

  • A US corporation is the sole shareholder of a foreign corporation with a manufacturing plant in Ireland, which has a 12.5% tax rate. If the manufacturing plant in Ireland cost $100 million to build, and the foreign income is $30 million (after properly allocating expenses), the corporation would calculate GILTI to be $20 million (total foreign income minus 10% of $100 million of depreciable assets).

    • The U.S. tax on GILTI would be $2.1 million before credits for foreign taxes (50% deduction of the $20 million GILTI amount available to corporations) times the 21% corporate tax rate). 

    • The net U.S. tax after credits would be $0.1 million ($2.1 million−$2 million credit for Irish taxes).

  • Note, in real-world applications, the calculations are likely to be much more complex, as U.S. corporations may have multiple operations abroad, thus how to properly allocate expenses among them may create other factors to be considered when calculating.​

R&D Credit / General Business Credits Considerations to GILTI: After the use of the deemed foreign tax credit (see IRC § 26), general business credits (e.g. R&D tax credit) may also be used to lower the total U.S. tax liability.

C. Base Erosion & Anti-Abuse Tax ("BEAT")

Over the past several decades, U.S. multinational corporations have used different techniques to shift profit from the U.S. to other countries. A U.S. based multinational corporation might, for example, pay an affiliate in a lower-taxed country to use patents or other intellectual property in the U.S. This would increase the U.S. corporation’s costs, thus reducing their reported profits in the U.S. and increase its revenue and reported profits in the lower-taxed country, potentially lowering the corporation’s overall global tax liability. Prior U.S. tax laws attempted to limit profit shifting, mainly by regulating "transfer prices" between companies, but the IRS has struggled to enforce these laws effectively.

To limit future profit shifting, the TCJA added a new tax, the Base Erosion and Anti-Abuse Tax (BEAT). The BEAT targets large U.S. corporations that make deductible payments, such as interest, royalties, and certain service payments, to related foreign parties.


The BEAT is a minimum tax add-on: A US corporation calculates its regular US tax, at a 21% rate, and then recalculates its tax at a lower BEAT rate after adding back the deductible payments. If the regular tax is lower than the BEAT, then the corporation must pay the regular tax plus the amount by which the BEAT exceeds the regular tax.

The BEAT Rate:

  • 5% in 2018; 

  • 10% in 2019 through 2025; and

  • 12.5% in 2026 and beyond.

For example, in 2019 a U.S. corporation has $300 million of gross income but pays deductible royalties to a foreign affiliate of $200 million. The corporation’s regular tax liability is $21 million (21% of $100 million), but its alternative BEAT tax is $30 million (10% of $300 million in 2019), so the corporation would pay $30 million to the United States (the regular tax of $21 million plus the BEAT of $9 million).

BEAT Application:

  • The BEAT applies to domestic corporations that are not taxed on a flow-through basis (that is, not S Corps, RICs, or REITs), are part of a group with at least $500 million of annual domestic (including effectively connected amounts earned by foreign affiliates) gross receipts (over a three-year averaging period), and have a “base erosion percentage” (discussed below) of 3% or higher for the tax​ year (or 2% for certain banks and securities dealers, which are also subject to a higher BEAT rate, as discussed below).

    • The targeted base erosion payments generally are, among others, amounts paid or incurred by the taxpayer to foreign related parties for which a deduction is allowable, and also include amounts paid in connection with the acquisition of depreciable or amortizable property from the foreign related party.

  • The provision also applies to foreign corporations engaged in a U.S. trade or business for purposes of determining their effectively connected income tax liability.

  • The new law also specifically includes cross-border reinsurance payments as base erosion payments.

  • However, the BEAT excludes payments that can be treated as cost of goods sold.

    • For example, if a US company properly accounts for interest or royalties as part of the cost of its inventory, the interest or royalties are not added back to the BEAT tax base.

  • The new law imposes a new base-erosion-focused minimum tax or BEAT that in many cases would significantly curtail the U.S. tax benefit of cross-border related-party payments made by large multinationals.

BEAT Computation:

  • The tax liability increase is determined through a multi-step formula used to derive the base erosion minimum tax amount.

    • This amount equals the excess of 10% of the taxpayer’s modified taxable income (“MTI”) for 2019 (5% for 2018), over an amount equal to the pre-credit regular income tax liability reduced (but not below zero) by any credits, OTHER THAN the research credit and a certain amount of “applicable IRC § 38 credits” that includes the IRC § 42(a) low-income housing credit, IRC § 45(a) renewable energy production credit, and IRC § 48 energy credit.

