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4

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20% of the taxpayer's expenditures on qualified

energy research undertaken by an energy

research consortium.

The base amount is a fixed-base percentage of

the taxpayer's average annual gross receipts

from a U.S. trade or business, net of returns

and allowances, for the four tax years

before the credit year, and can't be less

than 50% of the year's qualified

research expenses. The fixed-base

percentage for a non-startup

company is the percentage

(not exceeding 16%)

that the taxpayer's

total qualified

research expenses

represent within total

gross receipts for tax

years beginning after 1983

and before 1989. A 3% fixed-

base percentage applies for each

of the first five tax years in which

a “startup company” (one with fewer than

three tax years with both gross receipts and

qualified research expenses) has qualified

research expenses.

A taxpayer can elect an alternative simplified

research credit equal to 14% of the excess of the

qualified research expenses for the tax year over

50% of the average qualified research expenses for

the three tax years preceding the tax year for which

the credit is being determined. If a taxpayer has no

qualified research expenses in any one of the three

preceding tax years, the alternative simplified

research credit is 6% of the qualified research

expenses for the tax year for which the credit is

being determined.

Work opportunity tax credit is retroactively

extended through 2019 and expanded.

The Work Opportunity Tax Credit (WOTC) allows

employers who hire members of certain targeted

groups to receive a credit against income tax of a

percentage of first-year wages up to $6,000 per

employee ($3,000 for qualified summer youth

employees). Where the employee is a Long-term

Family Assistance (LTFA) recipient, the WOTC is a

percentage of first and second-year wages, up to

$10,000 per employee. Generally, the percentage

of qualifying wages is 40% of first-year wages; the

percentage is 25% for employees who have

completed at least 120 hours but less than 400

hours of service for the employer. For LTFA

recipients, an additional 50% of qualified

second-year wages is included.

The maximum WOTC for hiring a

qualifying veteran generally

is $6,000. However, the

credit can be as high

as $12,000,

$14,000, or $24,000,

depending on factors

such as whether the veteran

has a service-connected

disability, the period of his or her

unemployment before being hired,

and when that period of unemployment

occurred relative to the WOTC-eligible

hiring date.

The Act retroactively extends the WOTC so that it

applies to eligible veterans and non-veterans who

begin work for the employer on or before December

31, 2019.

Empowerment zone tax breaks are

retroactively extended through 2016.

The designation of an economically depressed

census tract as an “Empowerment Zone” renders

businesses and individual residents within such a

zone eligible for special tax incentives.

The Act extends for two years, through December

31, 2016, the period for which the designation of

an empowerment zone is in effect.

n

“A number of tax

reform proposals that

directly affected businesses

were passed in 2015

and 2016.”