On Friday, December 18th 2015, the "Protecting Americans from Tax Hikes (PATH) Act was signed into law by President Obama. This law makes billions of dollars in incentives and cost reduction programs available to Startup Companies. The PATH Act instituted the most sweeping tax code changes in 33 years.


Startup Companies That Qualify

A Startup Company that would qualify for the Startup & Innovation Tax Credit would be

  1. a corporation or partnership, if the gross receipts … of such entity for the taxable year is less than $5M and
  2. such entity did not have gross receipts for any taxable year preceding the 5-taxable-year period ending with such taxable year

With the following stipulations:

  • Active less than 6 years (TY 2023 - nothing prior to 2019)
  • Gross receipts under $5M 
  • Annual payroll of $250,000
Examples
  • Life Sciences - Comprises the fields of science that involve the study of living organisms, such as microorganisms, plants, animals, and human beings as well as bioethics.
    • Biotech
    • Pharmaceuticals
    • Bio Med
    • Cosmeceuticals
    •  Medical Devices 
  • Software & Information Technology - Is the application of computers and telecommunications equipment to store, retrieve, transmit and manipulate data, often in the context of a business or other enterprise.  The definition consists of three categories: 1) techniques for processing, 2) the application of statistical and mathematical methods to decision-making, and 3) the simulation of higher-order thinking through computer programs.
    • Hardware & Software
    • Computer Services
    • Internet
    • Telecom Equipment
    • Engineering
    • Healthcare
    • eCommerce


Our Methodology

Startup and Tech companies due to their nature should take advantage of Specialized Tax Incentives that are available to offset tax liability. GMG's expertise lie in programs such as the R&D Tax Credit, Cost Segregation, Hiring Incentives and Property Tax Mitigation. Programs that prior to the PATH Act were out of reach for small to mid sized companies are now attainable for Startups.  


Benefit

Prior to The PATH Act companies without income tax liability or companies who fell under Alternative Minimum Tax (AMT) either did not qualify for or had to carry forward R&D tax credits. Now, small businesses qualifying under The PATH Act can capture the R&D tax credit within the immediate tax year against payroll taxes, AMT, or Federal Income Taxes.  A Small Business qualifying under The PATH Act with a payroll of $250,000 would normally have to pay $15,500 in FICA. The available (estimated) R&D Tax Credit of $16,000 would offset their tax liability 100%.