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R&D tax credits were enacted to stimulate innovation and research investment in the United States. The stimulus provides material non-dilutive capital to companies that improves their cash flow through reduced federal and state taxes. Furthermore, companies can claim R&D tax credits each year, thus creating a significant reduction to future years’ federal and state tax […]

The R&D tax credit is an incentive the federal government provides to businesses to encourage them to engage in research and development activities. Businesses must meet certain criteria set forth by the Internal Revenue Service (IRS) to be eligible for these credits. Businesses can take advantage of the R&D tax credit if they engage in […]

For United States federal R&D tax credit calculations, there are two methods available to taxpayers – the regular credit (RC) calculation method and the alternative simplified credit (ASC) calculation method. Taxpayers are allowed to calculate the credit using both methods, then select whichever method provides the better result. The value of the R&D tax credit […]

The Inflation Reduction Act of 2022 signed into law by President Biden contains several provisions, including modifications to the payroll tax R&D credit for qualified small businesses (QSB). Current law allows QSBs to use R&D tax credits to offset social security payroll tax liability.  This provides an avenue for QSBs to see benefit from R&D […]

Taxpayers are allowed to file amended returns to reflect any changes or omissions from the original return if the amended return is filed within the three-year statute of limitations. Amended tax returns are an effective tool for capturing overlooked credits from prior years. There are many reasons a company, or individual, may decide to file […]

Companies claiming an R&D tax credit are required to have documentation to substantiate the value of the credit being claimed. The current record-keeping requirement is general and vague, and the IRS has not provided significant guidance as to what documentation is acceptable to substantiate R&D tax credits. Direction regarding substantiation must be gleaned from what […]

To stimulate research investment in the United States, Congress initially provisioned a general business tax credit under Internal Revenue Code section 41 in conjunction with The Economic Recovery Tax Act of 1981. Although the most substantial investment in research and development is a company’s people (and subsequently their wages), the supplies they use to create, […]

A contract research expense is paid or incurred for the performance of qualified research to the extent it is paid or incurred pursuant to an agreement that (i) is entered into prior to the performance of the qualified research, (ii) provides research be performed on behalf of the taxpayer (taxpayer retains substantial rights to the […]

The R&D tax credit code and regulations do not specify record-keeping requirements. However, the guidance provided to taxpayers is that they must retain documentation to substantiate the credits being claimed. Project documentation is used to demonstrate the qualified nature of research activities. To qualify for the R&D tax credit, a project must: 1) relate to […]