Research and Development Tax Credit
The Research and Development (R&D) Tax Credit helps companies remain competitive by allowing a reduction of federal and state income taxes owed for qualified expenditures related to the development or improvement of a product, process, software, formula or invention. The Federal R&D Tax Credit can be used to offset federal income taxes to the extent that qualified research expenditures exceed a base period amount. Businesses that do not pay federal corporate income tax, such as S-corporations and partnerships, are allowed to pass along their Federal R&D Tax Credits to shareholders or partners.
On Friday, December 18, 2015, the Federal R&D Tax Credit was made permanent after being pushed back multiple times since 1981. As one of the last western countries to permanently establish as R&D tax credit, the U.S. is joining its counterparts in highlighting the importance of and facilitating the R&D process. This law creates new benefits and opportunities for many companies with operations across the country.
Benefits and opportunities of the new R&D Tax Credit include:
- The new law retroactively applies to January 1, 2015, with no expiration. The R&D Tax Credit is now a right of all companies undertaking eligible projects, enabling them to include it in project plans, forecasts and budgets.
- The new R&D Tax Credit law includes an Alternative Minimum Tax (AMT) patch for tax years beginning after Dec. 31, 2015, essentially eliminating the AMT requirement. This will allow companies and individuals paying AMT with less than $50 million in average sales over the prior three years to claim the credit. This is a change from the previous situation, whereby many smaller companies and individuals were limited by AMT and therefore not able to claim or maximize their R&D Tax Credit. This will result in these companies paying fewer taxes.
- Beginning after December 31, 2015, companies with less than $5 million in gross revenue that are less than five years old will be able to use the credit to offset up to $250,000 in payroll taxes annually. This will help drive innovation by allowing start up companies to receive federal returns for their R&D projects.
At Ayming, we specialize in managing R&D tax claims, helping you receive all that you’re entitled to without taking unnecessary risks.
Your challenges :
- Do I qualify for the R&D tax credit?
- Have I identified all eligible projects and activities?
- How do I ensure I’m claiming all eligible costs?
- When I file my claim, am I ready to be called into an audit?
- Can I streamline the technical and financial gathering process to minimize impact on my critical R&D resources?
How Ayming can help
- We will deploy a team of innovation specialists including an account manager. They will manage the entire claim process, including communication with government authorities, and minimize the impact on your R&D staff.
- We will comprehensively identify eligible projects and write the claim with the appropriate technological positioning.
- We will identify eligible expenditures to maximize the value of your claim, review the documentation to confirm that it is supported, and provide recommendations on improving the supporting evidence.
- We will guide your claim through all steps, including an audit, until final resolution.