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SACRAMENTO — Assembly Speaker Toni G. Atkins has introduced legislation that would help small businesses cash the research and development tax credits that they are already earning, but have trouble using.

“Small businesses are so important to California’s economy that we need to be creative in helping these job-creators start and succeed,” said Speaker Atkins (D-San Diego). “Creating a grant program as part of the California Research Tax Credit helps small businesses by allowing them to cash out some of the research and development tax credits they receive and reinvest those resources, boosting their business and moving the state forward.”

AB 437 allows small businesses with $5 million or less in gross receipts to cash out a portion of the tax credits they have earned and use them to reinvest in further research and development. This bill authorizes eligible businesses to cash out 10 percent of all tax credits received in 2014 and 2015. From 2016 onward, eligible businesses will be able to cash out 15 percent of the credits generated. Any remaining credits would be carried forward by the businesses.

“As the majority of Biocom’s members are small to mid-size life science companies still in the research and development phase with no approved product, we praise and thank Speaker Atkins for this legislation,” Joe Panetta, President and CEO of Biocom added. “It is an inventive way to allow smaller companies to utilize the tax credits they have already accrued in a way that will help these companies to continue to power California’s economy. Ultimately, Speaker Atkins’ bill will save and create high-skill, high-wage life science jobs for all of California.” 

Data from the Franchise Tax Board shows that there were $100 million in tax credits generated for businesses with $1 million to $10 million in gross receipts, but only $13 million of those credits were used. Small and medium businesses earned the research and development credits but weren’t able to use them due to lack of tax liability.

“CHI applauds Speaker Atkins' leadership on thoughtful efforts to bolster our economy by promoting life sciences investment and innovation,” said California Healthcare Institute President and CEO Sara Radcliffe. “This legislation will help small companies—engaged in important biomedical research and development—leverage tax credits and enable them to continue developing breakthrough treatments and technologies for patients.”

“Research and development tax credits can be an important tool to help small businesses remain competitive, but for many companies these credits are more theoretical than practical,” said John Kabateck, Executive Director of the National Federation of Independent Business CA, America’s leading small business advocate. “AB 437 by Assembly Speaker Toni Atkins helps businesses get tangible benefits from the R&D tax credits they’ve earned. That means more businesses getting more products in the pipeline and putting more people on the payroll.”

Website of Assembly Speaker Toni G. Atkins: