If you’re running a tech startup, biotech company, or any business investing in innovation, the tax landscape just shifted dramatically in your favor. At a recent NextCorps lunch and learn, Joshua Hoffman, CPA, MSA, and Partner at MMB+CO, walked founders through game-changing legislation that could put significant money back in their pockets, and introduced several hiring incentives that many founders don’t even know exist.
The R&D tax law reversal
For the past few years, founders faced an unwelcome surprise: research and development costs could no longer be deducted immediately. Since 2022, companies have had to capitalize these expenses and amortize them over 5 or 15 years, turning a tax benefit into a cash-flow challenge.
That changed on July 4, 2025, when the One Big Beautiful Bill Act (P.L. 119-21) became law.
Domestic R&D is back to being expensed immediately. If you’re conducting research in the United States, you can now deduct qualifying R&D expenses in the year they are incurred. This is significant for cash flow and can dramatically reduce your tax burden right when you need capital most.
Small businesses can look backward. If your company has averaged less than $31 million in annual gross receipts over the past three years, you qualify for retroactive relief. That means you can go back and claim deductions for R&D expenses from 2022-2024 that you previously had to capitalize. For many startups, this represents a meaningful tax refund opportunity.
Foreign R&D follows different rules. Research conducted outside the U.S. still requires 15-year amortization, so it’s worth considering where you’re conducting your development work from a tax perspective.
What qualifies as R&D?
This is broader than many founders realize. If you’re developing new software, improving products, creating prototypes, or conducting experiments to advance technology, you’re likely doing R&D work. The key is that you’re trying to discover something new or improve upon existing technology in a way that involves uncertainty.
Navigating the changes
The IRS released detailed guidance (Revenue Procedure 2025-28) that outlines exactly how to claim these benefits. While the procedures are technical, the opportunity is clear. Founders should be working with their tax advisors now to:
- Review R&D expenses from 2022-2024 to identify retroactive deduction opportunities
- Ensure proper documentation of ongoing R&D activities
- Consider whether immediate expensing or optional amortization makes more sense for your specific situation
It’s also important to understand how R&D deductions connect with the R&D tax credit. These two benefits can work together, but they need to be coordinated carefully to get the most value.
Another key consideration is ownership. If your research is funded by another organization and you don’t retain the rights to the intellectual property, you may not qualify for the R&D credit. This situation commonly comes up with grant-funded or contract-based research.
Understanding hiring incentives
The second half of the workshop covered employment-based tax credits that can offset the cost of growing your team. Here are some important ones to make note of:
NY Qualified Emerging Technology Company (QETC) Employment Credit – This may be the most underutilized credit in New York State, according to Hoffman. If you’re a certified QETC in New York with under $10 million in annual product sales, you can claim $1,000 per full-time employee above your base-year average. This refundable credit is available for three consecutive years. The credit can offer an immediate return on investment to your investors, yet many startup founders don’t even know to apply for QETC certification. If you’re a tech company in New York, this should be on your checklist.
Work Opportunity Tax Credit (WOTC) – Created to help individuals facing employment barriers reenter the workforce, this federal credit supports inclusive hiring while also offering a practical benefit to employers. Businesses may receive a credit equal to 40% of qualified first-year wages for employees who work 400 hours or more, or 25% for those who work at least 120 hours. The credit currently applies to eligible hires made through the end of 2025.
Excelsior Jobs Program – For companies in targeted industries like tech, biotech, or manufacturing, this multi-component credit can cover job creation, capital investment, R&D expenses, and even property taxes. To qualify, you need to apply and receive certification from Empire State Development.
Employee Training Incentive Program (E-TIP) – This often-overlooked credit supports workforce training, including internship programs in advanced technology, life sciences, software development, and clean energy. If you’re investing in developing your team’s skills or running an internship program, you might qualify.
The bottom line
This isn’t just a technical tax update. For many startups, this is a cash-flow event. Immediate R&D expensing, retroactive relief for small businesses, and underutilized hiring credits could translate to meaningful refunds, reduced tax liability, and real dollars back into your company. That’s capital you can reinvest into product development, talent, and growth.
But these benefits don’t happen automatically. They require proactive review, proper documentation, and in some cases, certification.
If you’ve been capitalizing R&D since 2022 or growing your team in New York, now is the time to sit down with your tax advisor and run the numbers. The opportunity is significant, but only for founders who take action.
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