Research and Development Tax Credit Expansion Act of 2025

The Research and Development Tax Credit Expansion Act of 2025 aims to broaden and simplify the R&D tax credit for small businesses. Key changes include making a portion of the R&D credit refundable against unemployment taxes (FUTA), expanding who qualifies as a “qualified small business,” indexing some credit amounts for inflation after 2026, and significantly enhancing the alternative simplified credit (ASC) rate for small firms. The bill applies to taxable years beginning after December 31, 2025, and includes specific rules for first-year eligibility and year-to-year computations under the ASC. In short, the bill tries to improve cash flow for small, early-stage R&D companies by increasing the refundable portion of the credit, raising the size limit for eligibility, and boosting the credit rate under the ASC, while ensuring inflation adjustments and clear timelines for implementation.