• Our R&D Tax Credit group is a distinct specialty practice within the Tax Services Group.

    Is Your Company Maximizing Its Tax Benefit from the Research Credit?  

    What is the research and development tax credit?
    What expenses are eligible for the tax credit?
    The R&D credit is available for 2011 and prior years and it is expected to be extended.

    Our Large Corporate Tax group can help your company maximize the R&D credit.

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Research & Development Tax 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    Corporations often view efforts to develop new products, improve legacy products, or enhance outdated and costly processes merely as a cost of doing business.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:

    1. involve activities aimed at the development of a new or improved product or process. This includes all technical activities such as analysis, design technical requirements, developing, coding, testing, etc. undertaken from initial design, proof of concept, planning and definition, architecture and detailed design, and development testing.
    2. be intended to discover information that is “technical in nature” and useful in the development of a new or improved business product, process, computer software, technique, formula or invention.
    3. rely upon a process of experimentation whose ultimate aim is the development of a business component with a “new or improved function, performance or reliability or quality.” These activities generally involve the evaluation of alternatives, trial and error, failures, or other testing methodologies. Examples of qualifying activities include developing new and improved legacy products, designing and testing preproduction prototypes and models, and developing software applications.

    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.

    States 

    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.

EisnerAmper is an independent member of PKF North America.
PKF North America is an independent member of PKF International.