Recommendation
Congress should allow investors in small research companies to use their net operating losses associated with that research.
Details
Current law prevents passive investors from taking advantage of net operating losses or research tax credits of the companies in which they invest. This makes sense for tax shelters that are never meant to be profitable. But it makes it even harder for small research companies to find investors. Congress should create an exception for companies that devote over half of their expenses to research and development and that have fewer than 250 employees and less than $150 million in assets. Investors could only use that portion of the losses or credit that was devoted to qualifying research activity.
Keep reading:
▪ John Wu and Robert D. Atkinson, “How Technology-Based Start-Ups Support U.S. Economic Growth” (ITIF, November 29, 2017, https://itif.org/publications/2017/11/28/how-technology-based-start-ups-support-us-economic-growth.
