Research and Development Tax Credit Expansion Act of 2025

This bill, titled the "Research and Development Tax Credit Expansion Act of 2025," aims to significantly expand and simplify the research credit for certain small businesses. It introduces an inflation adjustment for the refundable credit amount, ensuring its value is maintained over time. Crucially, the bill allows the refundable credit to be applied against not only the employer's share of Social Security taxes but also against Federal Unemployment Tax Act (FUTA) taxes , providing more avenues for businesses to utilize the credit. The legislation also broadens the definition of a qualified small business by raising the annual gross receipts threshold from $5 million to $10 million and modifying the look-back period for prior gross receipts. Furthermore, it enhances the alternative simplified credit for these businesses, increasing the credit rate from 14 percent to 20 percent . Special rules are introduced for calculating the base amount, offering more favorable terms for businesses with no prior research expenses or those with fluctuating research activities, making the credit more accessible and beneficial.