  • Applicable IRC § 38 credits are only included to the extent of 80% of the lesser of the credits or the base erosion tax amount otherwise computed.

  • The BEAT formula allows taxpayers to retain, at least initially, the benefit of the research credit and some benefit for the three categories of applicable IRC § 38 credits.

The following examples may also help further illustrate the formula’s application using the 10% BEAT rate.

  • MTI is $400 (so 10% of MTI = $40), regular tax liability is $30, no credits.

    • The BEAT liability is $10 ($40 - $30 regular tax) and a combined tax of $40 ($10 BEAT tax + $30 regular tax).

  • Based on the same facts, the taxpayer reduces regular tax liability to $20 by taking $10 of carried forward § 45M(a) energy efficient appliance credit. 

    • The BEAT liability is $20 ($40 - $20 postcredit regular tax), maintaining a total combined tax liability of $40, so the carried forward section 45M(a) credit has not reduced the total tax liability.

  • Regular tax liability is reduced to $20 due to $10 of R&D credit.

    • The BEAT liability is still $10 (regular tax liability before the application of R&D credits), the total combined tax liability is $30, so the R&D credit has reduced the total tax liability.

  • Note however that the pre-credit regular income tax liability cannot be reduced to below zero, which means the research credit and the applicable § 38 credits may offset the BEAT only if there is a​ regular tax liability.

    • R&D Credit / General Business Credits Considerations: Furthermore, for tax years beginning after 2025, the research credit and the applicable section 38 credits cannot be used to offset BEAT.

(7) Other R&D Tax Considerations:Protecting Americans From Tax Hikes Act of 2015 

The TCJA did not eliminate the recent additional R&D tax credit incentives newly available apart of the Protecting Americans From Tax Hikes Act of 2015 (PATH Act), P.L. 114-113 as noted above. The PATH Act created several provisions favorable to taxpayers that incur qualified research and development (R&D) expenditures. This includes making permanent the previously temporary credit for increasing research activities (R&D credit) and added provisions allowing the credit to be claimed against payroll taxes or alternative minimum tax (AMT), advantages that eligible taxpayers may still claim even after the passing of the TCJA.

Retention of Eligible Small Business Credits & Alternative Minimum Tax (AMT) Offset

  • Prior to the enactment of the PATH Act, many taxpayers also were unable to realize the benefits of the R&D tax credit during a particular tax period due to AMT liability, which the R&D tax credit could not reduce previously. However, the PATH Act provided for eligible small businesses (ESBs) to use the R&D credit to offset their AMT liability for tax years beginning after Dec. 31, 2015.

  • An ESB is defined as a non-publicly traded corporation, a partnership, or a sole proprietorship with average annual gross receipts for the prior three years of $50 million or less. And all persons treated as a single employer under IRC § 52(a) or (b) or IRC § 414(m) or (o) are treated as a single taxpayer whose gross receipts must be aggregated. Gross receipts are reduced by returns and allowances and must be annualized for short tax years, and predecessors are taken into account.

  • Moving forward, although C-Corporation AMT was eliminated and individual AMT exemption and phaseout amounts were increased by the TCJA, these PATH Act provisions regarding ESB credit offset against AMT still benefit individual taxpayers with R&D credits from flow-through business entities that they have an ownership shares.

Retention of Qualified Small Business Payroll Credits

  • As first established under the 2015 Path Act, Startup companies with less than $5 million in revenue will still be able to make an election on an original return that will allow them to offset up to $250,000 in payroll taxes for the first five years they have gross receipts. The passing of the TCJA of 2017 does not impact eligible taxpayer abilities to continue making the payroll offset claim derived under the 2015 Path Act.

  • IRC § 41(h) and § 3111(f) allow a qualified small business to elect to apply a portion of the IRC § 41(a) research credit for the taxable year against the employer portion of the old-age, survivors, and disability insurance tax (social security tax) under the Federal Insurance Contributions Act. IRC § 41(h) and § 3111(f) are effective for taxable years beginning after December 31, 2015.

  • IRC § 41(h) and § 3111(f) were enacted by § 121(c) of the Protecting Americans from Tax Hikes Act of 2015, Pub. L. No. 114–113, Div. Q, 129 Stat. 2242. § 41(h)(1) provides that at the election of a qualified small business for any taxable year, § 3111(f) shall apply to the payroll tax credit portion of the research credit for the taxable year and such portion shall not be treated (other than for purposes of § 280C) as a research credit.

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