Our Large Corporate Tax group can help your company maximize the R&D credit.
Is Your Company Maximizing Its Tax Benefit from the Research Credit?
Corporations often view efforts to develop new products, improve legacy products, or enhance outdated and costly processes merely as a cost of doing business. As a result, these businesses may be overlooking a potential tax benefit.
What is the research tax credit?
The research tax credit was enacted as a provision of the Economic Recovery Tax Act of 1981 as a key component of a multi-faceted tax reduction package to ensure future economic growth. The credit is in addition to the tax deduction for research expenses and the benefit results in a dollar-for-dollar reduction of the business’ income tax liability.
What is qualified research?
Qualified research must:
What expenses are eligible for the credit?
Expenses included in the credit computation are in-house salaries and wages of employees engaged in qualified research, as well as costs of materials, supplies and certain time-sharing costs for computer use in qualified research. In addition, 65% of amounts paid to third-party contractors for conducting qualified research are eligible for the credit.
In addition to the federal research credit, approximately 35 states have enacted some form of research credit. R&D activities may also enable a company to qualify for other incentives, such as investment credits, jobs credits, and sales and use tax exemptions.
Is your company a candidate for the research credit?
Any firm with leading edge technology is likely to have qualified research and eligible costs. Companies in the chemical, electronics, manufacturing, medical technology, pharmaceutical, and software industry sectors are candidates for the credit.
The R&D credit is available for 2011 and prior years and is widely expected to be extended to years following 2012. Our Large Corporate Tax group can help your company maximize the R&D credit.