CREATE Act

Overview: HR 4840, the CREATE Act, was introduced in the House on August 01, 2025.

Purpose and Intent: The CREATE Act aims to promote innovation and economic growth by enhancing the research and development (R&D) tax credit. The bill seeks to make the credit more accessible and beneficial for businesses, particularly small and medium-sized enterprises, to encourage greater investment in R&D activities.

Key Provisions:
- Increases the alternative simplified credit rate from 14% to 20% of qualified research expenses
- Expands the definition of qualified research expenses to include a broader range of activities, such as software development and cloud computing
- Allows businesses to claim the credit against their payroll tax liability, making it more accessible for startups and small businesses

Affected Parties and Impacts: The CREATE Act would primarily benefit businesses that engage in R&D activities, particularly small and medium-sized enterprises that may have limited tax liability. The expanded credit could incentivize greater investment in innovation, leading to potential economic growth and job creation.

Procedural and Timeline Considerations: The bill has been introduced in the House and is currently in the early stages of the legislative process. If passed, the changes to the R&D tax credit would take effect for tax years beginning after the date of enactment.