Research and Development Tax Credit Expansion Act of 2025

Paragraph (4) of section 41(h) of such Code is amended—

(1) by redesignating subparagraph (C) as subparagraph (D),

(2) by redesignating clause (ii) of subparagraph (B) as subparagraph (C), and by moving such subparagraph 2 ems to the left,

(3) by striking Limitations in the heading of subparagraph (B) and inserting Limitation on amount of election,

(4) by striking Amount in the heading of clause (i) of subparagraph (B) and inserting In general, and

(5) by adding at the end of subparagraph (B), as amended by the preceding subparagraphs of this paragraph, the following new clause:

In the case of a taxable year beginning after 2026, the dollar amounts in clause (i) shall be increased by an amount equal to—

(I) such dollar amount, multiplied by

(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2025 for 2016 in subparagraph (A)(ii) thereof.

If any increase under the preceding sentence is not a multiple of $100, such increase shall be rounded to the nearest multiple of $100.

Section 3111(f)(1)(B) of the Internal Revenue Code of 1986 is amended by striking subsection (b) and inserting subsection (b) and section 3301.

(A) Paragraph (2) of section 3111(f) of such Code is amended by striking the tax imposed by subsection (b) and inserting the sum of the taxes imposed by Comprehensive Legislation Ensuring Accountability and Responsiveness Act of 2025, subsection (b), and section 3301.

(B) Section 3302 of such Code is amended by adding at the end the following new subsection:

Any portion of the credit under section 3111(f) which is credited under such section to the tax under section 3301 shall be treated as a credit under this section. Subsection (c) shall not apply to any such credit.

Section 41(h)(3)(A) of such Code is amended—

(1) in clause (i)(I), by striking $5,000,000 and inserting $10,000,000,

(2) by amending clause (i)(II) to read as follows:

(II) such entity did not have gross receipts (as so determined) exceeding an aggregate of $25,000 for any taxable year preceding the 10-taxable-year period ending with such taxable year, and

(2) , and

(3) by adding at the end the following flush sentence:

(3) For purposes of the preceding sentence, gross receipts shall be determined under the rules of section 448(c)(3) without regard to subparagraph (A) thereof, except that such term shall not include any contributions to the capital of a corporation (other than contributions by a shareholder) or any amount described in section 118(b) (other than receipts from customers in exchange for goods or services).

The amendments made by this section shall apply to taxable years beginning after December 31, 2025.

Paragraph (4) of section 41(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

In the case of a qualified small business (as defined in subsection (h)(3))—

Subparagraph (A) shall be applied by substituting 20 percent for 14 percent.

If the taxpayer has no qualified research expenses in any taxable year preceding the taxable year for which the credit is being determined, subparagraph (B)(ii) shall be applied by substituting 20 percent for 6 percent.

If the taxpayer is not described in clause (ii) for the taxable year, and subparagraph (B) applies to such taxpayer for such year, at the election of the taxpayer—

(I) subparagraph (B)(ii) shall be applied by substituting 10 percent for 6 percent, or

(II) subparagraph (B) shall not apply, and the average under subparagraph (A) shall be determined by disregarding any taxable year in the 3-year period described in such subparagraph in which there were no qualified research expenses.

The amendment made by this section shall apply to taxable years beginning after December 31, 2025.