After months of lobbying from the business community, Congress could vote this week on a bill that would offer startup companies relief from the so-called innovation tax.
House Speaker Mike Johnson said Monday he intends to put a bipartisan tax package on the floor for a vote. Should the bipartisan bill pass the House, it would still need to pass the Senate.
“However, if this gets enacted, it will be one of the most important developments for the N.C. innovation economy in decades,” said Eva Garland, founder of Eva Garland Consulting, which has been working with small businesses to push lawmakers to act.
The legislative fix included in the bill would correct an earlier decision not to extend a provision that allows R&D costs to be fully expensed under Section 174 of the federal tax code.
Closer look: How startups hope to survive the 'innovation tax'
Krista Covey, president of First Flight Venture Center in Research Triangle Park, said the issue is make or break for her firm’s tenants, many of which are startups in the biosciences and agtech sectors, industries with “very long runways to success.” The way those companies make it through the research and development process is through non-dilutive funding, like government grants.
“They’re just barely making those dollars work and having this tax on top of that, it’s a business killer,” Covey said. “It’s an innovation killer. We want to do everything we possibly can to get that removed.”
Both Garland and Covey are encouraging entrepreneurs to reach out to their elected representatives about the measure.
It’s unclear what kind of support the tax legislation could get, particularly in the Senate, as it includes other tidbits such as expanding the Child Tax Credit.
The bill will require a two-thirds majority to pass in the House before being sent to the Senate.
In an email, a spokesman for North Carolina Sen. Ted Budd said Budd “is currently undecided on the tax package overall, but he is supportive of fixing the Section 174 issue.”
A spokesperson for Sen. Thom Tillis did not return a request to comment for this story.
